Lloyds risk index 2011

Lloyd’s RISK INDEX 2011 Featuring content by REspoNdENt pRoFILEs WHICH OF THE FOLLOWING DESCRIBES YOUR JOB TITLE? WHAT IS YOUR COMPANY’S ANNUAL GLOBAL REVENUE IN US DOLLARS? % % Board member CEO/President/Managing director CFO/Treasurer/Comptroller CRO/Chief risk officer CIO/Technology director Chief compliance officer Other C-level executive 8.5% 52.7% 15.6% 3.8% 5.7% 0.6% 13.1% 51.0% 14.9% 17.1% 5.4% 11.6% $499m or less $500m to $999m $1bn to $4.999bn $5bn to $9.999bn $10bn or more IN WHAT REGION ARE YOU PERSONALLY BASED? North America Europe 27% 35% Asia-Pacific 27% Rest of the World 11% Lloyd’s Risk Index 2011 WHAT IS YOUR PRIMARY INDUSTRY? Financial services 18.6% Professional services 13.2% Manufacturing 10.4% IT and technology 9.8% Energy and natural resources 8.6% Healthcare, pharmaceuticals and biotechnology 4.8% Entertainment, media and publishing 4.4% Construction and real estate 4.2% Retailing 3.2% Consumer goods 3.0% Agriculture and agribusiness 2.6% Chemicals 2.6% Education 2.6% Telecommunications 2.6% Transportation, travel and tourism 2.6% Aerospace/Defense 1.8% Government/Public sector 1.8% Logistics and distribution 1.8% Automotive 1.6% 01 coNtENts Introduction Foreword by Richard Ward, Chief Executive, Lloyd’s 02 Executive summary of findings from the Economist Intelligence Unit (EIU) 03 01 02 the top five risks 03 mind the (reality) gap Risk awareness rises in the east Loss of customers 10 Political, crime and security risks Talent and skills shortages 11 Environmental risks – a balancing act for business 19 16 Reputational risk 13 The selective invisibility of natural hazards Currency fluctuation 13 Changing legislation 14 20 conclusions Conclusion 26 Appendix and methodology 27 Lloyd’s Risk Index 2011 An increased appreciation of risk 24 02 INTRODUCTION foreword Foreword by DR Richard Ward Risk awareness rises in the East In 2009 much of the world held its breath as we watched banks fail, high street businesses collapse and the damaging impact of the credit crunch on the ‘real economy’ It was in that highly charged context that Lloyd’s, in collaboration with the Economist Intelligence Unit (EIU), published its first global survey1 on risk attitudes amongst business leaders Fascinating too, is the speed at which risk awareness in the East has grown The rise in the scores given across all categories of risk, compared to 2009, by Asia-Pacific respondents is significant, as is the increase in levels of business preparedness to deal with them Interestingly, these greater scores not apply only to natural hazards, of which Asia-Pacific has had direct recent experience, but across all five categories of risk surveyed This awareness presents both risks and opportunities for domestic and international business, as the new world balance of economic and political power shifts Two years later, global economies remain in a state of flux, with growing debate on how long it will take to play out, as we see with the current political and sovereign debt crisis The last two years have thrown the world into economic and political turmoil from which it has yet to emerge This second Lloyd’s Risk Index, based on a survey of global business leaders by the EIU, shows that their perceptions of risks have evolved significantly in the intervening two years In all regions of the world, across all sectors, business leaders now perceive the world as an inherently riskier place As we look at these changing priorities in more detail in this report, three key strands emerge from the findings From Credit Crunch to talent crunch There has been a change in emphasis in business risk rankings In 2011, businesses are less concerned about the availability of credit and more worried about the loss of customers and orders created by a new age of austerity in the West More surprising is the way that the risk posed by talent and skills shortages has shot up the list to become the second highest priority for businesses There are a number of theories as to why this move from credit crunch to talent crunch has occurred, some of which we outline in this report We hope it will encourage debate about how businesses can manage this escalating risk more effectively Lloyd’s Risk Index 2011 Reality and perception at odds Business leaders have scored themselves as more than adequately prepared for 48 out of the 50 risks For Lloyd’s, and for the insurance industry as a whole, the fact that this ‘preparedness gap’ exists for only two of the listed risks, compared to eight in 2009 is interesting I welcome any increase in the implementation of formal risk systems, but businesses also need to recognise such systems cannot anticipate so-called ‘black swan’ events When it comes to risk management planning businesses need to increasingly think the unthinkable in order to identify all their vulnerabilities and minimise them In the last two years, the world has been thrown into economic and political turmoil from which it has yet to emerge It will be intriguing to see the impact on business attitudes over the next two years, when we publish the third Lloyd’s Risk Index in 2013 DR RICHARD WARD Chief Executive Lloyd’s 03 EIU executive summary Prepared