Economic slowdown, damage to reputation and supply chain failure key risks in the retail industry
The current economic slowdown, damage to reputation and disruption or supply chain failure are the top three risks identified by Aon Analytics in its recently released 2009 U.S. Retail Industry Report. The report was generated to help Aon’s retail industry clients remain abreast of emerging issues and learn how peers and competitors are managing risk, overcoming challenges and capturing opportunities.
The report noted that preparedness for risk in the retail industry was demonstrated by having in place a plan to address the risk or having undertaken a formal review of that risk. Risk concerns for the top ten risks which retail respondents reported the lowest state of preparedness mirrored the top three risks – economic slowdown at 33 percent, damage to reputation at 52 percent and distribution or supply chain failure at 53 percent – are typically more complex, difficult to control, enterprise-wide and carry a degree of predictability.
“Effective risk management relies on informed and insightful decision-making, which requires quality data and informed interpretation,” said Len Churnetski, managing director of the retail industry practice for Aon Risk Services. “Our report provides competitive industry data on key issues and concerns. These findings generated by Aon Analytics will allow clients and prospects to benchmark their risk management and risk financing practices as well as help identify procedures that may improve the effectiveness of their own risk management strategies.”
According to the report, more than 45 percent of the retail respondents indicated that they rely on senior management intuition and experience as the primary method of identifying and assessing their major risks. Twenty-four percent said they rely on business unit risk registers or key risk indicator worksheets for risk identification and business unit quantitative analysis for risk assessment.
“In practice, respondents to our report most likely are using a combination of methods to assess their levels of risk,” noted Churnetski. “However, risk identification based on experience may cause retail companies to miss emerging or new risks. These methods also may not be consistent in their application, and they could lead toward risk aversion.”
Aon Analytics also noted in the report that with respect to premiums, over the past year for the casualty lines of coverage reviewed, the retail industry averaged single digit rate decreases. For directors and officers’ liability and property, Aon Analytics said that it has seen average increases of 2.6 percent and 2.8 percent, respectively. For property, some of the larger national retailers saw double digit increases.
Aon will host a retail symposium for clients in Chicago October 20-22. The purpose of the symposium will be to provide clients with a focused forum to come together with their peers and Aon’s experts to discuss the latest industry research and benchmarking, such as the Aon Analytics report as well as specific challenges facing retailers such as foreign supplier liability and cyber risk.
Methodology
The Aon Analytics 2009 U.S. Retail Industry Report is based on data from Aon’s 2009 Global Risk Management Survey, Aon Global Risk Insight Platform(SM) (Aon GRIP) and other proprietary databases. Aon’s Global Risk Survey was conducted in October and November 2008 and is based on responses from 551 organizations in 40 countries. Results shown in this report based on the Risk Survey represent 33 global responses from the retail trade industry and are not limited to the United States. Aon GRIP is the world’s leading global repository of global risk and insurance placement information providing fact-based insights into Aon’s USD $54 billion in global premium flow. Results shown in this report based on data from Aon represent placement information from the United States between November 2008 through mid-year 2009. In addition to the Aon Global Risk Management Survey and Aon GRIP, data was included from other proprietary databases. Results shown in this report based on data from these other databases represent placement information from the United States between July 1, 2008 and June 30, 2009. Along with the support of other Aon insurance and industry specialists, Aon Analytics collected and tabulated results, provided analysis and interpretation of findings and prepared this report.
To access Aon’s 2009 U.S. Retail Industry Report, log onto www.aon.com/retailindustryreport