Reprioritizing Risk andResilience for a
Post-COVID-19 Future
Detailed insights and analysis from Aon’s COVID-19
Risk Management and Insurance Survey

Table of Contents
Executive Summary. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3React and Respond: Survey Insights. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
Recovery: Survey Insights .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 17
Reshape: Survey Insights .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23
Industry Insights.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 30
Appendix 1: Industry Mapping .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 50
About the research.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 51

2

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureExecutive Summary
Aon’s global COVID-19 Risk Management and Insurance Survey, conducted at the end of 2020,
was designed to evaluate how companies across different industry sectors have managed the
pandemic crisis, their priorities for reshaping their businesses, and the implications for risk and82%of respondents did

insurance. The following analysis of the survey results shows how organizations have adapted to

not list pandemics

this complex, dynamic and disruptive risk landscape and how their future decision-making willor other major healthbe shaped based on their priorities.

crises among the top

At the time of Aon’s 2019 Global Risk Management Survey, pandemic risk ranked 60th out of
69 identified risks. After potential threats from avian flu and swine flu receded, organizations
appear to have considered the risk of a pandemic but deemed it unlikely to materialize — so few

10 risks on their risk
registers before
this event

organizations truly planned for it or considered its scope or potential impact.
When faced with a crisis, especially one they are unprepared for, organizations are forced tothink and act quickly. Aon developed the COVID-19 Crisis Response Framework for Clients1 to
help organizations develop effective crisis responses in real time using a structured but flexible
decision-making framework. Organizations’ resiliency is considered in the context of the threemain time frames outlined by Aon’s COVID-19 Crisis Management Model:

75%• React and Respond• Recoverof respondents• Reshape

said they had
been impacted insome form by the
pandemic; of these,
Within each time frame, leaders face several key decisions. The nonlinear nature of the pandemic
and its multiple waves of impact mean that organizations are in different stages of the journey.

8% had been severely
impacted

While 80% of respondents felt their organization had moved beyond the first stage (react andrespond), there is still room to grow. This figure was higher in North America (89%) and lower
in Europe, the Middle East and Africa (EMEA) (73%) and Latin America (LATAM) (74%). Amongcompanies in later stages, 50% reported that they’re in recovery mode, and 30% are now
reshaping their vision, priorities and business. Highlighting the challenge of the pandemic, thenumber of companies that have already moved beyond the react-and-respond phase was notmaterially higher for companies that had a pandemic plan in place prior to COVID-19.
Going forward, risk and business leaders must reprioritize risk — broadening their perspective
and evaluating major shocks, not just anticipated losses, and elevating risk managers to an
enterprise-level strategic role. Doing so will also enable them to redefine resilience. These
are the post-COVID-19 imperatives required to reshape businesses into a more future-readyposture. With an integrated, resilient and agile risk approach, business leaders can make better
decisions in both the immediate term and the future. In the insights that follow, we examine howorganizations are responding, recovering and reshaping to emerge stronger and more resilient.

1

Read more about this framework in Aon’s whitepaper: Decision-Making in Complex and Volatile Times: Keys to Managing
COVID-19

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

3

Only

7%

of respondents said
they had thrived
during the pandemic

88%

React and Respond: Organizations’ Pandemic Response
The severity of the shock to business caused by the multiple waves of the pandemic
has left 20% of organizations still focusing on the first phase of their response tomaintain business continuity some nine months after the pandemic emerged.2 Oneof the challenges for many organizations is that their traditional enterprise-riskmanagement (ERM) processes did not identify the enterprise-wide threat posed by
the pandemic and did not appreciate the impact of interdependencies on the way
the organization functioned. Because of that, the initial react-and-respond stage wasof organizations

complex, as organizations worked to respond to a number of different challenges

have not made any

resulting from the pandemic.

claim under theirinsurance program
because of thepandemic31%

of respondents did

To do so effectively, organizations have overwhelmingly led their crisis management
response with a strategic COVID-19 task force charged with making decisions.
The importance of involving key stakeholders in managing the complex andinterdependent components of decisions is underlined by the strong cross-functional
support from human resources, business operations, risk management and financepersonnel within these task forces. In fact, there was overwhelming evidence thattaking an enterprise-wide approach to the response was the most valuable lesson.

not have a pandemic

Clearly there is a long way to go before organizations will be able to implement andplan in place

execute their post-COVID-19 plans, with nearly 60% believing COVID-19 will continue
to impact their business for at least another year. The impact of the pandemic varies,
but a significant number of companies reported that the pandemic has had a severe
impact on their organization and that a long recovery period lies ahead. Only 7% oforganizations said they saw the pandemic as an opportunity and described themselves
as thriving. A further cohort (17% of respondents) said they still do not understand thelong-term impact of the pandemic on their business, demonstrating the longevity andcomplexity of the crisis.
Organizations’ actions in the react-and-respond stage demonstrated some gaps
in the commercial insurance market. Very few organizations have sought to makean insurance claim as part of their response to the pandemic. This confirms theimportance of pre-event crisis management planning and the speed with whichorganizations had to respond and adapt. However, it also exposes the inflexible natureof the commercial insurance market and how this rigidity leaves many significant
commercial risks uninsurable.
The survey responses highlight the need for boards and executive management teams
to broaden their perspective when considering risk and focus on identifying andevaluating future major shocks. There is evidence that COVID-19 is starting to accelerate
this process. The organizations that do so and build on this experience to establish theirreact-and-respond approach — balancing agility, speed and structure — will be better
prepared for other long-tail risks that will require them to manage shifting priorities inreal time.

2

4

The World Health Organization declared the COVID-19 outbreak a pandemic on 11 March 2020

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureRecovery: Organizational Resilience

Only one-third

A significant majority of survey respondents said that they were still in the recovery phase and insaid their existing

the process of stabilizing their business and managing ongoing business impacts. In addition to

ERM program wasstabilizing the business, recovery also involves readjusting to risk — both small-scale challenges

sufficient to copeand major shocks.

with the impact ofof organizations

the pandemic
There were some regional variances that may reflect the progression of the pandemic across theglobe, but across all regions a similar number of organizations felt that their business remained
resilient despite being affected by the crisis. Even so, over half of organizations identified a need toreview business continuity management (BCM) (56%), suggesting that organizations understandthe need to reevaluate their existing plans to apply the lessons learned from the pandemic.
Many organizations are still uncertain about the overall impact of the pandemic, with 17%
reporting that they are unsure of the long-term impact and over 8% suggesting it will takesignificant time to recover.
Forty-three percent of respondents did not expect their organizations to become more dependent43%

did not believe theiron risk financing or insurance as an instrument to help smooth volatility of performance, even if

organization would

insurance products that apply to pandemic risk impacts were available. This may indicate that the

be more dependent

best-prepared organizations are confident in their response to such a major event.

on risk financing or

Survey responses indicate that organizations do not consider pandemic impacts to be insurable.

insurance

Recognizing that conventional insurance structures will not meet their needs, they are open
to exploring mechanisms that may provide an alternative way to finance risks. Indeed, 49% of
respondents agreed or partially agreed that their boards will review the ongoing performanceof a captive insurance company, and 46% agreed or partially agreed that the board will be
investigating the feasibility of a new captive solution.
There is a strong consensus among respondents (59%) that COVID-19 has not accelerated reviews
or adjustments of the company’s insurance programs or their structure/design. Most remain
unsure about when they will focus on reducing their total cost of risk (TCOR).
We expect organizations to turn renewed attention to the management of TCOR when the
pandemic and the macroeconomic circumstances stabilize. This, combined with the state of theinsurance market, is most likely to drive decision-making in this area over the next 12 months.
It will thus be more important than ever for organizations to identify and understand future
shocks and the risks associated with black swan losses. Thirty-five percent of respondents said

35%

have accelerated

their organizations have accelerated planning for future shocks because of the pandemic. Suchplanning for future

an approach is necessary to preserve shareholder value and maintain resilience in preparation forshocks because of

potential future events.

the pandemic

A strong strategy and approach have never been more important in helping clients to understandtheir choices and ensuring insurance programs are optimized and remain fit for purpose in acomplex world.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

5

Protecting people
and assets was

Reshape: Business Priorities and Future Planningconsistently ranked

Business Priorities

as the top priority

Respondents identified their main business priorities when it comes to reshaping theiracross all industries

organizations. Many organizations are putting a strong overall focus on protecting

Three specific areas
were identified as
critical:
1. Well-being of ourpeople2. Retaining key
employees
3. Operational
resilience

people and assets. This was a common theme across the world and among companiesof all sizes. Initiatives and interventions such as revisiting business strategy and balance
sheet protection, which may require longer-term planning, are less of a priority today.
This suggests that companies are still focused on short-term recovery planning, which
in many cases is supported by national subsidy methods such as furlough programs orbusiness loan schemes.
Protecting the well-being of employees remains a top priority for companies throughout
their pandemic response. The well-being focus relates to both employees’ physicalhealth in relation to COVID-19 and the mental health implications, both of which havethe potential to disrupt crisis management plans and reduce productivity.
Employees and communities have been central to the response and recovery phases forall organizations. As organizations look to adapt further and reshape, they will likely focus
on innovating their operational models and people policies so that they are more agile,
flexible and efficient. This, which is part of building a resilient workforce, is likely to be acornerstone of future success.

Maintaining or
increasing revenue
was the No. 2 priority
for organizations• New/accelerated
use of technology• Asset investment
opportunities• New productdevelopment

Maintaining or increasing revenue was the second highest priority for survey
respondents, with many turning to new or accelerated use of technology to advancethat agenda. This highlights the role of digital platforms in delivering dynamic, seamlessand efficient performance changes for organizations. It also suggests that technology
has been a cornerstone of response and recovery strategies. The organizational benefits
have been proved, building increased confidence in future investment decisions.
These opportunities do not come without risk. The acceleration of decision-making
means that many organizations may not have all the frameworks, systems or processes
in place to manage these contingent risks. This underscores the need for organizations
to understand the risks associated with changing business processes, stress test theircontrols and plan for future events.
Organizations have become increasingly dependent on digital platforms, making thempotentially vulnerable to adverse cyber events, information loss and reputational impacts
on a new scale. This will require a refresh of cyber strategy, risk management andevaluation of policy limits and the adequacy of coverage terms.
Cost management and balance sheet protection were very highly ranked byorganizations in all industries except financial services and technology and telecom,
where they ranked lowest.

6

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

Cost control is synonymous with the efficiency of people and processes within organizations;

Cost management

accordingly, significant emphasis is placed on these areas to shape the future operating model.

and balance sheet

Organizations will need to integrate their investment and digitization plans with their people

protection priorities

strategy to produce more agile and adaptable human capital models.

were:This will require significant strategic planning from HR teams to assess role fit and people• Redeploying

capabilities, which will entail employment consultation, engagement with unions and carefulconsideration of employee incentives, benefits and pensions. Understanding the investment cost

resource/activity• Business process
re-engineeringand efficiency savings are key to decision-making.

