Businesses in the United Kingdom could be facing a very challenging year with threats from the spreading bird flu virus and concerns over increased sophistication of cyber crime, a major brokerage firm said.
Chicago-based Aon's London office released its "2007 Risk Report" warning senior management to take the lead in stepping up their business continuity plans in the face of these major risk challenges.
Outlining the most prominent risks in 2007 from environmental liability to pandemics, the report underscored the growing importance of business continuity management (BCM), which it identified as the single process that can mean the difference between business survival and collapse.
Despite such risky times, the report explains that some companies continue to neglect BCM as senior management do not think it warrants their time.
"The main reason some companies are still holding back from BCM is that establishing an effective program requires the most precious resource of all–namely senior management's time–while appearing to yield little in the way of return should the disaster never strike," said Hugh Leighton, risk consultant, director at Aon.
Aon notes a tendency for BCM to be viewed simply as insurance planning, but emphasizes that it is a management process designed to understand what could bring a business down. Because of this, BCM should be at the top of the boardroom agenda for all businesses in the United Kingdom, Aon said.
The report made recommendations for managing pandemic and network risk.
It said the deadly H5N1, or 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.
According to the report, technology 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.
The report said that 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.
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, said the report.
The report also highlights the following risks at the top of the agenda in 2007:
o Directors and officers liability: though there were fewer court actions against directors in 2006, there may a rise in notifications under D&O policies. Directors need to make sure they have the optimum level of protection.
o Emerging markets present a risk as the appetite for mergers and acquisition in new markets continues to grow. Companies must examine the challenges of such investments, particularly cultural differences.
o As new regulations start to bite in Europe, companies must revisit their insurance needs and internal practices to ensure they are not caught out by environmental liability.
o Though energy prices have dropped in the early part of 2007, energy insecurity is rising. While there is time to prepare for inevitable shortages, businesses should examine how to safeguard their supply and prepare for the energy crunch
Copies of the 28-page report are online at www.aon.com/uk.
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