On Aon

19: On Aon’s 2021 Global Risk Management Survey with Rory Moloney

Episode Summary

The results of Aon’s Global Risk Management Survey showcase the main risks that businesses are facing today. This year’s results highlighted the interconnectivity of risk, and the impact that the COVID-19 pandemic has had across all threats. With more reliance on technology than ever before, cyber risk reached its highest rank since the inception of the survey, as the #1 concern among risk managers. The findings of this survey not only shed light on the risks that are top of mind, but also how Aon can help clients address and mitigate them. In this episode of “On Aon,” host and Senior Vice President, Health Solutions Joey Raheb welcomes Chief Operating Officer and Head of Strategic Client Advisory for Aon’s Large Account Segment Rory Moloney for a look at the results of the study and the impact it has on Aon.  

Episode Notes

The results of Aon’s Global Risk Management Survey showcase the main risks that businesses are facing today. This year’s results highlighted the interconnectivity of risk, and the impact that the COVID-19 pandemic has had across all threats. With more reliance on technology than ever before, cyber risk reached its highest rank since the inception of the survey, as the #1 concern among risk managers. The findings of this survey not only shed light on the risks that are top of mind, but also how Aon can help clients address and mitigate them. In this episode of “On Aon,” host and Senior Vice President, Health Solutions Joey Raheb welcomes Chief Operating Officer and Head of Strategic Client Advisory for Aon’s Large Account Segment Rory Moloney for a look at the results of the study and the impact it has on Aon.   

Additional Resources:

2021 Global Risk Management Survey

2021 Global Risk Management Survey Press Release

2021 CEO Better Decisions Research

Aon’s website

Tweetables:

“This survey has helped shape our Aon United approach to helping clients manage those connected risks.” — Rory Moloney

“What you don’t want to do is wait until you have enough events so that you understand the risk.” — Rory Moloney

“The ripple effect of the pandemic has been both direct and indirect and it’s shaping our concerns of the future.” — Rory Moloney

Episode Transcription

Episode 19: On Aon’s 2021 Global Risk Management Survey with Rory Moloney

Voiceover:

Welcome to On Aon, a podcast featuring conversations between colleagues on, well, Aon. This week, we hear from Rory Moloney about the recent findings from Aon’s 2021 Global Risk Management Survey. And now, this week’s host, Joey Raheb.

Joey Raheb:

Hello everybody. My name is Joey Raheb, and I've been a colleague at Aon for just over five years. At Aon, I serve in our Health Solutions practice in Canada as senior vice president and national leader for growth and client engagement. With me today is Rory Moloney who has been at Aon since 2001, and currently serves as Aon's Chief Operating Officer and Head of Strategic Client Advisory for Aon's Large Account Segment. Rory has unique insights to today's topic, 2021 Global Risk Management Survey Report, because of his wealth of experience with risk finance, analytics, and strategic risk consulting. Rory, thanks for being here today with us. Maybe before we jump into the Global Risk Management Survey, I'd like to understand a little bit more about how the survey was conducted, but also what it helped us, Aon, uncover.

Rory Moloney:

Sure. The Global Risk Management Survey was something we started in 2007. So we've done eight now. We do them bi-annually and most recently just released our 2021 version. You mentioned delivering Aon United, in terms of what has evolved and the process and the team is something that we're really proud of in terms of how we have evolved those efforts in developing the Global Risk Management Survey. The actual platform itself has been built in a bespoke basis by the Center for Innovation and Analytics in Dublin. And then the team that contribute to the development of the content and the question set in particular come from all across our Risk Consulting group, but also from all of our solution lines, all of our industry practice groups and all of our geographies.

Rory Moloney:

It's packaged, I think really well, in a way that aligns with our overall Aon Story and Aon messaging, which requires valuable and critical input from the marketing team. And ultimately it's something that our network across all solution lines takes to market, whether they're through the account executives or client directors promoting that to our clients and generating that feedback. Over the years, we now literally get thousands of responses we conducted in, I think, 11 languages about 17 different industry groups from over 60 countries. So it's something that we've continued to build momentum from over the years.