• Reorganizing theCompanies will use expense rationalization, liquidity planning and credit protection as three primary levers
to attempt to claw back balance sheet positions coming out of the pandemic. Credit solutions are becoming
increasingly important, not only as a way of ensuring liquidity but also as a means of assessing counterparty risk
and supply chain vulnerability.

workforce• Expense
rationalization• Liquidity planning

For many organizations, revisiting business strategy is a lower priority at present. This reflects• Credit protection

the continuing complexity of the macroeconomic and social environment and a recognition that
future shocks are possible. Organizations that have weathered the challenges of the pandemic arefocused on maintaining their resilience, and those that have been successful continue to execute
their response and recovery plans. Importantly, these organizations have identified the scope of the
impact of COVID-19 and are considering how they need to prepare for future risks on this scale.

Revisiting businessstrategy was ranked
lowest by mostorganizations globally

Future Shocks
Business leaders have been confronted with a number of decisions as they steer their workforces,
operating models, customers, portfolios and finances through massive uncertainty. Some of
the changes they’ve made are likely to last — and some are poised to completely reshape partsof their business. In the case of risk, COVID-19 has pushed companies to reprioritize risk andresilience. Respondents noted the increased importance of planning for future major shocks byboards and executives: 35% of respondents identified the need to accelerate plans to identify
these future shocks. Only 16% of respondents expressed confidence that they are very preparedfor future events.

1.	Economic
disruption
2.	A different

Similarly, they understand the need to improve their resilience to such events, with over halfplanning to review their business continuity management strategies.

pandemic or
health crisis
3.	Geopolitical

From a broader enterprise risk perspective, 76% planned to review their ERM program as part of thenormal business cycle, and a further 21% were actively aiming to investigate whether improvements
can be made. This shows that organizations want to apply the lessons of the pandemic in future
decision-making and to ensure that changes adopted quickly during the response and recovery
phase are sustainable and will remain effective as the risk landscape evolves.

Future Shocks

tension
4. Technologicaldisruptions
5. Business model
disruption

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

7

There was consensus from most sectors about the future shocks that could impact theirorganizations.
The identified major shocks demonstrate that organizations are taking a new perspective, learning lessons fromCOVID-19’s impact on their organization. Each of these shocks has the potential to challenge organizational
resilience and stability.
The potential for future impacts on an organization’s supply chain remains significant. In the
pandemic, 50% of organizations faced either demand- or supply-led issues in their supply
chain. Looking at the global, interdependent nature of the future shocks, these issues could alsosignificantly disrupt the supply chain.
Some companies have had to invest in new or more resilient supply chains in addition to work that
may have already been underway due to geopolitical issues. This will retain importance not only
to avoid disruption, but as a means of achieving environmental, sustainability and governance(ESG) and climate change objectives demanded by shareholders, customers, employees andcommunities. The scope and extent of the pandemic have reinforced the need for boards andexecutives to take a forward-looking risk perspective in future business objectives and to elevate risk
management to an executive, enterprise-level function within the organization.

Aon’s perspective
Traditional ERM processes failed to identify the full scale of the pandemic as its impacts materialized
into multiple key risks to organizations, such as liquidity, credit risk, human capital and accelerated
rates of change. However, there is overwhelming evidence that taking an enterprise-wide approachto the response was the most valuable lesson, and one that organizations are likely to carry forward.
With existing and emerging risks converging, future shocks on organizations’ radar, and heightenedrisks, such as cyber, associated with the pandemic response, organizations have to take steps toreprioritize risk and resilience.
Following are suggestions that could help organizations navigate and prepare for an increasingly
complex world.3

Expanding risk management decision-making to address long-tail and emerging risks
Boards and executive management teams need to broaden their perspective when consideringrisk and increase their focus on identifying and evaluating future major shocks that could disrupt
strategic objectives and present threats to the organization. This will help organizations increase
their preparedness and explore opportunities to enable them to thrive. It is becoming clear that
resilience plans associated with prior business models will not be sufficient to protect organizations
from these emerging risks.

3

Reference: “Helping Clients Navigate an Increasingly Complex World” and “Are You Prepared for the Next Big Threat?
Evaluating Current and Future Threats”

8

Reprioritizing Risk and Resilience for a Post-COVID-19 Future“The effects of theongoing COVID-19
pandemic are
still being felt byorganizations, andthe consequences
are expected to last
beyond a year bymost organizations.
Whilst it hascaused significant
financial, strategicand operationalpressures onorganizations, many
have adapted quickly
and demonstrated
resilience. The scopeand extent of thepandemic was notforeseen by mostorganizations,suggesting existingrisk management
frameworks needto adapt to support
future decisionmaking.”Building a resilient workforce
Survey responses point to an overwhelming consensus that people are at the heart of businessresilience and strategy success. It is notable that, at this early stage of recovery, respondents acrossthe globe saw protecting their people as their top priority. Workforce stability and engagement
is a key driver for businesses to be sustainable and adaptable across all countries and regions in avolatile and changing risk landscape.

Rethinking access to capitalFew respondents said they submitted COVID-19-related insurance claims, suggesting that insurance
was not viewed as a solution or was unable to meet the needs of organizations in financing theirrisk exposure. This is likely to be because either the risks are uninsurable or the scale of the event
exceeds conventional program limits or capacity. We have seen unprecedented appetite forgovernment support to organizations globally, which is likely to have mitigated the impact in someareas through, for example, support loans or grants. This support may not continue in the future,
meaning the insurance industry needs to adapt and develop solutions capable of anticipating,responding to and mitigating financial volatility for organizations.

“COVID-19 haschanged the wayorganizations view
risk and resiliency,
meaning theiroperating models
will need to evolve toenable them to thrivein an increasingly
complex world. We
see evidence that thisis already happening
as organizations put
people at the heart oftheir business process
re-engineering anddevelop their future
working models tonavigate the complex
risk landscape andbe better preparedfor future shocks.”

Reprioritizing Risk and Resilience for a Post-COVID-19 Future9React and Respond: Survey Insights
Geographic Insights
As the pandemic continues to spread at different speeds across the globe and waves ofrestrictions on communities and businesses impact the global economy, organizations in different
regions find themselves in different stages of crisis management. North America had the lowest
percentage of respondents still in the react phase (10%, which was 9% below the all-region
average). The remaining regions were broadly equal, with around 25% of respondents in eachregion reporting that they are still in this initial phase.
The ongoing nature of the pandemic may be the reason LATAM and EMEA showed consistent
responses in line with the react-and-reshape benchmark. Countries in these regions typicallyhave multiple land borders, and the complex interrelationship of commercial activity acrossthese borders may have introduced additional levels of complexity navigating through the
pandemic. This may have produced greater uncertainty in these regions, slowing the progressionof the recovery cycle. This is supported by the fact that 9% of organizations in LATAM and
EMEA reported significant impact with significant time to recover (which was higher than thebenchmark). By contrast, only 5% of Asia Pacific (APAC) organizations said impact was at this levelof severity.
Other regions showed different trends that reflect the geographic nuances of the pandemic, risk
maturity, level of resilience and pandemic approach.
APAC respondents reported significantly higher numbers of businesses thriving during the
pandemic than other regions (11% compared with 7% overall). All other regions only reported
6% as thriving. This suggests that these organizations were more resilient and better able topursue the opportunities created by the pandemic. It may also suggest that these organizations
have come through the pandemic’s cycles and are able to move forward while other regions
still deal with specific localized issues, or that the demand for the products, materials andcommodities they produce was less impacted by COVID-19.

Our business has thrived during COVID-19
6%9%
Agrifood

13%

2%
6%

Energy and Utilities
Financial Services
Health/Pharma/Life Sciences
Industrials and Manufacturing
Technology and Communications

11%

10

8%

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

Transport and Logistics

This response is also likely to be linked to their risk maturity. More than half (52%) of APAC
respondents had a pandemic plan in place prior to the event, which is significantly higher than thebenchmark (30%). Many of these organizations learned from earlier threats (SARS, avian flu andswine flu), so they introduced robust plans and had state-run track-and-trace technology alreadyin place. Even so, 35% reported that they have accelerated the review of ERM (benchmark 29%),
with 78% intending to review business continuity strategies (benchmark 57%). This appears todemonstrate a much higher level of risk maturity in these organizations, which has improved their
preparedness and their ability not only to be resilient but to thrive.

Did your company have a pandemic plan in place prior to COVID-19?
31%

52%
APAC
North America
LATAM
EMEA

21%

27%

Very high numbers of respondents in EMEA (73%) and LATAM (79% ) reported that they did nothave a pandemic plan in place (compared with the benchmark of 69%), meaning that between
one-fifth and one-quarter of these organizations were prepared. EMEA respondents nonetheless felt
their risk management was sufficient (71%), which was higher than the benchmark. A proportion of
EMEA (36%) and LATAM (21%) respondents did not think the pandemic would accelerate a review
of ERM process, although 31% of EMEA respondents reported that they would review it. North
America had the lowest number of respondents indicating that they would review ERM process(25%), but a higher proportion had not decided.
The results suggest that organizations in EMEA and LATAM may not have fully appreciated the link
between enterprise risk management and resiliency. The results suggest that these organizations
could do more to learn lessons from the pandemic response and apply them to future plans, withthe experience of APAC organizations demonstrating the value of adopting such approaches.
The fact that these organizations still identified improvement as a priority demonstrates a level ofmaturity in enterprise-based decision-making.

Preparedness by Industry
A very high number (82%) of respondents did not include a pandemic among the top 10 risks intheir organizations’ risk registers prior to COVID-19, with some industry nuances. Respondents in theagrifood and construction and real estate industries were least likely to identify a pandemic as a risk
(9% and 10% respectively), while health and pharma, public services, and financial services had muchhigher numbers responding that the pandemic or major health crisis was in fact on their risk register.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future11Accordingly, two of those industries had the highest percentages of respondents with a pandemicplan prior to COVID-19: financial services (51%) and health and pharma (45%).
This suggests these organizations had a more robust enterprise-risk-identification process inplace. This is often linked with higher risk maturity, which is common in sectors that have complex
regulatory requirements.

Prior to COVID-19, was a pandemic or a major health crisis a top 10 risk on yourorganization’s risk register? - Yes
Health/Pharma/Life Sciences

26%

Public Services

25%

Financial Services

25%
20%

Transport and Logistics
Energy and Utilities

18%

Technology and Communications

18%

Industrials and Manufacturing
Hospitality

16%
11%

Construction and Real Estate10%

Agrifood

9%
0%

12

5%

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

10%

15%

20%

25%

30%

Business Impact
Overall, 48% of respondents recognized the impact of COVID-19 but stated their businesses
remained resilient. Smaller numbers of respondents said their organizations had thrived (7%),
and on the other end of the spectrum, 8% reported they were severely affected and would taketime to recover. Around 17% of organizations were still uncertain about the long-term impact on
their businesses, reflecting the continued uncertainty caused by the progression of the pandemic
globally at different stages.

