According to Aon, business leaders who say they are “very prepared” for a downturn are more likely to see risk as interconnected and more willing to take it when a recession is expected.
In an interview with Insurance Business, Lambros Lambrou, CEO of Aon Commercial Risk Solutions, stated, “The risk and environment are changing at a rate we’ve never seen before.” “We’re witnessing unprecedented levels of volatility in and around risk. Risks are much more interconnected than they have ever been before.”
“Leaders are taking a different approach in this risky environment. They are taking risks and learning a lot from COVID.”
Sixty-one percent of leaders polled by Aon who said they were “very prepared” for a recession agreed that risk is all interconnected, compared to 36% who said they were not.
Sixty-two percent of leaders who said they were “very prepared” also agreed that a good outside advisor or consultant could help them make good decisions and deal with risk, compared to 33% of leaders who said they were “not very prepared.”
“What we see is that they [businesses that feel well-prepared] believe that outside advisors and consultants play an important role in assisting them in dealing with these long-term risks,” Lambrou explained.
According to Lambrou, the COVID-19 pandemic and how businesses responded to it aided some businesses in better understanding the risk environment. This is due to the fact that risks are becoming more interconnected, which has implications for how the insurance industry should view coverage.
“Many risks have been protected in almost separate lanes of risks over time,” Lambrou explained. “What we’re seeing now, and what we’ve seen through COVID, and what we’re seeing as we leave COVID, is that as risk becomes more interconnected, the types of solutions that clients will need to respond to these interconnected risks will change.”
“They can no longer take a one-size-fits-all approach, which has always allowed the insurance industry to provide these kinds of solutions in the past.”
The survey discovered differences between leaders who felt very prepared to deal with the effects of the recession and the current risk environment and those who felt less prepared.
54% of companies that didn’t feel very prepared delayed a capital investment, while 45% of companies that felt very prepared did the same. This is a nine percentage point difference.
Businesses that were better prepared were also less likely to slow or stop hiring. Only 49% of more prepared businesses said they had done this, while 54% of less prepared businesses said they had.
Sixty-eight percent of very prepared leaders said they had looked to reduce marketing budgets, compared to 56% of not very prepared survey takers, and 66% of very prepared respondents said they had raised prices, compared to 60% of not very prepared respondents.
Aon surveyed 800 business leaders in the United States, the United Kingdom, and Europe. The surveyed business leaders worked for companies with more than 500 employees.
Seventy-nine percent of leaders polled by Aon predicted a recession within the next year, with 43% believing it was “very likely.”
The top three risks that executives and leaders said their businesses were spending a “great deal” of time on were inflation (43%), a financial crisis (42%), and energy supply (41%), with cyberattacks (40%) falling from first to fourth place. The last item on the list was a supply chain issue (39%).
“The very prepared leaders are definitely spending a lot more time looking at, focusing on, and leaning in on these long-term risks [like climate],” said Lambrou. “As they do so, they seek the advice of an outside adviser in order to improve their company’s ability to make good decisions and deal with risks associated with this.”
“When we think about today’s risks, while there is a reprioritization in the risk landscape, and what the C-suite is looking at, and what the risk management community is looking at, what we can see is that as leaders think about how to embrace risk as an opportunity, those prepared leaders are not putting the brakes on long-term investments or ignoring long-term risks, even when a recession is looming.”