More than 18 months after Covid-19’s onset, business leaders are increasingly bullish about growth opportunities in the coming year and believe the pandemic experience has increased their companies’ appetite to take on more new risk and make investments to build future resilience.
Those are two of the findings from a new study undertaken by Aon which surveyed 800 C-suite and senior executives in industries such as technology, finance, production and services within the US, EU, UK and Canada to discover how organisations are preparing for and responding to interconnected risks.
Called A New Approach to Volatility: The Importance of Making Better Decisions, the study concluded that “successful leaders are risk-aware, not risk-averse”.
The key takeaways were that executives “recognise risk as a necessity to future resilience”; that organisations faring better during the pandemic were those that took a holistic approach to preparing for risks and factored the interconnectedness of potential threats into all decision making; and that stronger companies value analysis and expertise alongside data.
The results of the survey were published after Aon last week unveiled a repositioning of its proposition to clients as a firm “in the business of better decisions” to help companies face evolving risks and volatility.
Commenting on the results, Aon CEO Greg Case said the world is “at an inflection point where businesses are not only focused on overcoming the current challenges we are facing, but shifting to think about other long-tail risks and how to prepare for them”.
“As leaders look at the future of their businesses in an increasingly volatile world, the pandemic has reshaped their views of risk and sharpened the importance of making better decisions.
“The past year has given leaders the insight they need to understand the dynamics of long-tail risks and the need to be better prepared, sparking optimism for what lies ahead,” he added.
The survey results showed that 70 percent of respondents agreed that the pandemic exposed new risks and vulnerabilities that “require a significant change” in the way businesses think about the future.
And the study revealed that in the wake of the pandemic executives are now more willing to take on risk and make investments to build resilience.
Of the business leaders who took part in the study, 80 percent said the experience of the pandemic had increased their companies’ appetite to take on additional risk and invest to build resilience for the future.
Executives, Aon reported, are open to taking on new risks related to financing and capital investment, with 55 percent of respondents interested in raising new capital, financing or debt. Half of the participants said they were willing to take on more risk in the area of investing in new technologies.
The report also found that organisations which fared better during the pandemic were those that took what Aon said was “a holistic approach to preparing for risks”.
“In a world where risks are more intertwined, stronger companies are placing increased value on an approach to risk management that considers the interconnectedness of potential threats and integrates those factors into all decision making,” the broker said.
Among the other findings from the study was that the strongest companies value analysis and expertise as well as data.
Business leaders, Aon explained, are looking beyond just the numbers to obtain actionable insights from data, evaluating analysis and taking advice from both internal and external sources.
Bullish on growth
The survey also revealed a renewed sense of confidence in the economy and growth prospects among respondents.
As Aon’s study found, 79 percent of respondents reported increased revenue in the first half of 2021, including 40 percent seeing top-line growth in the double-digits range.
There has also been a notable uptick in leaders’ expectations of business conditions in the year ahead.
When asked in August last year whether business conditions would be stronger in one year’s time, 82 percent of US participants felt that would be the case, while 16 percent believed they would be weaker.
In the most recent survey, 92 percent of North American respondents (the 2021 study included C-suite executives from both the US and Canada) predicted business conditions will be stronger one year from now, while just 6 percent felt they will be weaker.
In Europe and the UK, 61 percent of respondents last year felt business conditions would improve, while 33 percent said they would deteriorate. Now though, 85 percent of those surveyed feel conditions will strengthen in one year’s time, while just 11 percent predicted they will drop.
Aon reported that among the 38 percent of business leaders who felt they were “very prepared” to deal with the pandemic, 55 percent of them estimate double-digit revenue growth for their companies next year.
“Our research shows that executives are confident in the future and have prioritised the need to be better prepared for risk in the wake of the pandemic,” said Lori Goltermann, CEO of Enterprise Clients at Aon.
The confidence of these executives that their companies will grow is based on what they largely believe to be a strong economy.
Of the respondents to Aon’s survey in August 2020, 64 percent of those based in the US felt that the economy was either “excellent” or “good”, with 36 percent believing it was either “only fair” or “poor”.
But this year, 85 percent of US and Canadian respondents believe the economy is either “excellent” or “good”.
In Europe and the UK, the confidence is slightly more muted, with 53 percent of respondents last year describing the economy as “excellent” or “good”, and the remainder viewing it as “only fair” or “poor”.
In this year’s survey, 77 percent of respondents described the economy as “excellent” or “good”, with 23 percent seeing it as “only fair” or “poor”.
Results from the survey show that the financial services industry was the most prepared to deal with the pandemic, with 45 percent and 46 percent of respondents in that sector respectively believing their company was either “very prepared” or “somewhat prepared” for it.
Also, C-suite executives were more confident in their firm’s ability to cope than their senior executive counterparts, as 45 percent and 43 percent felt their company was “very prepared” or “somewhat prepared” to handle the pandemic.
Aon’s study also found that companies which failed to prepare and then act when tough situations arise are weakened significantly. As the broker noted, those companies which were weakened by the pandemic – 32 percent of those surveyed – “struggled to integrate risk assessment into decision making and to focus on the interconnectedness of varying risks”.
According to Aon, those companies that were unprepared and were then subsequently weakened by the pandemic fell behind their successful counterparts in two key areas: access to financial protection against losses and the ability to keep employees safe and productive throughout the pandemic.
On the other side, strong companies that were prepared “took a holistic, integrated view to pandemic response and reported risk integration as key to their approach to disarming evolving risks”, Aon said.