My company has established an internal COVID-19 task force to help us manage
our firm’s response to COVID-19
5%

Yes
No

89%

From an industry perspective, technology and communications (13%) and industrials andmanufacturing (11%) had the highest percentages of businesses that have thrived because of
COVID-19, likely due to the rapid adoption and acceleration of technology in those industries. In
the hospitality industry, on the other hand, 67% of respondents stated their business was severely
impacted and would take time to recover.

How was your company’s supply chain disrupted?
7%
41%

36%
Our supply chain accelerated due to COVID-19
due to forced improvements throughout the crisis
Our supply chain faced demand issues, drop in
consumer demand due to COVID-19
Our supply chain faced supply issues, we
couldn’t source materials due to COVID-19
Our supply chain was not impacted by COVID-19

17%

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

13Despite the global nature of the pandemic, supply chains were resilient: 41% of respondents
reported that they did not see an impact on their supply chains.
Interestingly, the largest percentage of disruption in the supply chain was because of a drop in
consumer demand (36%), which affected hospitality and energy, sectors that are heavily led bydemand. Hospitality organizations faced the biggest issues because of a drop in consumer demand
due to COVID-19 restrictions (53%), and that demand decline could continue.
The pandemic had less of an impact on supply; the agrifood and industrials sectors showedresilience without stress on the supply chain. The construction and real estate (28%) and pharma
and health (27%) industries, however, had the highest percentage of supply chain issues, resulting
from limited material sourcing.
Regionally, APAC respondents showed a higher percentage of acceleration (12%) on the supply
chain due to forced improvements throughout crisis management, which aligns with the factthat respondents from this region reported faring better than other parts of the world in theirpandemic response.

Risk Management Response
Many organizations turned to a coordinated, enterprise-wide strategy for their crisis response:
89% of respondents said their companies had established an internal COVID-19 Task Force to help
manage their response to COVID-19.
The key functions of the task forces were identified as business operations (87%) and HR (95%). It isevident that a large part of the response across all regions and sectors has been focused on people.
Because people were a priority for response strategies, HR teams had to work closely with business
operations to maintain resilience.
The agrifood (81%) and hospitality (80%) industries show a below-average percentage ofcompanies that have established an internal COVID-19 task force. This suggests a more direct
reliance on operations to manage activities. For agrifood, this may be because the need tomaintain food security and safety meant that the response required less strategic planningbut more emphasis on compliance with health regulations. In the hospitality sector this may
be a consequence of these businesses being significantly impacted and a larger proportion of
employees at risk of furlough and other short-term measures.
There was overwhelming agreement that the key lesson to take away from this event was the need to have anenterprise-wide approach to risk (81%).
While the immediate impacts were people-focused, organizations had to solve complex issues to maintain
operational resiliency. The acceleration of technology deployment to enable remote working, the adaptation ofpremises to make them COVID-19 secure, and decision-making on key priorities resulted in an enterprise-wide
approach that ensured organizations could keep employees, customers and third parties safe while minimizing
disruption.

14

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

The overall sentiment on companies’ risk responses suggests that the pandemic took manyorganizations by surprise. More than two-thirds (67%) of respondents said their companies’ risk
management responses to COVID-19 were sufficient, but 32% recognized that additional planning
would have been beneficial.

Your company’s risk management response efforts around COVID-19 have been:

North America

34%

36%
LATAM

3%

Insufficient
71%

2%
36%

APAC

64%

0%
0%

Sufficient

61%

27%
EMEA

Sufficient, but moreplanning would havebeen beneficial

65%

1%

20%

40%

60%

80%

There were some sector-specific differences. Sectors reporting insufficient response were thehospitality (7%) and agrifood (5%) industries, which were higher than the average (1%). These arelikely to be the businesses that were least prepared and have suffered the most long-term impact
from the pandemic.
Public-sector respondents had a higher percentage (66%) that thought that, although theircompanies’ risk management response was sufficient, additional planning would have been
beneficial. The construction and real estate sector (38%) also reported that better planning would
have been beneficial.
The telecommunications and financial services sectors appeared most satisfied with their risk
management response. This may be because these sectors are more likely to have been able
to adapt digitally to the pandemic and is probably linked to their higher risk maturity. These
organizations tend to have more embedded systems to scan for emerging risks, and it is likely thatthe maturity of these systems has enabled these organizations to minimize impact and, in somecases, thrive.
Another area of risk management response is insurance. In a crisis, part of the risk response typicallyinvolves filing insurance claims, but this was not the case during the pandemic. Overall, 88% of total
respondents have not made COVID-19-related claims on their insurance programs.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future15

Has your organization made a claim on its insurance program or through its captive, which
was triggered by COVID-19? - Yes
Yes, under my General Liability coverage 0%
Yes, under my Employer’s Liability
and/or Workers’ Compensation coverage

Organizations with
under USD 1bn revenue

3%0%Organizations withover USD 1bn revenue

5%
4%

Yes, under my Property/BI coverage

9%Yes, under my Event Cancellation coverage 0%0%1%Yes, under other policies
2%
not specifically listed above
2%
Yes, under my pandemic coverage
2%

0%

2%

4%

6%

8%

10%

This suggests that organizations do not believe that insurance is an appropriate strategy and believe
themselves to have limited coverage due to the nature of the loss or the limits/ exclusions that could
impact potential coverage.
Of the 12% of respondents that have made a claim, 61% agree that the likelihood of renewing
the program with their lead/insurer is unchanged. In the global insurance market, which is seeing
hardening conditions in key classes such as property, professional indemnity and Directors &Officers, it is not surprising to see organizations seeking to maintain insurer relationships. This helps
to provide some certainty in a volatile trading period.
The hospitality industry has the highest percentage of respondents (40%) that have made a claimon their insurance, which may not be surprising given the extent to which the sector has been
affected by the pandemic.

If you have filed a claim, reflecting on the process to date, are you:
11%

Less likely to renew to my program with mylead /incumbent insurer
More likely to renew my program with mylead /incumbent insurer
The likelihood of renewing my program withthe lead /incumbent insurer is unchanged

28%
61%

16

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureRecovery: Survey Insights
Geographic Insights
Different regions of the world have experienced varying waves of the pandemic and rapidlychanging restrictions as a result, leading to regional nuances for organizations that report to be in
the recovery phase. APAC had the lowest number of respondents in the recovery phase (only 39%
compared with the benchmark of 52%) but much higher numbers of organizations in the reshapephase (36% compared with the benchmark of 29%). This may be related to the fact that the region
was hit earliest by first and second waves. It suggests that resilience and applying the lessons
learned from the event have enabled organizations to move forward with strategic plans.
North America showed the highest proportion of respondents in the recovery phase (59%) andwas slightly above the benchmark for organizations in the reshape phase. This suggests a level ofresilience within these organizations that has enabled them to stabilize and start to plan.

How would you describe the impact of COVID-19 on your business?
North America
6%
6%
6%

Our business has thrived during COVID-19
Our business has remained steady during
COVID-19 with little impact

APAC

EMEA

11%

8%

8%

20%
19%
22%

8%
9%
9%
5%

Our business has been severely impacted
and will take significant time to recover
Our business has been severely impacted
and our ongoing viability is uncertain

LATAM

2%
1%
2%
0%
15%
13%
20%
17%

Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient

42%

0%

51%
51%
57%

10% 20% 30% 40% 50% 60%

High numbers of respondents in all regions indicated that their organizations were affected but
remained resilient, with a benchmark of 48%. Again, APAC had the highest number of respondents
in this category (57%), followed by LATAM and North America (each at 51%). EMEA had the lowest
score for this metric (42%), and a higher proportion of EMEA respondents reported that theyremained unsure of the long-term impact (3% above the benchmark). At the time of the survey,
EMEA was entering its second wave. The resulting uncertainty is likely to have influenced the
responses for the region.
As organizations make decisions in the recovery stage, there was broad consensus that they
could do more to better integrate corporate risk and insurance activities, but there were regional
differences that reflect variances in priorities across geographies.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

17

AgreePartially agree

70

Disagree

64%

60

40

38%

44%

42%

34%

31%

30
20

53%

50%

50

19%

19%

31%

26%

23%

16%
10%

10
0

APAC

EMEA

LATAM

North America

Grand total

Overall, 49% of respondents agreed or partially agreed that their companies’ boards plan toreview the ongoing performance of a captive insurance company, and 46% agreed or partiallyagreed that the board will investigate the feasibility of a new captive solution. EMEA and LATAM
had the highest number of respondents suggesting they would not review plans. This seems
to be at odds with the proportion of organizations in these regions that were affected by the
pandemic. It may be that those organizations are still dealing with the immediate impacts andtherefore consider these areas a higher priority

My company could do more to better integrate its corporate risk and

Agree
50

49%

46%

Disagree

45%

39%

40
30

48%

Partially agree

32%

30%

26%

24%

30%

19%

20

13%
10

9%

0
APAC

EMEA

LATAM

North America

EMEA organizations appear more optimistic about how businesses integrate corporate risk andinsurance activities; 30% of respondents in this region do not think the company could do more
to improve this process. This may be because single-risk and insurance functions are embedded in
more of these organizations. However, when we look at the impact on organizations in this region,
there still appears to be room to improve the efficacy of the risk-management process throughimproved planning for future shocks.

18

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

Business continuity is another critical recovery area that demonstrates regional differences. North
American organizations placed higher importance on reviewing business-continuity-management(BCM) plans (60%), whereas only 51% of EMEA and 47% of LATAM respondents said that theywould review BCM.
This suggests that North American organizations place focus on business continuity planning as aseparate exercise rather than considering it to be part of the broader ERM strategy. However, thefocus on BCM could reflect their current priorities as they remain unsure how to apply lessons totheir enterprise-wide risk management going forward.

Risk Financing
The survey showed that 43% of respondents do not believe their companies will be more
dependent on risk financing/insurance after the pandemic.
Only 13% considered they would be more reliant on insurance or risk financing in the future.

