Aon’s 2022 Executive Risk Survey includes insights from over 800 CEOs and provides an in-depth look at business leaders’ view on risk. This week’s host and Aon’s President Eric Andersen is joined by Aon’s CEO of Commercial Risk Solutions, Lambros Lambrou, and Aon’s CEO of Enterprise Clients, Lori Goltermann, for a conversation about the findings of the survey, a potential recession and how leaders can best prepare for the interconnected risks of today, as well as those on the horizon.
Additional Resources:
Aon’s 2022 Executive Risk Survey
On Aon Podcast Episode 39: On Aon’s View on Challenging Economic Times – Part One with Eric Andersen and Leslie Follmer
The One Brief: Greg Case: How Business Leaders Are Preparing for the “Great Volatility”
Tweetables:
Voiceover:
Welcome to On Aon, a now award-winning podcast featuring conversations between colleagues on, well, Aon. This week, we hear from Lori Goltermann and Lambros Lambrou on the 2022 Executive Risk Survey. And now, this week's host, Eric Andersen.
Eric Andersen:
My name is Eric Andersen and I've been with Aon for over 20 years, and I currently serve as the President. Today, we're talking about Aon's recent Executive Risk Survey. More than 800 CEOs and senior executives were surveyed, and the results provided in-depth look at the top business leaders' view on risk. For the last two years, the COVID-19 pandemic, and the related impacts, have dominated the risk landscape. But now, what's top of mind for global executives is the looming fear of recession and how to be best prepared for the interconnected risk they see today and on the horizon.
With me today are Lambros Lambrou and Lori Goltermann. Lambros has been with Aon for over 36 years and currently serves as Chief Executive Officer of our Commercial Risk Solutions. Lambros has a unique insight to today's topic as the head of Commercial Risk. Lambros is having conversations with top business leaders and decision makers every day about managing increasingly volatile risks like geopolitical volatility, supply chain disruption and macroeconomic pressures.
Lori has been at Aon for over 29 years and currently serves as Aon's Chief Executive Officer of Enterprise Clients. Lori brings a unique client focus view to the conversation being very close to how the agendas of C-Suites are evolving. Thanks for being here, Lambros and Lori. Before we get started, I'd like to ask you both a quick warmup question. Today, we're talking about leaders and how they make decisions about risk in challenging times. To kick us off, I'd like to ask what well-known leader inspires you? Lambros, maybe we'll start with you.
Lambros Lambrou:
Thanks Eric, and absolutely delighted to be here. Geez, that's a tough question, so many people have stepped up over the last few years, but perhaps one that certainly caught my eye was Jacinda Ardern, who's the 40th prime minister of New Zealand, at the time, the world's youngest female head of government. I guess what I've seen with Jacinda, someone who is a courageous and brave leader really met challenges head on and was particularly visible helping New Zealand navigate through COVID and being quite frankly one of the few western nations to successfully contain the virus within their country. But beyond that, was involved in the dealings in and around the Christchurch terrorist attack and just some of the issues that were associated with that. Then, obviously, being the first female leader to actually bring her baby to the UN General Assembly, which I thought was pretty cool as well. I think Jacinda Ardern for me.
Eric Andersen:
That's awesome and a tough one to beat. Lori, how about you?
Lori Goltermann:
Well, Lambros and Eric, I'm so happy to be here as well. That is a wonderful leader. Mine was a little bit different avenue. Serena Williams is one that I picked. I admire her in so many ways. I have the love of tennis in my blood as well, but I've been so amazed at watching her as an athlete rise to winning, being in the number one spot for over 300 weeks, 23 grand slams and self-taught on a public court. I mean, Eric, you may not know it, but I started hitting tennis balls against my garage, so she clearly excelled to a height that's admirable by many. But what I love is her also being a mom, a wife and now stepping into Serena Ventures, which is an amazing business where she's investing in diverse companies, over 60 startups. As I look at so many of her attributes that I admire, Serena Williams was a great leader for me to represent here, Eric.
Eric Andersen:
Those are two fantastic, and thanks for sharing, really enjoyed both of those. Why don't we just jump right in? For question one, I'm interested to hear some of your top takeaways from Aon's Executive Risk Survey. Mainly, what are some of the biggest things that leaders need to know about managing the risk as we head into this year? Lambros, why don't we start with you?