by the Economist Intelligence Unit for Lloyd’s of London* The combination of global shocks through increasingly interlinked and interdependent systems has raised the threat levels of risk across the board About this executive summary The aim of this executive summary, based on findings and analysis from the EIU and commissioned by Lloyd’s, is to assess corporate risk priorities and attitudes around the world The findings are based on a global survey of over 500 C-suite and Board level executives conducted in August 2011 Survey respondents were distributed across Europe (35%), North America (27%) and Asia-Pacific (27%), with the rest of the world comprising about 11% Financial services provided the largest number of respondents at 19%, followed by professional services at 13%, manufacturing at 10% and technology at 10% The remaining 48% of respondents represent a wide range of other industries Around half of respondents represent corporations with annual revenues of over $500m In this summary, we examine some of the over-arching trends and themes emerging from the 2011 survey We also identify major shifts from the 2009 survey and report, Lloyd’s 360 Risk Insight: Risk Priorities and Preparedness We would like to thank the respondents who took the time to participate in the survey Methodology The survey examined attitudes to risk across five key categories: >> >> >> >> >> Business and strategic risk Economic, regulatory and market risk Political, crime and security risk Environmental and health risk, and Natural hazard risk Respondents to the survey were asked to rate both the overall risk category and a series of key risks within each category against their corporate risk priorities and degree of preparedness to manage those risks A score was calculated for each where zero represents the lowest level of priority or preparedness and ten represents the highest Some new risks have been added to the 2011 survey from the 2009 version These enable us to explore in greater detail the role of government, demographic forces, and global resource issues such as food security and water scarcity, all of which we believe will give a more complete picture of corporate risk priorities in 2011 In this summary, we identify the key risk areas by looking thematically at the overall risk ratings, the top risks and the biggest changes from 2009 We also examine the survey results through a regional lens for the biggest differences in relation to current economic, political and commercial operating contexts Summary of Insights Three years on from the start of the worst financial crisis for more than a generation, there is still uncertainty about the future Will we manage to avoid a double-dip recession and emerge into a period of growth? If we do, will it be strong growth, or a prolonged period of slow progress, as many economies are currently experiencing? How can businesses manage risk in this environment? The financial crisis has undoubtedly reduced global economic resilience and, as the World Bank argues in its 2011 report on the macroeconomic risk landscape, the combination of global shocks through increasingly interlinked and interdependent systems has raised the threat level of risks across the board Economies in many developed countries are weighed down with debt and face years of sluggish growth, and may lack the agility required to efficiently manage external factors in this context Meanwhile, Asia’s 3.5 billion consumers and dynamic market environment may provide a massive growth opportunity A number of interesting insights and consistent themes can be seen emerging from the survey There is a greater sense of preparedness to address risk across the world’s boardrooms, a significant global disparity across the entire risk arena between East and West and a heightened sense of priority across all risk categories Anything high on an executive’s risk priority list can be considered in terms of a potential critical point of failure for business; some significant changes in the risk landscape over the past two years reflect new critical points of failure, such as risk of talent shortages Yet, while executives’ attitudes to risk not suggest they are anticipating a new era of growth, their leading concern – that they will lose customers – shows that fear of a double-dip recession is high up in their thinking Uncertainty is still the issue of the day * The EIU bears sole responsibility for the content of this executive summary The EIU editorial team executed the online survey, conducted the analysis and wrote this summary Lloyd’s Risk Index 2011 04 introduction EIu executive summary continued KEy INsIghts aNd thEmEs All overall risk priorities are notably higher than two years ago, with Asia leading the way While risk priorities generally increased across all five risk categories globally, the East drove this increase with an average overall priority score increase of 26% since 2009, compared with only 4% in Europe and North America The global imbalance between high and low growth economies is no doubt driving the regional disparities But the notable overall increases are likely to be a combination of this and other factors, including the state of