My company will be more dependent on risk financing/insurance as an instrument
to help smooth the volatility of performance if insurance products are available that
apply to pandemic risk impacts.
60%

58%

Agree

53%

50%

48%

47%

45%

43%

Disagree

43%

40%
34%

33%

30%
24%

20%

20%
10%

27%

24%

16%
9%

15%

11%

15%
11%

5%

0%
PublicServices

Health/Pharma/Life
Sciences

Energy Construction Financial
andandServices
Utilities Real EstateTransport Technology Industrials
and
and
and
Logistics communi- Manufaccations
turingAgrifood

Hospitality

This suggests that organizations do not identify the impacts from the pandemic as insurable; theyrecognize that conventional insurance structures will not meet their needs and that exploringmechanisms may provide an alternative way to finance risks. Indeed, 49% of respondents agreed
or partially agreed that their company’s board will review the ongoing performance of a captive
insurance company, and 46% agreed or partially agreed that their boards will investigate thefeasibility of a new captive solution.
This means it is going to be more important than ever for organizations to identify and understandfuture shocks or the risks associated with black swan losses. This is necessary to preserve
shareholder value and maintain resilience in preparation for potential future events.
The transportation and logistics (24%) and agrifood (24%) industries have the highest percentageof respondents who said their company will be more dependent on risk financing/insurance as
an instrument to help smooth the volatility of performance if insurance products that apply to
pandemic risk impacts become available. This is likely to be driven by those organizations feelingmost significantly affected by the pandemic, as they consider how they may seek efficiencies andmanage the volatility created by the economic effects of COVID-19.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future19

Total Cost of Risk
The survey results show that companies are not focusing heavily on total cost of risk, despite ahardening insurance market and emerging long-tail risks. Only 39% of respondents agreed that
their company will be focusing on reducing TCOR, with the largest categories of respondentssuggesting they are unsure.

My company will be focused on reducing its Total Cost of Risk (TCOR).
No

60%

Unsure

Yes

52%

50%

47%

51%
48%

45%

46%

45%

40%
34%

26%26%

39% 39%
35%

34%

30%
20%

39%

38%
36%

47%

45%

25%

27%

27%
22%

21%
18%
15%

14%

17%

27%
14%

10%
0%
Agrifood Construction Energy
andandReal Estate Utilities

Financial
Services

Health/ Hospitality Industrials
Public Technology Transport
Pharma/andServicesandandLife Sciences
Manufacturingcommuni- Logistics
cations

This may reflect continued uncertainty over the ongoing impacts of COVID-19, particularly as
additional waves are affecting countries in EMEA and North America.
While companies may not be focused directly on reducing TCOR, the majority of respondentssuggested they would review TCOR as part of their normal business activities.
We expect organizations to turn renewed attention to the management of TCOR when the
pandemic recedes and the macroeconomic circumstances stabilize.

Insurance Program Structure and Design
There was a strong consensus among respondents that COVID-19 has not accelerated theircompany’s efforts to review and adjust insurance programs or structure/design (59%). Most
respondents noted that the reason for reviewing their insurance program structure or design
is to improve existing policies (48%) or to add new policies or coverage (40%). Given that few
organizations considered the impacts from the pandemic to be insurable, it makes sense thatthe pandemic itself was not seen as a catalyst for reviewing structure and design. Respondents
also cited cost reduction, capacity and market conditions as reasons to review the structure anddesign of their insurance programs.
Companies seeking to improve existing policies or add policies and coverage will likely facesome work ahead, with markets looking to tighten exclusions for pandemic clauses and areduced appetite to extend wording or coverage options.

20

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

COVID-19 has accelerated the reviewing and adjusting of my company’s insurance
program structure/design.
No

80%
65%

60%

62%

65%

62%

53%

Yes

69%

69%

70%

50%

Unsure

61%
53%

52%

40%
30%

30%

28%

26%
21%

20%

19%
16%

26%

22%

21%

21%
17%

17%

21%

17%

15% 15%

17%
14%

14%

10%

10%
0%
Agrifood Construction Energy
andandReal Estate Utilities

Financial
Services

Health/ Hospitality Industrials
Public Technology Transport
Pharma/andServicesandandLife Sciences
Manufacturingcommuni- Logistics
cations

We believe that the state of the insurance market is most likely to drive decision-making in this area overthe next 12 months. A strong strategy and approach have never been more important in helping clients tounderstand their choices and ensuring that insurance programs are optimized and remain fit for purpose
in a complex world.

Business Continuity Management
Although most respondents reported that their companies had remained resilient, a majority also
said that they need to review business continuity management (56%).

What are the reasons your company will be reviewing its BCM program?

80%

Review as part ofnormal business processes

Prioritize efforts toimprove BCM program

Other
90%

83%
78%
74%
68%

70%

69%

74%

67%

64%
60%

60%

53%

50%

47%

40%

32%

30%
20%

40%

36%
31%

31%
26%

22%

26%

17%

10%
2%

0%
Agrifood Construction Energy
andandReal Estate Utilities

Financial
Services

Health/ Hospitality Industrials
Public Technology TransportandPharma/andServices
andLife Sciences
Manufacturingcommuni- Logistics
cations

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

21

While more than two-thirds of respondents said they would review BCM as part of their normal
business processes (68%), just under a third said they should prioritize efforts to improve their BCM
programs (32%).
This suggests that organizations understand the need to reevaluate their existing plans to apply thelessons learned from the pandemic.
This is also necessary because the pandemic response is likely to have altered organizations’ dependence ontechnology as part of their plans to maintain resilience. The speed at which new technology has accelerated
in enterprise-wide use may mean the full interdependencies and critical failure points have not been
fully tested. As the pandemic has seen a rise in criminal activity associated with technology (ransomware
attacks and so-called state-sponsored malicious attacks), organizations must ensure they understand thesevulnerabilities.

22

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

Reshape: Survey Insights
Geographic Insights
Many organizations have made changes to their operating models, workforce strategies, products,
portfolios, and more. The pandemic has created massive uncertainty, but also an unprecedented
opportunity to learn and reshape parts of an organization, building resilience for future shocks.
Trends are emerging in priorities and reshaping actions at the regional level, reflecting the different
ways geographies have been affected by the pandemic and other risks.
New product development is the main priority in EMEA, APAC and LATAM, reflecting a realizationthat companies will need to innovate to survive in these markets. In North America, the focus is
more on workforce planning, possibly because the region typically has higher employee numbers
and wage rolls, coupled with more onerous workers’ compensation regulations.
Respondents across regions ranked economic disruption and a potential health crisis as top potential
shocks, but region-specific shocks are also on the radar. North American companies ranked
concerns over geopolitical tension above another pandemic, reflecting ongoing trade disputes
with China as well as domestic political unrest. North American companies are also more attuned
to the potential impact of a major cyber event, rating this their third most significant concern. This
supports our most recent Global Risk Management Survey’s finding that cyber is seen as the top riskin the U.S. and reflects the higher volumes of breaches and costs we see in North America.
APAC and LATAM both see business-model disruption as a top-three major shock. Both regions
are large exporters, and any major disruption to supply chains, for example, could impact these
economies significantly; this could also be part of the reason that new product development is amajor priority for companies in APAC and LATAM.
Companies in EMEA are most concerned about climate change as a major shock, which may be
a function of concern over the impact on their supply chains as well as increased regulations andcorporate scrutiny from consumers and investors.

Protecting People and Assets
The pandemic response was predominantly about people, including employees, customers andothers who are linked to commercial activities. It is unsurprising that this was ranked highest by
respondents across all industries and regions. However, organizations differ in how they manage
people and assets.
Organizations identified three specific reasons for protecting people and assets.
The main reason, which was consistent across all sectors, was wellbeing. This is not unexpected
given immediate concerns about employees contracting the disease within the workplace. The
definition of wellbeing has evolved as COVID-19 prevention measures were put in place and isincreasingly linked to mental and emotional wellbeing.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future23

Considering protecting people and assets, what are your company’s priorities inreshaping your business? (Please rank in order of importance from 1 to 10, with
1 being the most important)

6.1

6.2

Rightsizing

Reviewing
supply
chain

6.1

3.6

6.4

6.7

6.8

7.2

4.0

1.9

Operational
Wellbeingresilience

Retaining
key
employees

Reputation
risk

Cyber

PolicyReviewing
adaption on
assets /compensation, Redeployment
real
rewards
estateand investment

Operational resilience also ranked high, particularly for organizations that have provided
essential services during the pandemic. This includes manufacturers, distributors and life
sciences organizations, all of which had to ensure that employees and assets could service
continuing demand during the pandemic.
Retention of key people was another top consideration. This was initially linked to ensuring
people’s safety and their ability to perform business-critical roles, but increasingly we see
sectors concerned about the longer-term impact on employees. Some sectors are concerned
about emotional and other wellbeing issues impacting key colleague performance andproductivity, raising its importance.
These three issues took top priority across all regions, followed by maintaining reputation in all
regions other than LATAM. How companies are perceived to have managed COVID-19 and how
they retain the trust and confidence of their stakeholders — including employees, customers
and investors — will be an important component of their recovery.

Maintaining/Increasing Revenue
There was a strong digital theme to responses about priorities for maintaining and increasing
revenue. New and accelerated use of technology was the most significant opportunity, with new
products and digitization also featuring prominently. Asset investment was the second mostsignificant overall opportunity. This may be linked to the need to invest in assets to make them
COVID-19 secure, reconfigure to allow activity in compliance with local regulations, or add digitaltechnologies to promote agile working. The imperative to keep operations resilient and to gain
the trust of employees and customers is likely to be a key factor driving decision-making here.

24

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureConsidering maintaining or increasing revenue, what are your priorities in reshaping
your business? (Please rank in order of importance from 1 to 7, with 1 being themost important)

New / accelerated use of technology

2.8

New product / proposition development

3.1

Asset investment opportunities / risks

3.1

Digitizing the workforce

3.6

Rebalancing asset liability management
Monetization of intangible assets
Recapitalization

4.7
5.1
5.4

While these four main themes were common across all regions, new use of technology topped thelist of priorities for companies in EMEA and LATAM. New product development was the priority
for companies in APAC, presumably to respond to the increase in demand for digitization andautomation. This may also reflect the fact that more APAC companies were thriving during the
pandemic and appear better positioned coming out of it. This may enable them to think about how
they can further capitalize by deploying products that remain relevant.
In North America, asset investment opportunities/risks topped the list. This may be because
organizations that were more likely to be impacted also considered disposing of unprofitable assets
to reduce exposure. It is also likely to reflect the scale of investment needed to keep large working
populations safe from COVID-19 and to provide assurance to customers across their supply chains.
From a turnover perspective, there was little difference between the views of smaller and larger
companies in the survey sample, demonstrating that all companies have the opportunity and theneed to embrace digital ways of working to maintain or increase revenue.