Lambros Lambrou:
Thanks, Eric. I would say that certainly, in times of uncertainty and leading into greater degrees of uncertainty, one of the things that we saw in the survey quite frankly was embracing risk is the only option. When I think about some of the survey results and feedback that we got, percent of very prepared leaders agree that their company's appetite to address risk actually increased in response to the current macroeconomic conditions. For companies that feel very prepared heading into a recession, which obviously there's a lot of commentary in and around that at the moment, addressing risk isn't really a choice, it's more a question of survival.
And so, in the survey, the prepared leaders, their actions and their decisions are really not about hitting the brakes on long-term investments or ignoring long-term risks, even when facing the onset of a looming recession. The pandemic sort of changed, I would say, the way in which the best leaders think highlighting the true interconnectedness of risks today. We see that as the top five risks that all business leaders report that they're most focused on are inflation, the potential for a financial crisis, energy supply, cyberattacks and supply chain disruptions. In addition to this, addressing these types of risks, again, what we heard from the very prepared leaders was that they're looking ahead and spending more relative time than other leaders on longer term challenges like economic and social inequality and disruptive technologies.
Eric Andersen:
I love that one comment you made there, Lambros, which it really isn't a choice. Risks are just something that we have to deal with as business leaders and the success with which we do that often drives the success of the companies. Lori, what do you think?
Lori Goltermann:
I couldn't agree with both of you more. I’d probably add to that that companies are really looking at how can they integrate risk management into their growth plans and make sure that they've got that enterprise risk approach to many of the things, Lambros, that you just pointed out, navigating the headwinds of inflation and cost pressure, supply chain and I think the biggest one I hear is that how that connects in with the talent strategies. To me, these all jumped out in the survey and a couple of data points that hit me for years now, we've seen cyber as one of the top risk. It's sitting at number four still in the top ten, but what jumped up seven points now in the top ten is protecting their intellectual property.
As you think about where leaders are spending their time and how companies are changing the shape of their strategy to be more digital, intellectual property is a part of so many companies, and I would bet they don't even realize all the ways that we're creating a market around protecting intellectual property. So, I was thrilled to see that IP jump.
The other was that 61percent of those prepared leaders believe that all risks are interconnected, and they cannot be managed in a silo, and the most successful companies handle that risk regardless of where it comes from. Certainly, we learned that through the pandemic, we all had to pivot quickly, move to virtual, we watched unbelievable supply chain volatility and geopolitical risk. That connected nature and how companies manage that cannot be in a silo. I think it's the difference between those that survive and thrive, as you said, Eric, are those that fall behind. Risk management and the enterprise risk approach is a real differentiator and competitive advantage when navigated appropriately. I'd love to see that in the survey.
Eric Andersen:
No, that's great, Lori. Thank you for that. I do agree, and it's so interesting that over time, the risks do change and that the ability to see those risks coming on the horizon and the ability to steer their firms appropriately, it will be one of the hallmarks of success. It kind of leads me into the second question, which not surprising probably, survey results showed that about half, 49percent of the very prepared leaders are spending a great deal of time on climate change compared to just 26percent of the other leaders. I'd love to get your sense on it, Lori. What opportunities do climate risk pose in 2023?
Lori Goltermann:
Well, Eric, as you know, climate is in every client discussion we're having today, and it's in most of those boardrooms as well. I think the climate change is driving some of the largest reallocation of capital in our history. Some of the stats around this are really daunting. If you read to reach net zero emissions by 2050, the annual clean energy investment worldwide will need to more than triple by 2030. That is a number of around 4 trillion with a “T” dollars. Limiting global warming to just that one and a half degrees I think is going to be the greatest challenge, Lambros, that we see and face in our company and how we help our clients build their strategy, I think is a top priority. Companies are going to have to disclose the transparency around climate, Eric, is really moving up with all the regulatory pressure, and then managing the stakeholders that are your investors to your employees. Do employees want to work for our company depending on, in many cases, their culture and ESG strategy?