longer-term economic uncertainty in the current business environment The survey suggests that the discipline of risk management has also become more important, and this is demonstrated in many practical ways Businesses feel distinctly better prepared to manage risks to their business and operations than they did two years ago Our survey finds that a strong sense of preparedness prevails in boardrooms around the world More than 70% of survey respondents report that their company is better prepared to manage business and operational risks than they were two years ago, and fewer than 3% say they are less prepared This is a markedly different result from our 2009 survey, when we found ‘preparedness gaps’ (defined as risks where the preparedness score was not as high as the priority score), in eight out of 41 individual risks, compared with only two out of 50 in 2011 One should not ignore the fact that, for many companies, there will be a difference between actually being prepared and simply believing that they are prepared But in view of the severity of financial and natural disasters over the past three years, and the rise in practical risk management measures internally, perhaps executives themselves have re-calibrated, for the better, what it means to be prepared Lloyd’s Risk Index 2011 Chart compared to two years ago, how are you prepared for risks to your business and operations? 70% are better prepared 27% are about the same 3% are not well prepared 05 Overall business and strategic risks, as well as economic, regulatory and market risks, still dominate risk priorities globally Although business and strategic risks overall edged past economic, regulatory and market risks for the top priority spot this year, the scores for both were high (7.3 and 7.2 respectively) There are some regional differences in whether one or the other of these risk categories is seen as the top priority, but it is important to recognise that globally, the top three risks are all business and strategic risks: loss of customers and orders, talent and skills shortages and reputational risks Meanwhile, the next five are all economic risks: currency fluctuation, changing legislation, cost and availability of credit, price of material inputs and inflation Environmental and natural hazards are seen as lower priorities overall Risks concerning natural hazards, and longer-term environmental trends such as climate change, still tend to be of lower and less immediate concern to board-level executives ‘Black swan events’, which have a relatively small probability but a high impact, tend to be low on our survey respondents’ list of priorities Despite the relatively high profile of global issues such as food security and water scarcity, these are also perceived to be a low priority, as are demographic factors – although there are notable regional differences What is also particularly interesting this year, is that environmental and health risks increased in priority by the greatest amount, despite still remaining at a moderate risk priority level overall Pollution and environmental liability is the top risk in this category, probably reflecting the anticipated costs of increased regulation The companies which may be hit hardest by these costs are those with operations in countries such as China, where environmental regulations are currently well behind those in the West, but are likely to catch up quickly Table Overall risks, 2011 versus 2009 * 2011 Priority Rank Overall Risks Business and strategic risk Economic, regulatory and market risk Political, crime and security risk Environmental and health risk Natural hazard risk 2011 2011 Priority Preparedness Score Score 7.3 7.2 5.4 5.0 4.2 7.1 6.5 6.5 6.1 5.5 2009 Priority Score 2009 Preparedness Score 6.5 6.8 4.9 4.0 3.9 6.0 5.8 5.1 5.1 5.4 * The survey conducted in 2009 offered respondents a list of 41 risks The 2011 Lloyd’s Risk Index updated this list to reflect the current risk environment by removing some of these risks and adding others A full list of these removals and additions can be found in the Appendix This means that the 2009 and 2011 rankings are not statistically directly comparable, although they offer an insight into changes in both perceptions of risk priority and preparedness over the last two years Lloyd’s Risk Index 2011 06 introduction EIU executive summary continued Chart individual risks, priority and preparedness scores 2011 Risk Loss of customers/Cancelled orders Business 6.2 6.3 Talent and skills shortages (including succession risk) Business 6.2 5.9 Reputational risk Business 5.8 6.6 Currency fluctuation Economic 5.6 5.9 Changing legislation Economic 5.6 5.4 Cost and availability of credit Economic 5.5 6.4 Price of material inputs Economic 5.4 5.7 Inflation Economic 5.4 5.5 Corporate liability Business 5.4 6.6 10 Excessively strict regulation Economic 5.4 5.6 11 Rapid technological changes Business 5.3 6.1 12 Cyber attacks (malicious) Political 5.3 6.0 13 High taxation Economic 5.2 5.5 14 Failed investment Business 5.2 6.1 15 Major asset price volatility Economic 5.2 5.7 16 Theft of assets/Intellectual Property Political 5.2 6.1 17 Fraud and corruption Political 5.2 6.3 18 Interest rate change