Protecting Balance Sheets
The two most significant balance sheet priorities for respondents across regions and industries were
expense rationalization and liquidity planning. While many companies are not yet at the point ofdeciding on significant cost-cutting measures, most are looking to manage a low level of expense tooffset volatility in their revenue lines while optimizing their free cash-flow position. Some of thesedecisions have likely been delayed by government responses to the pandemic. While individual
country responses have differed, governments have resorted to fiscal stimuli, state-backed support
and other schemes to help organizations weather the most severe phases of the pandemic.
As these schemes are rolled back, reduced and phased out, we expect to see increased focus oncost cutting as a longer-term solution beyond expense rationalization.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future25Respondents also cited credit protection and contingent capital as areas of focus. Longer-termbalance sheet planning initiatives, such as the review of pension plans to reduce liabilities, are alower priority at this stage, as companies continue to focus on short-term recovery measures.

Considering balance sheet protection, what are your priorities in reshaping your business?
(Please rank in order of importance from 1 to 7, with 1 being the most important)

Expense rationalization

2.6

Liquidity planning

2.8

Contingent capital

3.9

Capital raising

3.9

Credit protection

3.9Counterparty risk
Pension plans

4.5
6.0

When we look at results from a turnover perspective, liquidity planning is the priority for companies
with turnover of less than USD 1 billion. For these companies, cash is critical to resilience. Evenin normal trading circumstances, liquidity is a focus when there are issues with debtors. The
macroeconomic impact of COVID-19, its longevity and its impact on demand have increased thesignificance of this factor for these organizations.
Larger companies (over USD 1 billion in turnover) are focused on expense rationalization, which
offers more options for variable costs to be reviewed and reduced in the short term. This is likely
to change as we move into the medium term and they consider longer-term solutions that impact
efficiency and profitability.

Managing Costs
Respondents had three standout priorities when it comes to cost management: redeploying
resources, reengineering business processes and reorganizing the workforce. While all of thesepriorities represent valuable long-term reshaping strategies, they also play an important role inretaining performance during the recovery phase of COVID-19.
These priorities are likely to be strongly linked to decisions taken to protect people and assets.
Organizations have had to undertake prioritization exercises to identify critical assets and organize
capital and resources to support this activity. In doing so they have chosen to redeploy resources,
which suggests an increasingly agile philosophy toward employees and their skills. These steps aredone in conjunction with the need to maintain efficiency.

26

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureConsidering cost management, what are your priorities in reshaping your business?
(Please rank in order of importance from 1 to 6, with 1 being the most important)

Redeploying resources / activities

2.3

Reorganizing the workforce

2.4

Business process re-engineering

2.4

Reviewing compensation costs

3.7

Reassessing healthcare costs

4.6

Re-evaluating pension and retirement costs

5.2

Redeploying resources was a priority in all regions other than APAC, which is mostly focused on
business process re-engineering. This could reflect the higher percentage of manufacturing andtrade sectors operating in APAC’s economy. It may also suggest that these organizations haveidentified the value of further efficiencies through redesigning operating processes.
While priorities for companies with lower turnover were very similar to those with higher turnovers,
companies with revenues of over USD 1 billion focused on wider business process re-engineering,whereas smaller companies looked to redeploy resources.

Revisiting Business Strategy
Revisiting business strategy was the most important objective for most geographies andsectors, save for some industries where the pandemic has created an opportunity to retain
competitive advantage.
Priorities for respondents in this area were both strategic (new product development and capital
investment planning) and focused on human capital (workforce planning and future of work).

Considering revisiting business strategy, what are your priorities in reshaping your business?
(Please rank in order of importance from 1 to 10, with 1 being the most important)
New product development

3.5

Workforce planning

4.0

Future of work

4.2

Capital investment planning

4.6

Employee value proposition

5.5

Responding to regulatory changes

5.6

M&A

6.4

Reshaping reward strategy

6.7

Revising recruitment strategy

6.7

Divestments

7.5

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

27

The results show that organizations are thinking about how they can deploy capital and resources
efficiently through new products and services that meet future demands.
From a turnover perspective, responses are largely comparable. This reflects a realization amongsmaller businesses that everyone will need to reinvent themselves in the aftermath of the pandemic.

Reshaping Risk Management for Future Shocks
Future shocks (Ranked in order of likelihood from 1-10, with 1 being the least likely
and 10 being the most likely)
10
9
8
7
6
5
4
3
2
1

Economic Another Geopolitical Technological Businessdisruption healthtensiondisruption
model
crisis/disruption
pandemic

A major
cyber
event

ClimatechangeTerrorism Bioterrorism A nuclear /chemicalincident

Because traditional ERM processes did not identify the pandemic as a threat, and organizations’existing risk infrastructures exposed gaps as the pandemic unfolded, many organizations arenow seeking to reshape risk management, especially as they prepare for the next major shocks.
Respondents were most likely to cite economic disruption, another health crisis and geopoliticaltension as the major shocks they expect to see in the future.
The majority of survey respondents (83%) either agreed or partially agreed that COVID-19 has
accelerated planning for future shocks. This will likely involve reshaping their ERM function,
starting with better integrating risk management and developing strategy at the executive andC-suite level. Twenty-nine percent of respondents agreed that COVID-19 has accelerated theirboards’ review of ERM. Three-quarters of respondents expect their boards to review the ERM
program as part of normal business processes. This suggests ERM will form part of the normal
business cycle in reviewing changes and applying lessons learned.
This shows that organizations have been quick to consider the impact of the pandemic and are
already considering the longer-term implications for their organization. The global reach of thepandemic has provided a stark, tangible example of not only the scope of these shocks, but also
the opportunity that exists for companies that are prepared.
The results support the view that even the best-prepared regions, sectors and businesses
recognize the need to apply the lessons learned to the future. They clearly understand that their
ERM and BCM strategies must continue to evolve if they are to maintain resilience and seize
opportunities to successfully navigate future shocks.

28

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureOrganizations around the globe will face significant macroeconomic challenges in the postpandemic era. The impact of the pandemic on demand, the risks of bad debt and insolvency
across supply chains present challenges for all organizations as they look to rebuild.
An additional barrier to growth is linked to political uncertainty. Trade tensions between major
trading blocs have the potential to add complexity through increased costs associated with tariffs,
delays in exports and regulatory compliance creating additional hurdles to accessing markets.
It is surprising that a major cyber event ranked only sixth in priority. Organizations’ increasing
reliance on digital solutions and remote work increases their vulnerability by making
cybersecurity a more concentrated possible point of failure.
Climate change remains important, but this may be viewed as a longer-term risk that can be
managed at an enterprise level. It is already taking on increased prominence as consumer
attitudes change and investors seek assurance that companies have identified and put in place
plans to mitigate the risks.
Responses in regard to future shocks were closely aligned, but companies with annual revenues
under USD 1 billion are more concerned about another health crisis, given the fragility of manysmaller companies during the pandemic. Companies with annual revenues above USD 1 billion
are more concerned about a major cyberattack, presumably because they believe their brandprominence makes them a more likely target. This may also reflect an understanding that theirglobal operations rely on technology, and while this has allowed them to successfully invest in andaccelerate digital plans, it nonetheless creates potential vulnerability if not managed effectively.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future29

Industry Insights
Global Benchmark in parentheses

Agrifood
Agrifood – Impact Severity
9%

5%

9%
Our business has been severely impacted
and will take significant time to recover23%

Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact
Our business has thrived during COVID-19
55%

Survey highlights
Seventy percent of respondents in the agrifood industry were from North America or EMEA.
Overall, agrifood had a smaller proportion of respondents still in the react phase than other sectors.
Forty percent of respondents said they were in the reshape phase, which is higher than the overall
industry benchmark (30%). This is supported by the fact that 12% (7%) of respondents said theircompanies had thrived during the crisis.
A higher proportion of respondents also said they had been impacted by the pandemic but that
their organization remained resilient.
Notwithstanding this, over half of respondents expect to take more than a year to recover fromthe pandemic.
A much higher proportion of agrifood organizations — 39% — said insurance and risk management
could be better integrated into their business compared with all industries (28%), with a similar
percentage saying the pandemic would accelerate their review of ERM processes. This industry also
demonstrated an increased willingness to consider captives as an alternative solution, at 23% (16%).
At 42%, agrifood respondents reported a higher demand-led impact on their supply chain comparedwith the overall industry benchmark (36%), which is consistent with the industry’s vertical position in
the chain to consumers. However, only 7% reported significant supply issues (17%).
National food security is a significant issue that has been amplified by COVID-19, especially for net
importers of food, as well as by geopolitical issues such as Brexit and trade wars between the U.S.
and China. This has added transit delays and tariffs to products that critically impact this industry,
which is especially challenging for products lower margins (below 10%) and for lean working
models (including sequencing), where disruption and delay can cause significant challenges.

30

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

Agrifood: Proportion of organizations facing supply chain issues

Future Shocks
1.	Economic

19%
Our supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19

38%

Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

10%

33%

Industry insights
The survey results bear out what we are seeing across the industry: a mix of organizations thatare thriving and others that have been hit hard; the severity of the impact of COVID-19 tends tobe linked to distribution channels. Many agrifood businesses supply both retail and food service
customers, meaning that some organizations have experienced different impacts. This has led todecisions to reallocate resources or repurpose them to mitigate the net impact. This is likely why alarge proportion of respondents said the impact was either not ascertainable or minimal.
Companies supplying retail have faced huge demand, resulting in challenges resourcing andfulfilling this sudden increase. This presents workforce management issues in resourcing to meet
additional production quotas, maintaining a COVID-19 secure production environment or dealing
with absences. The industry also faces significant competition for talent, especially in R&D areas.
COVID-19 has added to existing challenges relating to food safety and security. Criminal
networks have sought to take advantage of those challenges through techniques including cyber/ransomware, employee social engineering and interfering with supply chain quality.
Macroeconomic factors will continue to be a threat. Consumer demand could change foodpreferences (e.g., reducing demand for premium products). The future of food is also a big topic
driving decision-making. For example, companies are exploring technology to drive greater
efficiency and productivity to match population growth. This is creating disruptive business models,
backed by new private equity and other investors, that use technology-based solutions to generate
new operating models. This is probably why M&A activity was identified as a higher priority inthis industry. M&A activity is also prevalent in secondary processing, with increased investment inbusiness models linked to craft food and beverages.
We see the identifying contingent capital as a priority in the context of the hardening insurance
market. These organizations are keen to explore ways to release capital.

disruption
2.	Technologicaldisruption
3.	Business model
disruption
4. Climate change
5.	Geopoliticaltension“Climate change is
one of the biggest
future issues thatthe industry isfacing. The issues
are complex andhave the potential
to impact on supply
chain, businessmodel, corporate
governance andreputation. The
findings from thissurvey show not only
the importance, butmore significantly thebenefit, of planning
enterprise-wide
strategies to respondto future shocks. Thisis going to require
executive leaders
to understandthe full range ofimpacts fromshifting demandsof employees,
customers andshareholders orinvestors thatplace increased
emphasis on thecorporate strategy
in such areas.”
Ciara Jackson EMEA Food,
Agribusinessand Beverage
Practice Leader

Reprioritizing Risk and Resilience for a Post-COVID-19 Future31Construction and Real Estate
Construction and Real Estate – Impact Severity
6%
28%

15%

Our business has been severely impacted
and will take significant time to recover
Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact
Our business has thrived during COVID-19

51%

Survey highlights
Seventy-four percent of respondents in this industry were from North America or EMEA, and over
28% of respondents disclosed revenue between USD 75 million and USD 249 million.
Overall, this industry had a smaller proportion of respondents in the reshape phase, 16%, with most
respondents, 58%, in the recovery phase.
Prior to the pandemic, 80% of respondents did not include a pandemic or major health crisis in the
top 10 risks on their risk register, and 66% did not have a plan in place.
Over 43% of respondents agreed that their businesses were impacted by COVID-19 but resilient.
This is in line with the average from all industries. However, a higher number of respondents in theconstruction and real estate industry said their businesses had remained steady during COVID-19
with little impact (24% vs. the average 19%).
Still, as with other industries, most respondents (56%) expect COVID-19 to affect their businesses
for at least six more months, with 32% expecting the impact to extend to over a year.
More respondents in this industry than in others reported a supply-led impact on their supply chain
at 28% (16%), which is consistent with limitations to source materials during the pandemic. Even so,
41% of respondents reported that their supply chain was not impacted by the COVID-19.
Ninety-eight percent of respondents stated that their company’s risk management response efforts
to COVID-19 were sufficient, but still, 38% agreed that more planning would have been beneficial.