As I think about how we're helping clients deal with climate, it really falls in three areas. The first is building resilience and mitigating the climate-related physical risk. What are their risks today, and what does it look like into the future? Where are they going to invest their CapEx and footprint to really address climate? The second is de-risking the transition and the path to net zero. Every client has built their own strategy, Eric, but what's interesting is how will the insurance companies show up to help manage and mitigate that risk along the way? I know you are hosting a lot of those meetings, and Lambros, you are as well. So, I think that's a very open question for all of us right now, but that transition path, how do we de-risk it? The third is how do we unlock growth opportunity and bring new forms of capital to accelerate innovation? These are the three big topics. It's very pertinent this year, but we're going to be talking about this for years to come.
Eric Andersen:
I totally agree with that, Lori. That was a great answer. Thank you. Lambros, Lori mentioned the insurers, certainly your role as the leader of Commercial Risk for Aon, you have a certain vantage point as well. What can you share?
Lambros Lambrou:
Well, I think if you're just following up on what Lori was saying and very much in tandem with what we've said before, you can look at climate as a huge issue through the lens of challenge and difficulties, or you can run towards it as opportunity. Certainly, climate is a good example of where we see prepared leaders continuing to focus their investments over the long term. We saw it in the Executive Survey with 47percent of C-suite and senior executives saying that severe weather and climate change is having a negative impact on their business. Within that, in terms when they look at the aggregation of the amalgam of risks that they've been focused on, climate change cracked the list of leaders top ten risks for the first time that they're investing a great deal of time on, and that's risen from the ranks of 12 in 2021 and number 16 back in 2020.
It's been interesting to see, even though the topic has been around for a while, it's been interesting to see how quickly it is starting to ramp up and appear, as Lori said, in the C-suite, in the boardrooms of organizations. But with that, therein lies opportunity in terms of how to deal with that. I would say certainly in our role trying to enable clients in and around their decisions, whether it's reducing the volatility of financial balance sheets and statements or whether it's enabling strategies for them, we continue to focus a lot of our attention with the insurance and reinsurance marketplace around how do we make products more relevant to the risks that we're seeing through the climate lens today.
It's probably fair to say, if we go back right at the very beginning in and around the notion of the interconnectedness of risk, a lot of products kind of have grown up over the years through I would say sort of risk silos that didn't have to respond to an environment of interconnectedness, but certainly what we have seen over the last couple of years is that that reality has changed. And so, the way we think about innovation through the lens of actual solutions, the investments that we make in data analytics to understand how risk behaves across different environments, recognizing that that actually is the reality of today, that's a lot of our discussion with the carrier community today is how can we better understand how risk is evolving? In that regard, with all of the feedback that we're getting from clients around benefit, helping the industry be more relevant to the new, dare I say, risk frontier that many of the organizations are facing, that's a lot of what we're doing.
And so, we feel that the client demand is absolutely there because frankly the pressure on companies to act on climate change simply continues to increase. I think particularly with disclosure expectations acting as the principal driver for taking a proactive stance on addressing climate related risk and opportunity, that's going to continue to be a huge focus for us as to how we think about engaging with the marketplace around these needs that our clients had.
Eric Andersen:
That was great, Lambros. I want to pick up on one point you mentioned there, which was about supply chain you mentioned, which really drives to the fact of how interconnected all these risks actually are. If you think about supply chain and just from climate for example, any thoughts on how that plays its way through, and maybe some thoughts from you, and then Lori, maybe I'll get your perspective on it as well?
Lambros Lambrou:
Well, supply chain is interesting. Supply chain came up as the number five risk on leaders' top risks in the survey. I think when we think about the interconnected of risk around climate and supply chain, it was interesting to see that almost two-thirds of business leaders say supply chain disruptions are having a negative impact on business. As you might imagine, the interconnected of that, whether it's through the geopolitical issues or whether it's through climate issues, they're ever present in what companies and obviously leaders are facing today.
We do see that leaders are focusing more on this, their ability to problem-solve in and around supply chain is absolutely changing, the way that they partner up with organizations is absolutely shifting, the different way they think about supply chain is definitely taking place. I think in response to that, we see that supply chains can be impacted in just so, so many ways. But ultimately, it comes back to, for many organizations, it comes back to business continuity. Regardless of what the risk causes the disruption, what can we do to help clients maintain what is a risk that I would say continues to evolve at an extremely rapid pace across just so many industries and it's an absolute global phenomenon.