Economic 5.1 6.0 19 Cyber risks (non-malicious) Political 5.1 6.2 20 Poor/incomplete regulation Economic 5.0 5.4 21 Critical infrastructure failure Business 4.9 5.9 22 Government spending cuts Economic 4.9 5.4 23 Supply chain failure Business 4.8 6.1 24 Pollution/environmental liability Environmental 4.7 5.7 25 Sovereign debt Economic 4.6 5.2 Score – out of 10 Priority Lloyd’s Preparedness Risk Index 2011 07 Risk 26 Increased protectionism Economic 4.6 5.4 27 Industrial/workplace accident Environmental 4.6 6.2 28 Energy security Business 4.5 5.8 29 Insolvency risk Business 4.5 6.2 30 Demographic shift (eg ageing population, youth emigration) Environmental 4.4 5.2 31 Strikes and industrial action Political 4.2 5.8 32 Climate change Environmental 4.1 4.8 33 Pandemic Environmental 4.0 4.7 34 Piracy Political 3.9 5.6 35 Water scarcity Environmental 3.9 4.9 36 Terrorism Political 3.9 5.0 37 Urbanisation Environmental 3.9 5.1 38 Population growth Environmental 3.8 5.1 39 Riots and civil commotion Political 3.7 5.1 40 Food security Environmental 3.6 4.8 41 Harmful effects of new technology Environmental 3.6 4.7 42 Flooding Natural 3.6 5.2 43 Expropriation of assets Political 3.4 5.2 44 Earthquake (including tsunami) Natural 3.3 4.5 45 Abrupt regime change Political 3.3 4.8 46 Windstorm (eg hurricane, cyclone, typhoon) Natural 3.2 4.5 47 Drought Natural 3.0 4.4 48 Threats to biodiversity Natural 2.8 4.3 49 Impact of space weather (eg solar flares) Natural 2.6 3.8 50 Volcanic eruption (including ash) Natural 2.4 4.0 Score – out of 10 Priority Lloyd’s Preparedness Risk Index 2011 08 introduction EIU executive summary continued Loss of customers is seen by businesses as the leading risk The top economic risk priorities have become more sophisticated There is an imbalance between East and West During times of economic uncertainty, sensitivity to losing customers becomes a critical point of failure for businesses In Asia, for example, where the economy is dominated by tradable goods, sensitivity to losing customers is more abrupt; businesses in this region were hard hit in 2008, but recovered quickly in the following year – a relatively quick recovery is possible in a goods-dominated market In the West, where services comprise a significant portion of the economy, companies continue to look for new market opportunities, particularly in regions where the cost of capital has gone down The survey suggests that companies understand that the most successful strategy for shoring up against the threat of recession is to attract and retain customers The uncertainty that dominates global business is reflected in the economic risk priorities of the respondents to our survey A good deal of the uncertainty is likely to be caused by an expectation that regional current events may escalate to cause bigger, global problems There are very real threats to the eurozone’s economic stability, for example, as problems have spread from Ireland and Greece to Italy, Spain and France Meanwhile, there is ongoing uncertainty caused by the downgrading of the US credit rating in August of this year, and also concern that inflation may escalate in the East unless exchange rates are carefully managed Survival was certainly the theme of 2008-2009, when cost and availability of credit and currency fluctuations were the top two global risk priorities These are still in the top ten, but the picture is now more complicated Corporate leaders also recognise the critical role of policy such as legislation and exchange rate policy and its impact on inflation, on their businesses Linked to this is the price of material inputs, which have risen substantially in priority in our survey rankings When exploring the main themes emerging from our survey, significant regional and sector disparities emerge There is a significant imbalance in the consumer sector, where Asia, particularly China, is faring very well and Europe and the US are struggling Certainly, one of the key challenges for policymakers at this time is to make allowances for the ways in which other regions will manage their own economic policies In the US and Europe, emerging from recession, or avoiding a double-dip recession, has not typically been consumer-led in the past, but stimulated by government policy, as well as innovation, particularly in technology One of the developments we may be seeing in the higher risk scores across Asia-Pacific is a lack of confidence that they will continue to be able to achieve the kind of growth generated in the past Their export opportunities are shrinking and many are looking to more dynamic markets closer to home as being more promising sources of long-term growth And the region’s 3.5 billion consumers still provide a massive growth opportunity Risk of talent shortage has escalated dramatically The risk of talent and skill shortages rose from a relatively lowly 22nd ranked priority in 2009 to 2nd in 2011, and companies feel relatively less able to manage this risk A number of pressures are likely to have driven this shift, including demographic (China, for example, has a large population of young and old people, but a deficit of working-age, professional workers), competitive (including