32

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureConstruction and Real Estate: Proportion of organizations facing supply chain issues
2%

Future Shocks
1.	Economic

28%
41%

Our supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19
Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

disruption
2.	Another healthcrisis/pandemic
3. Climate change
4.	Business model
disruption
5.	Technologicaldisruption

28%

Industry insights
For the construction and real estate industries, wellbeing and employee retention are new priorities.
Finding and retaining key talent with the correct skill sets has always been a challenge in theconstruction industry, and it has become more acute in recent years as the workforce has aged andthe industry has struggled to attract younger talent. It is thus not surprising that respondents in thisindustry ranked retaining key employees higher than the overall survey sample. Employee wellbeing
has not traditionally been a focus in the construction space, given the industry’s more transient
workforce and traditional workplace culture. However, the pandemic has driven many organizations
to give top priority to protecting their people, and the survey results indicate this is the case forconstruction and real estate firms as well.
The construction industry has traditionally been slower than other industries to pilot and implement
new technologies and digitize operations. Technology has been a hot topic in the wake of
COVID-19, with many organizations accelerating their innovation efforts in this space. However, it isdisappointing to see it remain slightly behind the general survey sample in terms of importance.
Asset investment/management and liquidity planning are reshaping priorities for the sector.
Contractors in many geographies have begun the challenging work of shifting business strategies
to reflect new economic realities in the wake of the global pandemic. Large construction
organizations are reviewing their business models in response to reduced demand in commercial,hospitality and urban multifamily construction, hoping to capture growth in segments like civil
infrastructure (where project volume has remained steady) or industrial and logistics, where
projects have accelerated as large retailers expand their e-commerce and delivery capabilities.
Other contractors are taking the opportunity to invest in adjacent areas such as asset ownership andcommercialization, given the higher margins traditionally associated with these classes of business.
Respondents in the construction and real estate industries ranked climate change higher than mostother respondents, which is unsurprising given the impact of climate-related extreme weather on
the industry. All stakeholders in the built world — project developers, governments, contractors,architects and engineers — are increasingly interested in ways to build more climate-resilient andsustainable infrastructure, and in building assets to better manage the expected volatility if climatechange becomes more difficult to control in the near and distant future. Additionally, the industry
is facing increasing pressure from investors and other stakeholders to uphold higher ESG standards,
which adds a reputational element to this challenge. Firms in the construction space are awareof this pressure, as the industry is traditionally perceived to be less responsive than the general
population to climate change and other ESG elements.
Reprioritizing Risk and Resilience for a Post-COVID-19 Future

33

Energy and Utilities
Energy and Utilities – Impact Severity
2%

12%

28%

8%

Our business has been severely impacted
and will take significant time to recover
Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact
Our business has thrived during COVID-19

51%

Survey highlights
Sixty-six percent of respondents in the energy and utilities industry were from North America or
EMEA, and 27% were from LATAM.
Overall, this industry had a smaller proportion of respondents in the reshape phase (12%compared with the average of 30%) and a higher proportion in the recovery phase (60%compared with the average of 51%).
Eighty-two percent of respondents did not consider a pandemic to be a key risk prior to the
COVID-19 outbreak, and just 30% of respondents had a pandemic plan in place.
Half of respondents said the pandemic had impacted their businesses but that they remained
resilient. Only 12% of respondents considered the impact to be significant and challenging torecover from.
In line with the overall industry benchmark, respondents in this industry felt the pandemic
would have a medium-term impact, with 80% of participants expecting the impact to last
between six months and two years.
Overall, respondents were positive about their risk management response efforts. Only 2% of
respondents said their response was insufficient, which was slightly higher than the benchmark.

34

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

Energy and Utilities: Proportion of organizations facing supply chain issues

Future Shocks
1.	Economic

10%
43%
37%

Our supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19
Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

disruption
2.	Geopoliticaltension
3. Climate change
4.	Another healthcrisis/pandemic
5.	A major cyber
event

11%

Industry insights
Energy and utility is a demand-led industry, and the pandemic has resulted in sudden downshifts
in demand globally. In addition, energy and petrochemical industries have been impacted by thecontinued low price of oil, increasing the need for liquidity planning.
Employee wellbeing has been a specific challenge in the industry, particularly for offshore
operations. Employees in this industry work in close proximity over prolonged periods of time,
which heightened the risk of COVID-19 transmission in the early phase of the pandemic. Fatalities
resulted, leading organizations to invest in controls to make their operations safer and to ensure theuse of testing and other controls to reduce transmission risk.
Asset investment has become more of a focus for energy companies as they plan for divestmentof assets. Across the industry we see evidence of asset sales that are strongly linked to shifting
business strategies toward sustainable products and green energy. This is an area where capital
investment planning is on the rise as organizations reshape to meet the future challenges of the
global economy. This shift is driven by regulatory change as governments seek to introduce andmeet climate change goals. It is also driven by future end-user demand and the ESG strategies ofmultinationals and investors.
Continued economic disruption has the potential to elongate demand pressures within theindustry. If manufacturing and other activity is reduced, there will be consequences for companies
in the industry. Respondents in this industry ranked climate change much higher than the overallbenchmark as an area of future risk. Many organizations are already grappling with the complex
challenges associated with climate change, including increased risk from more frequent and more
extreme weather events, rising sea levels and an accelerated change in demand toward alternativeand sustainable sources of energy.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future35

Financial Services
Financial Services – Impact Severity
6%

1%

30%

17%
Our business has been severely impacted
and will take significant time to recover
Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact
Our business has thrived during COVID-19
46%

Survey highlights
Seventy-three percent of respondents in the financial services industry were from North America or
EMEA, and 17% were from LATAM.
Overall, this industry had a smaller proportion of respondents who said they were in the react phase(12% compared to the average of 20%).
A higher percentage of respondents in financial services reported that their companies included
a pandemic as a key risk prior to COVID-19 (25% compared to the average of 18%), and financial
services shows the highest percentage of respondents (51%) whose companies had a pandemicplan in place prior to COVID-19. Nearly half (45%) agreed that their businesses were affected by the
pandemic but remained resilient.
More than half (57%) of respondents expect the impact to last for one to two years.
Three-quarters (75%) of respondents said their supply chain was not impacted by the pandemic.
All respondents said their risk management response efforts were sufficient. However, 25%
suggested that additional planning would have been beneficial.

36

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureIndustry insights

Future Shocks

The regulation within financial services and the application of lessons learned from the 2008
financial crisis appear to have assisted this industry in remaining resilient during the pandemic.
This resilience is probably associated with the industry’s increased risk maturity, which enabledcompanies to plan for liquidity and capital management. As a result, the industry was able torespond proactively to support private and commercial customers that were dealing with theeconomic consequences of the pandemic.
Wellbeing continues to be a significant priority for a number of reasons. Like other industries,
financial services adapted quickly to remote working and maintained productivity. However, thisshift has had an impact on employees. The change of dynamic from the office — or, in the case

1.	Economic
disruption
2.	Technologicaldisruption
3.	A major cyber
event
4.	Business model
disruption
5.	Geopoliticaltensionof retail banks, customer branches — has created mental-health challenges. Across the industry,
employees continue to be under pressures that can lead to burnout, health issues and absences. In
the worst cases, this has the potential to affect employee behavior.
The employee value proposition is important to ensure balance and retain talent. Companies
need to adapt to the competitive landscape through disruptive cryptocurrency and technologybased solutions.
Business strategy review is a priority in this industry as organizations try to apply the lessons learned
from the pandemic. Legacy assets, principally property, may be rebalanced as financial services lookto move to a more agile service model. A number of established structural frameworks will be underreview as organizations consider how they can develop a lean, efficient customer-focused model
while maintaining regulator confidence and compliance.
Operational resilience continues to be a priority to ensure that financial services companies canmeet regulator mandates.
A key future risk in this industry relates to technology and cyber events. The increased relianceon technology and new business models creates the potential for vulnerabilities that could be
exploited without careful risk management. The rise in both sophisticated, state-sponsoredcyberattacks and cybercrime during the pandemic mean this will be a key risk for the sector.

The accelerationof digital working
enabled manyfinancial services
companies to remain
resilient during the
pandemic. The pace ofchange has presented
ongoing challenges in
the form of employee
well-being, withincreased risk ofhealth and wellbeing issues. This has
potential to present
heightened security
risks, either throughremote working
cyber vulnerabilityor through negative
behaviours
associated withaffected employees.
The risk of Financial
losses is still high on
the agenda owing toincreased volatilityof financial and nonfinancial risk. This
includes the increased
potential for credit
default as macro
conditions deteriorate,
litigation risk and IP
or reputation risks.
Daniel Butler, EMEA
Financial Institutions
Industry Leader /EMEA Head ofFinancial Institutions
Risk Advisory

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

37

Health/Pharma/Life Sciences
Health/Pharma/Life Sciences – Impact Severity
8%

3%
18%
Our business has been severely impacted
and will take significant time to recover16%

Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact
Our business has thrived during COVID-19
55%

Survey highlights
Seventy-two percent of respondents in this industry were from North America or EMEA, and 19%
were from LATAM.
More health/pharma/life sciences organizations are in the react phase (34%) compared with theoverall industry benchmark.
This is a highly regulated industry, so organizations within it often show higher levels of risk
maturity. The combination of risk maturity and pandemic response is aligned to the industry itself,
meaning a higher proportion of organizations in this industry identified pandemic as a key risk
prior to the COVID-19 outbreak (26% compared with the average of 18%). In addition, 45% of
respondents had a pandemic plan in place prior to the 2020 event — higher than the benchmark.
More than half (55%) of respondents agreed that COVID-19 had impacted their businesses but feltthat they had remained resilient. Forty-seven percent agreed that their businesses remained stable
during the pandemic. This further demonstrates the risk and resiliency maturity of this industry, as
only 3% reported significant impact to their businesses, compared with 8% for all organizations.
All respondents agreed that their risk management response efforts were sufficient, but even so,
30% suggested that more planning would have been beneficial.

