Aon warns management to brace itself for the riskiest year yet

LONDON, 12 MARCH 2007 – UK businesses should be preparing for what could be the riskiest year yet, according to leading insurance broker and risk management consultant Aon. In its 2007 Risk Report published today, Aon warns senior management to take the lead in stepping up their business continuity plans in the face of major risk challenges.

Outlining the most prominent risks in 2007 from environmental liability to pandemics, the report underlines the growing importance of the single process that can mean the difference between business survival and collapse: business continuity management (BCM).

Despite such risky times, the report explains that some companies continue to neglect BCM as senior management do not think it warrants their time. Hugh Leighton, risk consultant – director at Aon, comments: “The main reason some companies are still holding back from BCM is that establishing an effective programme requires the most precious resource of all, namely senior management time, while appearing to yield little in the way of return should the disaster never strike. If ever there was a false economy, this is it.”

Aon notes a tendency for BCM to be viewed simply as insurance planning, but emphasises that it is a management process designed to understand what could bring a business down. As such, BCM should be at the top of the boardroom agenda for all UK businesses.

Management need to recognise how BCM can help prepare for the following two major risks in 2007, as highlighted in the report:

  • Pandemics: as the deadly H5N1 surfaces in the UK, avian flu is not insurable for most businesses but must be managed in other ways. With employees at risk from illness, business continuity plans will help to protect the business while this essential asset is under attack.
  • Network risks: IT security for data systems is a blind spot for many companies, but they need to focus on protecting themselves from the threat of fraud or data loss, for example, as a result of increasingly sophisticated cyber criminals or technological disruptions. Ensuring service continuity in the event of a crisis means detailed planning and business continuity management.

While it is tempting to anticipate major global disasters as being the potential cause for such a disruption, the reality can be more mundane. BCM can help a company to avoid a catastrophic loss of revenue or market share and survive anything from an outbreak of avian flu to a fire next door.

Hugh, also a member of the British Standards Institute’s BCM technical standards committee, continued: “BCM is becoming increasingly recognised as a key ingredient of good corporate governance. Part One of the British Standard BS25999 was published in November 2006, creating a code of practice. Now Part Two is scheduled for mid-2007 and a certification scheme is on the horizon. If business fatality was not enough to spur management into action, they may soon have even stronger drivers to address BCM.”

The report also highlights the following risks at the top of the agenda in 2007:

  • Directors & officers liability: though there were fewer court actions against directors in 2006, there may be turbulent waters beneath the surface with a rise in notifications under D&O policies. Directors need to make sure they have the optimum level of protection.
  • Emerging markets: as the appetite for M&A in new markets continues to grow, companies must examine the challenges of such investments, particularly cultural differences.
  • Environmental liability: as new regulations start to bite in Europe, companies must re-visit their insurance needs and internal practices to ensure they are not caught out.

Energy prices: though prices have dropped in the early part of 2007, energy insecurity is rising. With time to prepare for inevitable shortages – how can businesses safeguard their supply and prepare for the ‘energy crunch’?

About Aon

Aon Corporation is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 43,000 employees working in Aon’s 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.