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Jul 2019

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Reputational risk on the rise as business confidence declines: CNA Hardy

Source: Middle East Insurance Review | Jul 2019

As global, interconnected risks become a reality, reputational risk is rising and business confidence is on the slide, according to CNA Hardy’s 2019 Global Risk & Confidence Survey.
 
Research for the latest edition of the annual risk and confidence survey report highlights a clear East-West divide in terms of confidence. While optimism has fallen among executives leading European, UK and North American businesses, it continues to rise in Asia Pacific.
 
Asia Pacific is the only region where confidence has risen (up 23% to 65%) in the past six months and where executives globally believe there is the greatest capacity to drive growth.
Globally, economic risk is the biggest concern both now and in 12 months’ time, followed by cyber then technological risk.  Economic risk – though remaining the most mentioned risk overall –  is set to decline as political and reputational risk gain momentum.
 
Reputation risk rising fast
As business leaders look ahead to May 2020, the survey found that reputation risk is growing faster than any other – up 29% globally, a third (33%) in Europe and doubling in Asia Pacific between May 2019 and May 2020.
 
“In an increasingly complex, tech-led, interconnected global economy, business leaders are being tested like never before. The result is that confidence has dipped, investment in business fundamentals is down across the board, and reputation risk has emerged as the new threat that stalks the corridors of power,” said CNA Hardy CEO Dave Brosnan.
 
Divided on how to manage reputation risk
Businesses included in the survey were divided regarding the most significant challenges they face when dealing with brand or reputation risk.
 
Managing the logistical challenges – securing board buy-in and implementing a timely plan of action – were two of the highest ranked priorities. But maintaining brand value was narrowly the top concern globally, with sentiment particularly marked in Asia Pacific and North America.
 
Strong appetite for innovative insurance response
CNA Hardy has found significant appetite among its broker network and insureds for deeper discussion and insight around the drivers of boardroom risk and strategies for risk prevention and mitigation.
 
“Reputation cover will become mainstream as boardroom risk is re-evaluated. In the same way the market has found a way to model the cost of non-physical damage business interruption claims as part of terror and political violence cover, we believe there is scope to model and mitigate the cost of managing reputation risk and the consequential damage to brand value caused by specific triggers,” said Mr Brosnan.
 
Asia Pacific: The tiger roars again
Confidence among business leaders in Asia Pacific has soared in the past six months from 53% to 65% with the region now leading the world in terms of its buoyant outlook. 
 
The mood suggests the region’s leaders believe they can weather the worst of the Chinese-US trade war and have faith in the growing economic dominance of the region as a whole.
 
Supporting rising confidence, Asia Pacific’s perceptions of risk have grown only modestly in the last six months, with 85% of business leaders now believing they operate in a moderate to high risk environment, compared to 82% in November 2018.
 
The main external risks concerning business leaders are economic (24% of business leaders) and cyber risk at 18%, although supply chain is rising in importance, now ranking fourth position for the first time.
 
Asia will be the region with greatest capacity to drive growth
By May 2020, over a fifth of global business leaders predict that Asia will be the region that has the greatest capacity to drive their growth, putting it well ahead of the global pack.
 
“The growth in confidence in Asia Pacific is great news for corporates in this part of the world and marks a significant shift in sentiment from just six months ago,” said CNA Hardy vice president property, marine and energy Carl Day.
 
“As President Xi’s signature belt-and-road initiative rebuilds the region’s ancient silk routes with nearly $1tn earmarked for infrastructure investments to around 1,000 projects, domestic and foreign enterprises alike will want to ensure that their supply chains are optimised to capitalise on the Asian growth story,” Mr Day said. M 
 
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