38

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureHealth/Pharma/Life Sciences: Proportion of organizations facing supply chain issues

Future Shocks
1.	Economic

11%
43%

19%

disruption

Our supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19

2.	Geopolitical

Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

4.	Technologicaltension
3.	Another healthcrisis/pandemic
disruption
5.	A major cyber
event

27%

Industry insights
Forty-three percent of respondents said they did not see an impact on their supply chain. However, 27%
faced supply issues and difficulties in sourcing materials — 11% higher than the overall industry benchmark.
The priority for this sector was protecting people and assets and retaining key employees andsupporting their overall wellbeing. The need to review the supply chain was the third highest
priority for asset protection; while most large pharma companies were sufficiently equipped during
COVID-19 to keep their labs open, there have been shortages of certain drugs during the same
period. For innovative pharma companies with a heavy reliance on outsourcing, the supply chain
challenge will be more profound. Also, key in the protection of people and assets was reputation
risk. This has been a focus for life sciences companies since well before the current pandemic as theywork to reposition the industry as providing solutions and promoting science.
Cost management is the second most significant priority for the sector, while expense rationalization is
the key strategy for ongoing balance sheet protection. This may seem surprising given that life sciencescompanies typically operate at high margins, much of which is reinvested in R&D as a central part oftheir strategy. However, throughout COVID-19 clinical trials have been re-prioritized and all companies
in the health life cycle have played a role in the pandemic response, whether providing vaccines,
plasma or testing kits. In many ways, then, cost management is inextricably linked to revisiting businessstrategy, where the industry has more appetite for M&A to support its reshaping strategy.
Economic disruption, a mainstay in many industry responses, was ranked the No. 1 future shockby health/pharma/life sciences organizations, followed by geopolitical tension. Changes in the
U.S. administration could change healthcare financing and insurance, which could in turn impact
available funding and access to medication. In Europe, Brexit will likely create accelerated risk
around the movement and costs of medication across borders.
This industry ranked another health crisis as the third most significant potential shock. The
definition of “another health crisis” likely extends well beyond another pandemic to include new or
accelerated lifestyle diseases, such as diabetes.
Technological disruption and the associated increased exposure to cyber risk also featureprominently in the top five. The sector is going through a massive change to its business modeland the digitalization of its workforce. In the near-term future, physicians’ decision-making will be
underpinned by data and analytics, changing the way in which therapies are delivered.
Reprioritizing Risk and Resilience for a Post-COVID-19 Future39Hospitality
Hospitality – Impact Severity

20%

Our business has been severely impacted
and will take significant time to recover
Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient

13%

67%

Survey highlights
Sixty-three percent of respondents in this industry were from North America or EMEA, and 58%
were from private companies.
This industry had a smaller proportion of respondents in the reshape phase (15%), with most
respondents (68%) in the recovery phase.
Prior to COVID-19, 84% of respondents had not identified pandemic or a major health crisis as a
top 10 risk in the company’s risk register. Additionally, 74% of respondents did not have a formal
pandemic plan in place.
Sixty-seven percent of respondents have seen their business severely impacted and expect it willtake significant time to recover — 63% expect the impact to their business to last over a year, and
37% expect it could take longer than 24 months.
The industry reported a higher demand-led impact on its supply chain than the overall industry
benchmark at 42% (36%), which is consistent with government restrictions during the pandemic.
The hospitality industry has been strongly impacted. However, 73% of respondents agreed that
their company’s risk management response was sufficient. Nearly a quarter (24%) agreed that
although the response was sufficient, more planning would have been beneficial.

40

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureHospitality: Proportion of organizations facing supply chain issues

Future Shocks
1.	Economic

7%
27%

13%

disruption

Our supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19

2.	Another health

Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

4.	Geopoliticalcrisis/pandemic
3.	Business model
disruption
tension5.	Technologicaldisruption

53%

Industry insights
The hospitality industry has been one of the hardest hit by the pandemic. A high proportion of
respondents also reported that they did not have pandemic plans in place.
Large parts of the industry are still fighting to survive.
Their main priority has been ensuring the safety of employees and customers, which is key tobuilding confidence in their COVID-19 security. This has been linked with asset investment to ensure
customers can be accommodated safely but in a way that limits the impact on customer experience.
The potential transmission risk is likely why reputation ranks as a higher priority in this industry
compared with the overall benchmark. Brand identity is extremely important, and the global natureof certain brands means that meeting the varied regulatory requirements to ensure safety has beena high priority.
In this industry, the failure to predict the pandemic and the degree of impact have meant that costmanagement is a very high priority. We have already seen organizations restructuring, with large
hotel and other hospitality chains reducing employee numbers in so-called nonessential areas incentral functions. This may mean that risk management for some organizations will be faced witheven further challenges in the near term.
At the start of the pandemic, there were some signs that the crisis would drive consolidation
through opportunistic acquisitions. This is still likely to be important and is linked to capital
investment planning as organizations consider how to deploy capital. This may create a focus on
specific regions where opportunities exist.
The focus in this industry has been managing the immediate impact of the pandemic. But theindustry remains concerned about the future macroeconomic shocks that are likely to follow the
pandemic. Reduction in spending and travel, which may be associated with macro conditions,creates future volatility for an industry already hit hard financially by the pandemic. Future
geopolitical tensions that may deter or restrict travel have the potential to exacerbate this volatility.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

41

Industrials and Manufacturing
Industrials and Manufacturing – Impact Severity
11%

1%

Our business has been severely impacted
and our ongoing viability is uncertain

5%
20%

15%

Our business has been severely impacted
and will take significant time to recover
Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact
Our business has thrived during COVID-19

48%

Survey highlights
Seventy-three percent of respondents in this industry were from North America or EMEA, and 17%
were from LATAM.
Overall, a high number of respondents said they were in the recovery (48%) and reshape(34%) phases.
Eighty-four percent of respondents did not consider pandemic a key risk prior to COVID-19, and just
20% had a pandemic plan in place prior to this event.
Nearly half (48%) of respondents said their business had been impacted by COVID-19 but hadremained resilient.
Eighty-three percent of respondents expect the impact to last between six months and two years.
Forty-five percent of respondents stated that their supply chain faced demand issues due to
COVID-19. Additionally, 20% of respondents faced supply challenges when sourcing materials.
Sixty-six percent of respondents felt that their risk management response efforts were sufficient.

42

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureIndustrials and Manufacturing: Proportion of organizations facing supply chain issues

Future Shocks
1.	Economic

6%29%

disruption

Our supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19

2.	Another health

Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

4.	A major cybercrisis/pandemic
3.	Geopoliticaltensionevent
5.	Technologicaldisruption

45%
20%

Industry insights
The manufacturing industry suffered more than most in dealing with the unpredictability of supply
and demand throughout the pandemic. Disruptions in the availability of materials triggered
production slowdowns and, in some cases, delays in releases. This underlines the continued focus of
the industry on protecting people and assets.
Leaders in manufacturing and industrial companies will learn from the pandemic and look to reshape
in several areas. Supply chains will be reviewed, with many manufacturers looking to decouple their
supply chains, in some cases reducing their dependence on China and other parts of Asia.
Cost management will also be a priority, with permanent reconfiguration and design changes tofactory floors, both to maintain the ongoing safety of employees and to drive efficiencies.
Underpinning this will be continued adoption of smart manufacturing and automation, where
capital expenditure budgets will allow, to maintain and grow revenue. In addition, rapid adoptionof new products, such as electric vehicles, will create new skills requirements of workforces and help
satisfy growing stakeholder demand for environmentally friendly products and processes.
It is perhaps not surprising to see economic disruption and another health crisis top the list of
future shocks for manufacturers, since the industry is one of the most exposed to volatility inmarkets. Respondents also ranked technological disruption, with its impact on cyber risk, in the
top five future shocks. This could be partly due to recent high-profile cases in which operationalransomware threatened to close plants down. As the industry embraces automation, this risk is only
likely to increase.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future43

Transport and Logistics
Transport and Logistics – Impact Severity

4%

6%

4%
16%

Our business has been severely impacted
and our ongoing viability is uncertain
Our business has been severely impacted
and will take significant time to recover
Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact

24%

Our business has thrived during COVID-19

45%

Survey highlights
Sixty-five percent of respondents in this industry were from North America or EMEA, and 20%
were from APAC.
Overall, a higher number of respondents said they were in the react phase (27% compared withthe 20% average), with a low number of participants in the recovery phase (37% comparedwith 51%). However, the number of respondents in the reshape phase is higher than the
average (37% compared to 30%).
Prior to COVID-19, 80% of respondents didn’t consider pandemic a key risk, but 40% of
respondents had a pandemic plan in place.
Sixty-nine percent of respondents said they have seen an impact on their business. Out of these,
24% are unsure of the long-term impact that the pandemic will have.
Thirty-five percent of respondents expect the impact to last less than a year, and 42% expect it
to last between one and two years.
Every respondent agreed that their organization’s risk management response efforts were
sufficient, but 43% thought more planning would have added value.