Rory Moloney:

When I think about how it started, in 2007, it's quite a simple goal really, that we really just wanted to get a perspective on how clients ranked their risks to ensure that we were focusing on the right things and maybe get a view for what was coming next in terms of solution development. And what was really interesting was yes, we did get that ranking and that's informed a lot of our thinking ever since, but we also got a feel for the breadth of, I suppose, subject matter and areas contributing to volatility. We started with a list, I think of maybe 40 and then our Risk Survey of today, I think it's just about 60 issues classified, but each of which are ones that different clients in different sectors and industries feel very passionately about.

Rory Moloney:

I think the second thing that we understood very early on was the fact that when one thinks of a risk survey, you're thinking about your insurable risks. And I think what we figured out was that many of those risks were either insurable partly or insurable or not insurable at all. And I think that partly and none has actually increased over time and I think in 2021 of the list of 60, maybe 15% is insurable and maybe 50% overall insurable or partly insurable. So it has really highlighted to us how the risk continuum has moved around and that informs how we develop our business.

Rory Moloney:

The final thing I'd say is it's been really critical to helping us, I suppose, uncover trends again, which influence how we support clients. So we've seen a lot about how actual risks are interconnected requiring that interconnected response from clients. And I think that had some part in shaping our Aon United approach to helping clients manage those connected risks across risk and people. We've also understood the industry lens and the nuance at industry level has been hugely important and is something that we have ... there's a really central theme how we analyze our data today. We've had the rise of technology. And most recently in 2021, I think two things have been really evident is that the prominence of what it called new forms of volatility in particular long-tail exposures, such as ESG becoming materially important. And also that transition from what we call event-based analysis to impact-based analysis where actually risk triggers have a ripple effect and impact across other aspects of the business, not just on a single site or location. So it's an evolved process, Joey, I guess something that continues to evolve and for inform us as, as we move along.

Joey Raheb:

Lots of interesting things there that I want to unpack. Okay. First let's go to the finding for this year. So cyber topped the risk globally. Why do you think it topped the list this year?

Rory Moloney:

A couple of reasons, again. I think cyber, if we look back, it's something we've seen on the horizon, I think since 2011. I think in 2017, it moved into the top five. And I think we predicted even back then that in the coming three or four years, it would become the number one exposure. A lot of that I think has to do with just the explosion in technology underpinning core business processes, which was, I guess always likely as capability in technology develops. I think it has had some impetus along the way. For example, post the last recession we saw unprecedented decentralization and globalization as a response from largely trying to manage efficiency and costs, and technology enabled that to happen. So I did think it, it changed the format of business models.

Rory Moloney:

With that there's the good side and the enabling effect. And obviously with that, it also comes the downside and the threat vectors that were affecting that development have also evolved pretty much at the same pace. Going back to the late '90s and early 2000s, you had the introduction of cyber events or hacking, which were at that time originally focused on, I guess, stealing essentially, or getting hold of personally identifiable information and were focused on that data theft aspect. I think over the years, we've seen that evolve as threat factors understood the ability to disrupt business for whatever reason. And now, we have had an explosion in the last few years in particular of malware supporting ransomware efforts around the world. Just to give you a start on that, I think in 2018 to 2020, the global ransomware incidents have increased by over 400%. And I think again, in the COVID-19 era, that pandemic as businesses have brought many aspects of businesses that weren't previously online or technology-enabled has increased. That has increased the platform and the threat vectors have responded to that, to the level we've seen today. So I think that was always logical that it would become more important. I think what's been really interesting just is to track the different aspects of how it has and more importantly, how we manage and mitigate that.

Joey Raheb:

Yeah, I agree. I think in a lot of ways you can understand or appreciate why it would've been a top risk. And for people in the industry, I think it may feel almost intuitive that it topped the survey. Were there any surprises in the results of the survey this year?

Rory Moloney:

Yeah. Joey, every year I think there's a couple of things where we go, where we didn't expect to see that. There's maybe three I'll touch on just now. One is related to workforce shortages and the whole talent agenda. I think as we talk in terms of concepts, like the great resignation that's on the tips of people's tongues just now, when this was completed in Q1 of 2021, it obviously didn't resonate to the same effects. I think it came in at number 14, and we probably would've expected that to come in the top 10.