Eric Andersen:
That's great, Lambros. Lori, I know you're interacting with many of our clients at their senior most levels talking about topics like climate. Are there any other issues that come to mind when you're talking about it with those clients?
Lori Goltermann:
Yeah, it's a great question. Lambros, as you teed up supply chain, I would say when I started my career, you would find out what is your client's top supplier. You could work insurance and some risk protection around that key supplier. Now, Eric, we're trying to go down four or five levels into the supply chain and understand what is the interdependency of that supply chain to the revenue stream of the company. What sticks out for me is when you think about the revenue interruption, there's also a tie between climate supply chain with the broader ESG strategy, and within everyone's ESG strategy, we're making public statements of when our suppliers will be net zero.
I would say the complexity today of how climate sits as part of the ESG strategy and the commitments that we're making to transparency and disclosure on the complexity of something, Lambros, like you talked about with supply chain, is so much deeper today than it ever has been. For us with clients, it often can feel overwhelming from their standpoint because the strategy that they have to build is so multifaceted, Eric, and it has so many stakeholder engagement they need to worry about.
What we're doing with many is saying, let us meet you where you are and let's start with an assessment of what is your ESG strategy, how do we work across your firm to understand where are you today, mitigate that risk on your path and understand the commitments that you've made to your stakeholders, and in many cases it's tied to executive compensation. This has to be a very well thought out plan that is managed throughout all the different ways we have to do the reporting. It's coming up today in the D&O meetings, in the property meetings and the commitment around the talent side of that agenda in diversity, equity and inclusion is probably what jumps out at me.
So, while we say the word climate, climate always sits in the context of ESG, and you can never get through the ESG strategy without talking about climate, diversity, equity and inclusion. Often, Eric, when you think about how clients want to grow, where they want to shift their assets, that also relates to how you source talent. It just goes back to how all these things are interconnected. Then you add on top of that the complexity of industry, if we're talking to a hospital versus an energy company, incredibly different. For me, this is a really complicated path that has a lot of tentacles that we have to sort through with our clients. If there's a number one theme, no one has it figured out, it feels early days and they're looking for help along the way, and that's what the exciting part of the job is.
Eric Andersen:
Well, you're making me feel better, Lori, because I will tell you, as I read through the results of the survey, the complexity, the interconnectedness, the severity of all those risks and how they can affect the outcome of colleagues, of clients, of your firm at large really kind of jumped out at me. I just want to go a little deeper, how are we helping clients make those kind of decisions and trade-offs as we go into the year?
Lori Goltermann:
Well, it's a great question. You start to think about what's the magnitude if we don't, and one stat that jumped out at me is by 2030, the heat stress will cause 80 million jobs to be impacted by climate, 34 million alone in India. You just start with that headline, and you think, oh my gosh, how are we going to do this together with our clients, build that strategy and make better decisions?
The common theme for me is really about how do we use our data and analytics, how do we use our insights to help navigate and build that informed strategy to manage across the enterprise their risk? That's really why I think it's so important to anchor around those data input so they can make better decisions. Now, we meet clients where they are in that need. It could be early shaping of a broad strategy, or maybe it's in a very focused area, Eric, such as cyber resilience, which remains on absolutely everybody's mind. In all these areas, I'm really proud that Aon has made such a vast investment in data and analytics and industry insights so we can help our clients make better decisions and use that data to create net new solutions, which I know, Lambros, your team works on all the time.
Eric Andersen:
I was just going to say, so thanks for that, Lori. That was fantastic. Lambros, maybe over to you as well. I know you're speaking to clients really all over the world about many of these issues. How do you see it? How are we helping clients think through some of these issues?
Lambros Lambrou:
The bar around decision-making is a completely different level for all the reasons that we've talked about over the last while, and say when talking to clients, what we often hear in every conversation, it's, "I want to be better informed. I want to understand how risk is evolving. I want to be better advised in and around how that risk will evolve in the short, medium and longer term. And, ultimately, I want to be put into a position where I can make better decisions around how I manage that risk."
I think from an Aon perspective, we're very proud around the time that we have taken to come up with a framework around engagement with clients that really responds to those three things. When we think about being better informed, that is supported by the level of investment that we put into data and analytics capabilities and tools that help to really focus on the identification and quantification of new and emerging risks, recognizing that oftentimes, the risks of today and tomorrow, history is not a great determinant of the future.
