Cyber security now sits squarely towards the top of the agenda for boards around the world, according to the third Lloyd’s Risk Index.
A survey of more than 500 of the world’s senior business leaders also suggests executives are focusing on more pressing problems including cyber-attacks and increased material costs, rather than longer-term strategic decisions. Loss of customers has slipped to second place, down from the number one risk two years ago as businesses struggle with the continued effects of economic turbulence. In response to the findings, Lloyd’s Chief Executive, Richard Ward, is warning that focusing on near-term issues at the expense of longer-term strategic decision making can leave organisations over exposed to future business challenges.
First published in 2009, this year’s Risk Index – run with polling firm Ipsos MORI – provides a picture of how global business leaders prioritise and prepare for major risks:
High taxation is identified as the biggest risk faced by business leaders after prolonged public and political exposure and debate. It has soared up the index ranking from 13th to first place in the last two years.
Richard Ward said: “With business tax in the spotlight and rising up the political agenda, executives are understandably concerned. Yet the danger is that an emphasis on near-term, operational issues comes at the expense of significant, strategic decisions that have previously exercised business leaders.
“With the timetable for global economic recovery likely to be much longer than we hoped, a focus on long-term sustainability and effective risk management should be a priority for boards across the world.”
The Index suggests the relationship between preparedness and prioritisation of risks has changed in recent years, as well as the diverging approaches taken by large and smaller companies:
Over the last five years, business leaders have developed a more sophisticated and proportionate approach to risk management. In 2013, across the 50 key risks, those given a higher priority score are also given a higher preparedness score, while risks ranked lower in priority are ranked lower in preparedness.
In 2013, company size is the biggest differentiator in risk perception and management. In 2009, large and small companies had a more comparable view on priority and preparedness across all risks than in 2013. Now, smaller companies give all risks lower priority (10% below average) compared to larger companies (8% above average).
In 2011 cyber risk was two separate categories – Cyber Attacks (which was 12th) and Cyber Risk (which was 19th)
For more information visit www.lloyds.com/riskindex
About the research – Methodology
The survey asked 588 C-suite and Board level executives about their attitudes to 50 risks across five categories:
Business and strategic risk
Economic, regulatory and market risk
Political, crime and security risk
Environmental and health risk, and
Natural hazard risk.
Respondents were asked to rate both the overall risk category and a number of specific risks within each of the overall categories for both their corporate risk priorities and for the degree of their business’ preparedness to manage those risks. A score was calculated for each, with zero being the lowest level of priority or preparedness and ten being the highest.
Survey respondents were distributed across Europe (28 per cent), North America (26pc), Latin America (10pc) and Asia Pacific (31pc), and South Africa (5pc) and the research was between 9 April and 17 May 2013. 77pc of respondents represent smaller businesses with an annual turnover of $US499million or less, and 23pc from larger companies with an annual turnover of US$500m or more.