Rory Moloney:

I think the other area, which has probably been a trend, is that we've expected this before. I've called this [inaudible 00:09:16] being underrated probably in 19, as well as just the prominence of intellectual property risks. I think the value of corporate asset value has massively shifted from a tangible base to an intangible base in the last 20 years. And the volatility that that exposure creates is not quite translating in terms of risk prominence from corporates just yet. I think it actually was something like 53, that low down. So it was a long way off the top 10. But again, the surprise for us. And look, I think our feeling on that is maybe that ... Sorry, it was 43, actually. I think our feeling on that is that maybe the stakeholders that we're engaging with are not necessarily the ones that are tasked with managing that volatility. But I do think there is a lot that the risk industry could bring to the management of that exposure at an enterprise level.

Rory Moloney:

And the final one I'd probably touch on would be ESG and climate change in particular. I think given the prominence of the issues, I think globally, but also now as they're beginning to impact businesses and bring volatility associated with climate transition and changes in the regulatory environment and changes in the competitive environment. I think climate came in at number 23 and ESG came in at 31. There are two things that we probably would've expected to have been higher. And I think I would forecast that they will be moving up, not down in the future.

Joey Raheb:

Thanks Rory. For those people who may be wondering about ESG or climate change and what that means to them and their organization, what's one or two things that you'd give them as food for thought as they're considering in their work for '21 and 2022?

Rory Moloney:

Well, I think one of the things that's probably close to my heart, obviously these are massive topics in themselves is in terms of how they impact overall corporates, their business and how corporates conduct their business. If I narrow it down a little bit, Joey, just with the risk lens, there's again, even the risk that it presents are multifaceted. I think a lot of our focus is on, again, that climate transition risk. Whether that's associated with maybe change of business processes with adopting a net carbon neutral footprint at some point in the future, whether that's regulatory change associated with changing business models. We really would advocate, I guess, having that discussion and development of, I suppose, what we call a climate risk register in terms of getting those both risks. And there are some opportunities associated with that as well on the table.

Rory Moloney:

Secondly, quantifying those. And we've done some fantastic work in our business, across the Risk business, the Reinsurance business, and with some of external partners where we have great capability in terms of identifying scenarios. But also using AI essentially to draw on lots of available third-party information and incorporate that into a more predictive model for impact on asset values in the future. And then the third one is really building that into business planning so that there is a perspective for that risk exposure as to its influences, corporate strategy and a particular corporate risk management strategy of the future. So a drop in the ocean of the overall topic, but that's just one of many of the capabilities we have around the firm in different solution lines and that's something that we're working on now and been pulling together and making more accessible for everybody.

Joey Raheb:

Yeah, that's really helpful, Rory. I want to come back to a question that I had from a response in my first question to you. You spent a bit of time talking about insurable versus uninsurable or partially insurable risks. I think the preconceived notion from both folks inside of Aon, but also from clients and organizations that work with Aon is that our primary focus is working on insurance. Can you talk about how Aon supports clients in those uninsurable or partially uninsurable risks and anything in particular that you think might be a good example for people to understand.

Rory Moloney:

Yeah. No, listen, thanks to that look in an interesting question, and one that we get a lot. And the response I revert to a lot of the time, if you think of the insurance industry itself, I think it plays a vital role in supporting industry and managing those exposures. And I think about traditional risks that may be property risk, casualty risks, marine transit risks, for hundreds of years, the industry has collated data on, I suppose, the exposure and the claims and what goes wrong. And that has put them in a position, when you have scale and diversification to be able to offer a hedge for those exposures. And it's the underwriting and in particular, the quantification associated with that underwriting, that enables that proposition.

Rory Moloney:

Now, I suppose what I always say is if you could go back to day one of those exposures, there was no data, but the exposure was there. And I think with a lot of our emerging exposures, whether that's brand and reputation, whether that's IP, or if you go back 15, 20 years, that was cyber. And that's something that we need to, I think, as an industry and where we've been really presented differentiated capability in supporting the development of a product offering to do that. What you don't want to do is wait till you have enough events so that you understand it, right? So our approach, and I think what we've done with cyber has been a good example has been from the early days, working with clients and the industry, and by the industry I mean the insurance markets, to understand, I suppose, the scenarios that drive events to understand and building quantitative models to support the development, both scenario-driven and sarcastic analysis that puts the markets in a better position to understand the exposure, have an input in terms of how corporates should be managing that exposure, but also offer capacity.

