Lloyd's Report Suggests Global Businesses Worry About Wrong Risks

(This post was written by colleague Robert O'Connor, London editor with A.M. Best. He can contacted via eMail at Robert.OConnor@ambest.com)

Business executives around the world may be more worried about risks that don't pose a threat to them than those that do, according to Lloyd's.

High among the concerns of businesses are external risks such as lost orders and foreign exchange movements, Lloyd's said in a report. Lower on the list are such internal issues as corporate liability and damaged reputations.

The report, "Risk Priorities and Preparedness," was released jointly with the Economist Intelligence Unit. Lloyd's described it as one of the largest surveys ever conducted on risk. It sought the views of 570 board level-executives around the world on 20 risks. Broad risk categories included the environment and health, business and strategy, natural hazards and political risk, crime and security.

"Since late 2007, the contraction of credit in financial markets and the subsequent economic downturn has had a dramatic impact on corporate confidence," the report said. "Across the full range of regions and industries, companies are postponing investment, cutting costs and retrenching into core markets."

Business executives should be aware of the actual risks they face, Lloyd's Chairman Peter Levene said. "While good risk management will help to minimize internal factors, they should recognize that they need to extend their thinking outwards to their suppliers, customers and other stakeholders to ascertain how their behavior will resonate with the company itself," Levene said in a statement.

Levene recalled last year's Lloyds 360 Risk Insight report, which he said warned of the international spread of "a U.S.-style compensation culture."

He said businesses should not ignore such long-term perils as climate change. The current report "will form the basis" of a new interactive global risk map that will be released next year, according to Lloyd's.

The document pointed to what it said is the growing role within organizations of risks managers. The importance of someone who can keep a companys reaction to risk sensible and accurate is essential," Levene said. "Risk is not a dirty word . We just need to understand it to manage it properly.

Businesses in China and Southeast Asia are likely to place particular emphasis on environmental and health risks, the report said. Political risk and crime were given more priority in the Middle East, North Africa and Latin America.

Lloyd's has a current Best's Financial Strength Rating of A (Excellent).