Therefore, the way that we think about capturing data, the way we think about modeling data, the importance of predictive analytics is absolutely critical to that. Then, supporting that with industry expertise and a sort of, I would say a proven methodology around the discovery sessions we have with clients to really deeply understand their issues at the strategic as well as at the risk level. Then, translating that into conversations around, well, what are the solutions that exist out there to respond to those needs?
And so, if I move from better informed to better advised, well what does that feel like? It's a combination of, I would say, a collaborative “sleeves rolled up” approach to really understanding those issues and starting to connect them with solutions that might exist out there. As I said before, the notion of identification and quantification and understanding how risk is evolving and understanding how risk is connected to other issues that exist out there, and I would say really working in partnership with clients.
I mean, that's where I see also a real shift over the last couple of years is the relationship with the clients around understanding their needs and the partnership with which we now spend time with them thinking about how to innovate more effectively in and around these new and emerging risks. Now that's been, I think, a dimension to the relationship that we see has really evolved over the last couple of years in particular. Then, ultimately, we get to the, dare I say, at the tip of the spear around, okay, I now need to make a decision, so how do I make better decisions recognizing all of that investment that have been made prior to that?
I'd say those decisions are supported by increasingly integrated solutions, which responds to the interconnected nature of risk. And so, there's a huge area of opportunity for the industry in helping to, dare I say, fill in the gaps because risk emerges in organizations that we have said, no longer in silos. It works across and up and down within organizations. Candidly, insurance solutions need to evolve to be able to respond appropriately to that greater interconnected nature that exists out there.
Then, within that and within the partnership is a tailored client experience and with I would say practical execution around the things that truly matter that have maximum impact for their organization. Again, where the focus is not just around, dare I say, the protection of the financial statements and the financial aspects of an organization, but also, and Lori talked about many of these things, so think about talents as a good example. What is it we can do to enable organizations to be more successful in the way that they execute their strategies that are most important to them?
Eric Andersen:
That was great. Thanks to both of you. This is the favorite part of the podcast for me, and we give the opportunity to each of you to share a little bit, I'm going to ask you a question, to share a little bit about yourselves for the listeners that's a little bit off the path of the expertise that you both have shared with us today. And so, maybe I'll start with you, Lori. What's the last book you read?
Lori Goltermann:
Time Management. Boy, that's a tough one in our lives. Reading a book, I had a luxury over the holiday, so I'm glad I'm getting this question after the holiday. I read a book called Lessons in Chemistry, and even though I'm a biology major, Eric, which you may not even know, it had nothing to do with why I read this book. It was written by Bonnie Garmus, and it's about a brilliant chemist who throughout the story somehow leads a cooking talk show. She's a single mother and a great role model for her daughter, and I could not put the book down. Lessons in Chemistry is a page turner. I'd highly recommend it.
Eric Andersen:
That's fantastic. Thanks, Lori. I'll have to pick it. Lambros, a different question for you. How do you get ready for the workday?
Lambros Lambrou:
Another great question. I would say, as a family, we purchased a COVID dog, COVID pooch as it were, so mini Goldendoodle, which has given me a great opportunity as someone who tends to be a bit of an early riser or certainly an early riser in our family to, say, walk it in and around Manhattan as New York awakens in the morning. I find it very cathartic, dare I say it, to watch a city wake up. It's really interesting to see those that are out and about helping to start the day for New York City, and dare I say, it gives me a little bit of thinking time as I'm walking the streets with our mini Goldendoodle. I would probably say at the other end of the spectrum, I'm also the person responsible for taking her out at the end of the day. I guess, I get equalized, equal opportunity of when New York starts to think about going to sleep. Although, I guess in my time here, it is probably fair to say that New York certainly lives up to its reputation as the city that never sleeps.
Eric Andersen:
We could do an entire podcast on your decision around getting a dog, but we'll talk about that at another time.
Voiceover:
This has been a conversation On Aon and Aon's 2022 Executive Risk Survey. Thank you for listening. If you enjoyed this latest episode, tune in soon for our next edition. You can also check out past episodes on Simplecast. To learn more about Aon, its colleagues, solutions and news, check out our show notes and visit our website at aon.com.