Rory Moloney:

And I think in the last 10 years, we've probably seen the capacity offered on an exposure like cyber multiply, probably 10 times over as we have refined how we present the risk on behalf of the clients and as we've put better quantification to help the industry understand it. So if you apply that logic to whether it's climate exposure, brand and reputation exposure, complex supply chain, contingent business interruption, I think through data and analytics and our deep industry insight and the scale of access we have to information across all regions and geographies, that's where I think we're in the unique position to build that proposition for what I call the emerging portfolio of corporate risk. And I think not only are we able to, I think Joey actually is very important that we do do that. That we're not saying to an entity, "Well, you have a basket of risks and we're very good at some of them."

Rory Moloney:

I think it's important that we are addressing the portfolio both the judicial risks and the new forms of volatility. And you see that reference a internally as to the essentially client's unmet need that clients are telling us time and time again, they have this exposure, they have this volatility, they need to understand it so that they can invest in mitigation but also they're looking to us to bring the insurance market to bear from that aspect as well in the form of risk transfer products, which we're working hard on doing.

Joey Raheb:

Yeah. I think that's all really important, especially in the context of what we're talking about, the Global Risk Management Survey is that these things, these surveys, the data, the analytics you're talking about is what sets up foundationally, what we're doing for clients. And again, helps us differentiate in solutions we bear to markets, to organizations. Just bringing us back to the Global Risk Management Survey, the pandemic had a lot to do, I think with much of what we're seeing in the results. What sort of ripple effects do you think the pandemic will play in the results of this survey compared to previous ones we've seen?

Rory Moloney:

Yeah. No, look, I'm cognizant of the fact that you're using that word, ripple effect, Joey, that has been an important factor, I guess, in terms of responding to the pandemic. This has been an enduring long-tail event. When we have a fire, an event in a factory, stuff gets shut down, you manage the business interruption and you're up and running. I think the pandemic has had ripple effects across lots of aspects of business and generated associated volatility with that. So I think how we've seen that in terms of the current survey, as we've touched on cyber coming out as number one disruption of that key enabler. But also if you look at some of the others in the top 10, things like business interruption, supply chain, impact of commodity price fluctuations, concerns about changing regulatory environments, they're all derivative. They're the ripple effects just now as to why these things are front of mind.

Rory Moloney:

So as we talk, at this period, end of year, the challenges with turkeys, Christmas trees and PlayStations, they all are reflecting a challenge in the global supply chain. Which there may be multiple incidents contributing to those, but one of those is the overall slowdown or disruption generated by the pandemic essentially in the first place. So you are seeing that ripple effect.

Rory Moloney:

I think one of the questions, Joey we ask is what we think people consider will be the most important risk in 2024 when we look at the future. And it's very interesting just now, I think people's minds are firmly rooted in what they're seeing today. So there's a slightly different order, but it is cyber. It is business interruption. It is commodity price. It is competition. It is whether the economy will get back on its feet again. So as I said, in terms of the response, the ripple effect, I think it's been both direct and indirect and I think it's shaping concerns of the future. And that's all in addition to the fact that we are seeing business models change in response to that as well.

Joey Raheb:

Thank you Rory. It's been great talking to you today. Before we sign off, I do want to ask you a more personal question, when you're not working, what is it that you like to do for fun?

Rory Moloney:

Well, I'm based here in Dublin Ireland, Joey and I suppose, the pandemic experience has been interesting and that I think we're now about to, as of today going into our fourth shutdown level of activity. One of the things that has been hit a lot has been sporting activity. So two things in particular attending anything, any sporting events I think is great. And in particular, I've got three kids who are 20, 17 and 15, so it's been great to get back on the side of those pitches, both rugby and hockey again. So that's something I'm enjoying a lot right now.

Voiceover:

This has been a conversation On Aon and the 2021 Global Risk Management Survey. Thank you for listening. If you enjoyed this week’s episode, tune in in two weeks to hear Aon’s forecasts for 2022. To learn more about Aon, its colleagues, solutions and news, check out our show notes, and visit our website at Aon.com.