44

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureTransport and Logistics: Proportion of organizations facing supply chain issues

1.	Geopolitical

6%
27%

19%

Future Shocks
tensionOur supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19

2.	Economic

Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

4.	Business model

disruption
3.	Another healthcrisis/pandemic
disruption
5.	A major cyber
event

48%

Industry insights
Nearly half (48%) of respondents faced issues in their supply chain due to a drop in consumer
demand — much higher than the overall industry benchmark (36%).
However, over a quarter of respondents didn’t see an issue in their supply chain, which suggests alink to those organizations that had plans in place in the event of a pandemic.
Revisiting business strategy ranked far down on the list of priorities for this industry, which is surprising.
Just-in-time distribution failed in many parts of the industry during the pandemic, and there is alreadyevidence that manufacturers are moving toward a more localized supplier model with more strategic useof warehousing and inventory. This will reinvent supply chains, whether logistics companies like it or not.
Like all industries, transportation and logistics will be looking for cost savings. This will be morechallenging and therefore less profound than in other industries, because transportation andlogistics is an asset-intensive industry. White-collar workers make up the minority of the workforce inthis industry and will likely be rightsized during 2021.
The third most significant reshaping strategy for this industry was maintaining or increasing revenue
and, within this, the use of new technology. Logistics has been transitioning from manual to digitalfor some time now, retooling to meet the needs of e-commerce. As more tech-savvy startups begin
to flood the market, some of the bigger players will likely turn to M&A as a strategy to accelerate theadoption of technology.
Geopolitical tension tops the list of future shocks for transportation and logistics companies. In addition
to the uncertainty triggered by major administration changes around the world, the retrenchment ofsome companies from China, as they look to shorten their supply chains, will exacerbate this issue.
Economic disruption remains a key concern for the sector, despite the sector benefiting to somedegree from the decline in in-person shopping and an apparent shift in consumer behavior.
Whether this is a shift for good will become more evident over the coming year.
Business model disruption ranked fourth behind another health crisis. Continued pressure from
non-asset-based providers will see an acceleration in the adoption of AI and blockchain to bringefficiencies. Today, the logistics industry is a high-risk operation. As it transitions further into
digital and automation, some of this risk should lessen. But growing exposure to cyberattacks andinterruption will undoubtedly take its place.
Reprioritizing Risk and Resilience for a Post-COVID-19 Future45

Public Services
Public Services – Impact Severity
15%

10%
25%

Our business has been severely impacted
and will take significant time to recover
Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact

50%

Survey highlights
Eight-five percent of respondents in this industry were from North America or EMEA, 5% were from
APAC and 10% were from LATAM.
More than half (55%) of respondents said they were in the recovery phase — slightly higher than
the average.
Three-quarters (75%) of respondents didn’t consider pandemic a key risk prior to COVID-19.
However, a higher proportion of respondents in public services versus other industries said they
had a pandemic plan in place prior to the event.
Seventy-five percent of respondents said that they had seen an impact in their organization becauseof the pandemic. Of these, 25% are unsure of the potential long-term impact.
Eighty-two percent of respondents expect the impact to last for at least one year.
Sixty-two percent agreed that the risk management response of their organization was sufficient butthat more planning would have benefited the organization.

46

Reprioritizing Risk and Resilience for a Post-COVID-19 FuturePublic Services: Proportion of organizations facing supply chain issues

Future Shocks
1.	Another health5%16%crisis/pandemic

Our supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19

2.	Economic

Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

4.	Climate change

disruption
3.	Technologicaldisruption
5.	A major cyber
event

21%
58%

Industry insights
Public services entities bore much of the cost of the world’s COVID-19 response. And at the sametime, unemployment continues to rise, creating uncertainty around revenues generated throughtaxation for the year. In many parts of the world, public services organizations are mandated to havebalanced budgets, so it’s unsurprising that respondents ranked cost management high in the list ofreshaping priorities, and ahead of the overall survey sample.
One response to the pandemic has been to look at business process re-engineering — retooling
how services are provided and making big efforts to keep people employed by moving them into
pandemic-related jobs. This has triggered a shift in how funding is disbursed. In the U.S. this meant
a redeployment of federal funds.
Respondents agreed that workforce planning is a high priority. In 2021 we can expect to see
public services entities look at revaluing pension costs, addressing the talent gap and emphasizing
employment benefits to younger employees.
New use of technology is at the heart of the industry’s revenue strategy, as it seeks to meet thetransition to urbanization, smart cities and the possibility of providing services at a reduced
cost. The use of AI and the adoption of digital strategies will also help to address the deficit ininfrastructure investment seen in many major economies — but will also subject public services
organizations to increased cyberthreats from individuals, criminal organizations and state actors.
The public sector was the only industry that ranked another health crisis at the top of the list ofsignificant future shocks. Public sector entities were at the forefront of the pandemic response, andsome were ill prepared. As government responses to COVID-19 became increasingly politicized,
the provision of essential front-line services grew even more challenging. It is not surprising that theindustry fears another crisis of this type.
Climate change also features highly in the list of shocks. In the U.S., hurricanes, flooding and othernatural disasters scare the public sector and can worsen existing infrastructure issues, creating bothfinancial and social pressures.

Reprioritizing Risk and Resilience for a Post-COVID-19 Future

47

Technology and Communications
Technology and Communications – Impact Severity
13%

3%
11%
Our business has been severely impacted
and will take significant time to recover21%

Our business has been impacted, but weare unsure of the long-term impact
Our business has been impacted,
but has been resilient
Our business has remained steadyduring COVID-19 with little impact
Our business has thrived during COVID-19
53%

Survey highlights
Half of respondents in this industry were from North America or EMEA, and 26% were from APAC.
Overall, there were the same number of respondents in the recovery phase (43%) and the reshapephase (43%).
Eighty percent of respondents in the technology and communications industry did not consider
pandemic a key risk, and just 30% had a pandemic plan in place prior to COVID-19. This is in linewith the overall industry benchmark.
More than half (53%) of respondents agreed that their business was resilient, and 13% stated theirbusiness had thrived because of the pandemic — higher than the overall industry benchmark (6%).
Forty percent of respondents expect COVID-19 to impact their business for a period of less than ayear and 44% for a period between one and two years.
Sixty-six percent of respondents experienced supply chain issues, and 34% reported demand issues
due to a drop in consumer demand.
Overall, respondents were optimistic around risk management procedures. All respondents statedthat their company’s risk management response efforts around COVID-19 were sufficient.

48

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureTechnology and Communications: Proportion of organizations facing supply chain issues

Future Shocks
1.	Business model

11%
34%
34%

disruption

Our supply chain accelerated due to
COVID-19 due to forced improvements
throughout the crisis
Our supply chain faced demand issues,
drop in consumer demand due to COVID-19

2.	Economic

Our supply chain faced supply issues,
we couldn’t source materials due to COVID-19
Our supply chain was not impacted
by COVID-19

4.	Geopolitical

disruption
3.	Technologicaldisruption
tension
5.	Another healthcrisis/pandemic

20%

Industry insights
Protecting people and assets has been the priority for this industry during the pandemic. We
have seen tech companies making swift decisions to seek remote working as a long-term strategy,
but this creates the need to ensure employees are supported to avoid future challenges of healthand wellbeing. In some areas, wellbeing is linked to the risk of burnout, and this strongly links
to employers’ recognition that they need to retain key talent. This is why we have also seen theimportance of employee value proposition in this industry.
This industry has a complex and sophisticated set of interdependencies in the supply chain, fromsecurity to manufacturing to technology R&D. This has created demand- and supply-led challenges
and explains why respondents from this industry expressed an increased desire to review the supply
chain. Parts of the supply chain may consist of smaller teams without capital backing, making themmore susceptible to failure and thereby creating counterparty risk for these companies.
Respondents in this industry ranked revisiting business strategy as a higher priority than mostothers did. Given the dynamic and fast-paced change in the industry, this is not surprising. This isstrongly linked to new product development and capital investment planning. Established telecom
businesses face significant risk from competitor activity, especially businesses that were “borndigital.” The newer companies do not have some of the legacy costs (pension liabilities) facing longstanding businesses, allowing them to be much more agile.
The tech and telecom industry continues to see a considerable level of M&A activity, which isn’t
surprising given previous economic crises that demonstrated the ability of companies in thisindustry to attract capital. Therefore, we believe the monetization of intangible assets is also
becoming important to balance sheet performance.
Respondents in this industry ranked business model disruption as the most significant future shock.
The growth and agility of digital organizations create significant risk to long-standing organizations.
Nowhere is this more relevant than in the media industry, which is challenged by new digitalplatforms and ways of engaging with customers. Technology disruption is linked to increased
reliance on technology resulting from the pandemic. Not only does this present a challenge toorganizations’ own operations but it poses new and greater risks as their customers become morereliant on technology. Technology failure or disruption, which could arise from the aggregatedexposure from cloud-based technology, could impact across many key risks. Efforts to ensure
increased levels of resilience will therefore be required in the future.
Reprioritizing Risk and Resilience for a Post-COVID-19 Future49Appendix 1: Industry Mapping
Industry Designation
1 Agrifood

1 Agribusiness2 Construction and Real Estate

7 Aviation

3 Energy and Utilities

4 Banking

4 Financial Services

1 Beverages

5 Health/Pharma/Life Sciences

3 Chemicals

6 Industrials and Manufacturing

6 Conglomerate

7 Transportation and Logistics

2 Construction

8 Public Services

6 Consumer Goods Manufacturing

9 Technology and Communications

8 Education

10 Hospitality

3 Energy (Oil, Gas, Mining, Etc.)
6 Food Processing and Distribution
8 Government
5 Healthcare
10 Hotels and Hospitality
4 Insurance
4 Investment and Finance6 Lumber, Furniture, Paper and Packaging
6 Machinery and Equipment Manufacturers
6 Metal Milling and Manufacturing
5 Pharmaceuticals and Biotechnology (Life Sciences)
3 Power/Utilities
4 Private Equity
4 Professional and Personal Services
2 Real Estate
10 Restaurant
6 Retail Trade
6 Rubber, Plastics, Stone and Cement
9 Technology
9 Telecommunications and Broadcasting
6 Textiles

50

Reprioritizing Risk and Resilience for a Post-COVID-19 FutureAbout the ResearchThis new survey, a companion to our Global Risk Management Survey, was conducted in the lastquarter of 2020 and completed by over 500 participants from organizations of various sizes in
41 countries across the globe. It was designed to evaluate how companies from different industry
sectors have managed the pandemic crisis, their priorities for reshaping their businesses, and theimplications for risk and insurance.

Methodology
This web-based survey addressed both qualitative and quantitative risk issues. Responding risk
managers, CROs, CFOs, treasurers and others provided feedback and insight on their insurance andrisk management choices, interests and concerns.
Aon Centre of Innovation and Analytics conducted the survey and collected and tabulated the
responses. Other Aon insurance and industry specialists provided supporting analysis and helpedwith interpretation of the findings.
All responses for individual organizations are held confidential, with only the consolidated data
incorporated into this report. Percentages for some of the responses may not add up to 100 due
to rounding or the ability of respondents to select more than one answer. All revenue amounts areshown in U.S. dollars.

Contacts
For Report Inquiries
Rory Moloney
Chief Executive Officer
Global Risk Consulting
Aonrory.moloney@aon.co.uk
Richard Waterer
Managing Director, EMEA
Global Risk Consulting
Aon
Richard.Waterer@aon.co.uk+44.20.7086.3263
Marc Spurling
U.K. Head of Enterprise Risk and Resilience
Global Risk Consulting
Aon
Marc.spurling@aon.co.uk+44.20.7086.1321

Reprioritizing Risk and Resilience for a Post-COVID-19 Future51

About Aon
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