LONDON, Nov. 20, 2018
Key risk and confidence findings from the first global CNA Hardy Risk and Confidence Survey
LONDON, Nov. 20, 2018 /PRNewswire/ --
Less than two thirds (59%) of business executives worldwide are currently confident about the ability of their business to grow and prosper, according to the latest edition of CNA Hardy's Risk and Confidence Survey, released today. However, there are substantial regional variations, with 70% of leaders in Continental Europe expressing confidence, well ahead of those in North America (64%), Asia Pacific (53%) and the UK (39%).
In terms of threat perception, there is greater consensus: economic risk is the primary concern for 22% of business leaders worldwide, ranking in the two top risks in every region ahead of cyber (19%), technology (14%) and political risk (13%).
Dave Brosnan, CEO, CNA Hardy, commented: "Economic risk is top of the leader board in every region bar Continental Europe and it hits business confidence hardest where organisations feel they have most to lose – namely in the UK where Brexit is paralysing decision-making and in Asia where trade wars are distorting trade patterns.
"By contrast, in North America and Continental Europe, comparatively strong economic growth means business leaders are far more confident, despite the overall sense that they are operating in a moderate to high risk environment.
"However, what is interesting to note is that no matter what their confidence levels are, executives in every single region are prioritising international expansion to fuel growth. While this bullish approach is positive from a business perspective, growth should be treated with caution. Increasingly protectionist economic policy could undermine companies' international growth ambitions. Executing a global growth strategy is much harder against political and economic headwinds."
Rising technology investment sees tech and cyber risk rise
Alongside international expansion, executives globally are showing a strong preference for technology and R&D investments over people. 74% of business leaders worldwide are prioritising technology spend and 70% R&D spend in order to support topline growth.
Historically, CNA Hardy research data has shown an equal preference for technology and talent to support companies' growth ambitions. In November 2018, however, hiring of temporary staff was a lower priority than spending on corporate development (e.g. M&A) or plant and equipment.
This shift in investment priorities has also altered risk perceptions, making technology1 a global top three risk, with 14% of leaders globally ranking it as their top risk now and 37% suggesting the risk will increase in six months' time.
Dave Brosnan commented: "Although technology is essential to fuel the global expansion on which business growth depends, in many ways it is also the soft under-belly of the 4th industrial revolution. As technology becomes ever more critical and embedded, so managing it becomes harder and the risk of getting it wrong increases. Greater dependence inevitably paves the way for greater cyber exposure and other technology-related risks. It is an inescapable but vicious circle.
"It is no wonder then, that looking ahead six months to May '19, cyber risk takes centre stage as the top risk globally, with almost half (49%) of executives saying it is set to increase. Interestingly, 50% of large companies, with turnover in excess of $US1.3bn, said the risk was likely to increase compared with only 36% of small and 45% of mid-size companies. Our data suggests that SMEs are not viewing cyber as a priority as they appear to feel less vulnerable to the risk. This is a false impression, and insurers need to do more to highlight the risk of cyber to businesses of all sizes."
Companies must prepare for interconnected risks
The top three business risks - economic, cyber and technology - are global, inter-connected and complex.
In our view, companies need more than the traditional financial and legal skills if they are to manage these risks. They also need a broader, more diverse range of skills on the board to help identify and manage the threats to brand reputation posed, for example, by failure to prepare adequately for Brexit or a disruption to the supply chain caused by a cyber-attack. Organisations also need to think about embedding a more proactive approach to loss and risk prevention. Stronger leadership teams, operating within a more proactive risk culture will be better placed to make the strategic investments in technology, people and processes that will enable growth.
Dave Brosnan commented: "Large losses today are caused by the same drivers as twenty years ago – fire and flood. If businesses cannot master these more obvious risks, inevitably they will struggle when faced with more complex, global and interconnected risks. Leadership, culture and strategy are key as insurers get better at understanding and responding to these risks and communicating what needs to change.
"Risk management is as much about service and support as it is about balance sheet risk transfer, and for that to work effectively there has to be better dialogue between clients and the industry."
North America strides forward, confidence riding high
Nick Creatura, President and CEO, CNA Canada commented: "The US and Canada are experiencing the twin phenomena of high growth and high risk. The high levels of confidence among business leaders across North America appear to be driven by local factors, predominantly the strength of their economies. In contrast, risks are becoming increasingly global – such as trade wars and Brexit – which are beyond the immediate control of business leaders."
Is the Asia Pacific tiger losing its roar?
Rob Hands, CEO, CNA Hardy Asia commented: "Asia has experienced a long period of rapid growth, underpinned by a buoyant Chinese economy and strong demand. The on-going trade war with the US may cause an economic slowdown in China, and we can see increasing caution amongst company executives as a result."
UK and Europe: a continent divided by Brexit
Stuart Middleton, CEO, CNA Hardy Europe commented: "The Channel between Europe and the UK is narrow, but the gulf in confidence between the two markets is enormous. Continental European businesses have the luxury of balancing cyber, technology and the economy as their top concerns. In the UK, it's economic risk that is dominating the C-suite risk agenda and sucking up all the oxygen in the boardroom."
About the research
Opinion Matters, an independent research agency, conducted quantitative research on behalf of CNA Hardy. This research was undertaken during July and September 2018, via an online survey of 1,500 business leaders of multinational firms with operations in Europe.
Company size ranged from businesses with turnover of US$6.5m up to more than US$1.3bn.
The regional sample split was:
The survey respondents were evenly split from across the following industry sectors:
- 450 firms based in the UK
- 250 firms based in France and Germany
- 450 firms based in the USA
- Transportation and Logistics
- 100 firms based in Canada
- Financial Services
- 250 firms based in Singapore, South Korea & Australia
- Professional Services
- Healthcare (private)
- Life Science
In addition, Luther Pendragon, undertook telephone interviews with representatives across the target business sectors and CNA Hardy representatives based in the UK, North America, Continental Europe and Asia Pacific.
Luther Pendragon worked with CNA Hardy to analyse the data, write and prepare the November 2018 Global Risk and Confidence survey report.
About CNA Hardy
CNA Hardy, acting through Hardy (Underwriting Agencies) Limited and CNA Insurance Company Limited, independent wholly-owned UK subsidiaries, are a leading specialist commercial insurance provider for clients within both the Lloyd's and company markets. For more information, please visit CNA Hardy at www.cnahardy.com.
CNA is one of the largest U.S. commercial property and casualty insurance companies. CNA provides a broad range of standard and specialized property and casualty insurance products and services for businesses and professionals in the U.S., Canada, Europe and Asia, backed by 120 years of experience and more than $45 billion of assets. For more information about CNA, visit our website at www.cna.com.
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1 Technology risk definition - IT system failure, disruption from new tech-enabled competitors or start-ups
2 Corporate risk definition - fraud, corruption, poor governance, pension exposure, poor corporate culture