Aviva Risk Insights Report: Covid-19, Brexit and disruption top British business concerns

Pandemic highlights interconnectivity of risks, as need for Cyber protection grows  

• 69% of businesses said the long-term impact of Covid-19 on their business will be negative
• Businesses twice as likely to say impact of Brexit has been negative rather than positive
• Cyber is a top-five risk as businesses increase homeworking and diversify through digital
• Only 11% of businesses said climate change and extreme weather events was a top-five risk
• 89% of businesses believe they are resilient to business risks
• Only 47% said they regularly undertake health and safety risk assessments
• Report comes as Aviva launches a new risk management website to provide expert guidance and support

British businesses have loosened their grip on the climate emergency as they continue to battle the Covid-19 crisis, with many employers stating that their business is not exposed to any risks as a result of climate change, Aviva’s first annual Risk Insights Report shows.

Commissioned by Aviva with YouGov, the research canvassed the opinions of 1,260 business leaders from organisations of all sizes, industries and locations across the UK.

The report charts the top concerns on the minds of British employers, with Covid-19, Brexit, and business and supply chain interruption dominating the top three spots. Climate change ranked as the number 13 risk faced by businesses, with just 11% identifying it and extreme weather events as one of their top five concerns.  

The Top 10 Risks facing UK Businesses*

*Business leaders were asked to select up to five risks. The table ranks the top risks by the proportion of businesses that stated that risk is one of the five risks they are most exposed to 

While 89% of businesses believe they are resilient to business risks, less than half (47%) of all businesses said they regularly undertake health and safety risk assessments, fire risk assessments (33%) or business continuity planning (28%). This is especially concerning, given that some assessments are required by law (e.g. health and safety, fire). Small businesses in particular are struggling to prepare: 42% of small businesses said they have not carried out any of the main risk management activities in the past 12 months.  

Coronavirus

Operating in the midst of a global pandemic has presented businesses with an ongoing series of challenges of a breadth and depth previously unknown. Looking to the future, 69% of businesses said the long-term impact of Covid-19 on their business will be negative. For 39% of businesses, lower growth is expected as a result. So it is not surprising that businesses said they are more “worried” about the impact of Covid-19 than any other risk in the research.

Brexit

Business leaders were more than twice as likely to say that the impact of Brexit on their business has been negative rather than positive. This outlook reflects the risks businesses face from legislative and regulatory changes, which was the second largest risk business leaders said they are exposed to, after public health events.

Businesses say they face a wide range of risks during a potentially bumpy period as the UK seeks to develop new trading relationships outside the EU. For example, supply chains that previously relied on the free movement of goods and services across the EU have had to be reviewed and revised.  Aviva’s research shows that three-in-ten (31%) businesses said they were actively looking to source from local or British suppliers to help ensure greater transparency and control, especially as consumer attention on a business’ supply chain has heightened. One-in-six (17%) business leaders identified a shortage of skilled workers as a top-five risk for their business, reflecting uncertainty in the supply of labour post-Brexit.

Climate Change

Only 11% of businesses ranked climate change and extreme weather events as one of their top five risks. While current risks facing British businesses are pressing, they should not be the only risk management and prevention considerations taken by businesses.

More than one-in-three (36%) businesses said they were not exposed to any risks as a result of climate change. Businesses cannot ignore the very real risks associated with climate change and climate-related extreme weather events. Those businesses that did recognise climate-related risks said they are most exposed to economic and market risks (29%) as a result of the climate emergency, followed by regulatory and legal changes (24%) and operational disruption (21%).

Cyber

In response to the challenges of operating in the midst of a pandemic, nearly half (48%) of businesses said they increased their digital adoption of technology. They did so largely to reduce their cost base (28%) and diversify their operations (27%). However, the migration online also poses a significant and growing risk, with more than one-in-four businesses (27%) – and one-in-three large corporates (36%) – listing the risk of cyber attacks as a top risk faced by their business.

The impact of a cyber attack can be crippling: 44% of businesses said they would face operational disruption in the event of a cyber attack; 42% said loss of data; and one-in-three said loss of customer confidence (33%), financial impact (33%) and loss of reputation (32%) would all stem from a cyber attack. However, 20% of business leaders said they did not think they were exposed to any Cyber risks, highlighting the need for greater awareness of cyber risks.

Nick Major, Interim Managing Director, Commercial Insurance, Aviva, said, “Businesses have had to deal with a tremendous amount of uncertainty in the past year, and the agility and determination they have shown in response to the challenges they have faced has been extraordinary.

“The pandemic has underscored how increasingly interconnected and complex the risk landscape is; the importance of a strategic, proactive programme of risk management and prevention has never been clearer.

“Looking ahead, the challenge for businesses will be to juggle a multitude of pressing risk management priorities: managing the uncertainty of operating in a current pandemic, knock-on risks such as supply chain disruption, emerging risks such as cyber, while not forgetting fire and flood, and the evolving threat of climate change, which in the long-term pose some of the most disastrous risks to business. The ability to manage the immediate threat, but retain an eye on the evolving and longer-term risks is going to be critical for business.

“The explosion of homeworking and the move online through  successive lockdowns has created an opportunity for cyber criminals; as our dependency on technology grows, so too must our emphasis on the prevention and protection from the increasing threat of cyber attacks. Cyber is now one of the biggest risks businesses face.

“British businesses are strong and resilient, and will emerge from the challenges of the current pandemic and Brexit. But evolving risks such as cyber and climate change remain the most significant long-term threats, not just for business, but for society. Failure to address the climate emergency now jeopardises our collective future, and UK businesses have a responsibility to act today to ensure a better tomorrow.”

At a time where 83% of businesses recognise the need to maintain or increase their focus on risk management strategies, quick access to expert guidance and support is key. Aviva’s report coincides with the launch of the new Aviva Risk Management Solutions website to assist all businesses large or small, providing access to guidance to help identify, understand and mitigate the current, and – importantly – new emerging risks they face.  The new website can be found at https://www.aviva.co.uk/risksolutions/

Click the image below to download the report

Authored by Aviva