the need for innovation and entrepreneurship to help lead the West out of recession) and productivity (doing more with less) The search for talent is also much more acute in the Asia-Pacific region In our survey, 70% and 60% of respondents from the Asia-Pacific region and the rest of the world respectively, rated talent as high or very high priority, compared to only 42% and 45% of respondents in Europe and North America respectively Lloyd’s Risk Index 2011 24 section three Risk awareness rises in the East An escalated appreciation of risk Business leaders in the Asia-Pacific region have significantly raised their assessment of the seriousness of all five categories of risk since 2009 Business risks rise from a priority score of 6.5 in 2009 to 7.7 today, economic risks from 6.6 to 7.3, political risk from 5.0 to 6.1 and natural hazards from 4.3 to 5.4 The sharpest rise of all has been the perception of environmental risks, from 4.7 in 2009 to 6.0 today While these rises tell a clear story of a region increasingly recognising risk, the Index findings also show a significant disparity between the scores given to top risks by European and North American respondents and those given by respondents in the Asia-Pacific region ‘Loss of customers/cancelled orders’ is the number one risk for European and North American business leaders and the score they give it is 6.0 and 6.2 respectively While the same risk ranks only fourth for Asia-Pacific respondents, they give it a score of 6.3 Similarly, while ‘reputational risk’ comes in as the second highest priority for North America it is given a score of 5.9 Despite this risk being placed fifth by Asia-Pacific respondents, they give it a higher score of 6.2 Chart 10 top priority and preparedness scores – Asia-pacific Talent and skills shortages 7.1 6.1 Currency fluctuation 6.5 6.2 Inflation 6.4 5.9 Loss of customers/cancelled orders 6.3 6.7 Priority Reputational risk 6.2 7.1 Preparedness Score – out of 10 Chart 11 Comparison of risk category scores by region Lloyd’s global north america europe asiapacific rest of the world business 7.3 7.1 7.1 6.9 7.0 6.9 7.7 7.3 7.9 7.3 economic 7.2 6.5 7.2 6.5 7.2 6.4 7.3 6.8 7.3 6.3 political 5.4 6.5 4.8 6.7 5.0 6.2 6.1 6.8 6.9 6.4 environmental 5.0 6.1 4.5 6.3 4.5 5.9 6.0 6.6 5.2 5.1 natural 4.3 5.5 4.1 6.5 3.4 4.7 5.4 5.8 4.7 4.9 Risk Index 2011 Priority Preparedness Score – out of 10 25 Concern about talent and skills shortages, in particular, is considerably higher in Asia-Pacific than in the other regions of the world 70% of Asia-Pacific respondents gave it a very high or high priority, against 42% for Europe, 45% for North America and 60% for the rest of the world With this degree of priority, it is interesting that Asia-Pacific’s score for being ‘very’ or ‘well’ prepared against this risk is only 48% This is the highest gap between priority and preparedness for this risk of any of the world’s regions Having experienced a devastating year of natural catastrophes, it’s not surprising that the Asia-Pacific region gives the risk category ‘natural hazards’ the highest priority of all other world regions, with a score of 5.4 What is, perhaps, surprising is that respondents still believe they are slightly over-prepared for the risk at 5.8 Given that, for example, the claims made to the non-life insurance industry for damage caused by the Japanese earthquake and tsunami were $30bn and the total economic loss to the region has been estimated at nearer $100bn24, the belief in near-parity between risk priority and preparedness may be harder to justify Chart 12 overall risk categories priority scores 2011 versus 2009 – asia-pacific Business 2011 2009 7.7 6.5 economic political environmental natural 7.3 6.1 6.0 5.4 6.6 5.0 4.3 4.7 Score – out of 10 Lloyd’s Risk Index 2011 26 conclusion conclusion Is it credible that so many boards across the world are adequately prepared for climate change, another volcanic ash cloud or a major earthquake? By any standards, the two year period between 2009 and 2011 has been more than usually eventful Exceptionally frequent and costly natural disasters, waves of political change across North Africa and the Middle East, and an escalating sovereign debt crisis in Europe have created new economic, political, environmental and social uncertainties That the risk priorities of business leaders across the globe have changed is not surprising What is more surprising is the general level of confidence, with some notable exceptions, that respondents show in their ability to deal with these risks Whatever the trends or partial explanation, we come back to the fact that in 48 out of the 50 risks in the Index most respondents believe their preparedness for a particular risk outweighed its sense of priority As a major international insurer we have to ask: people feel better prepared, at least in part, because they have the option of insurance? It is interesting that levels of perceived preparedness increase in those areas where insurance is most readily available, such as natural hazards, and shrink in relation to areas where it is not, such as in preventing the loss of customers, eradicating sovereign debt or solving talent and skills shortages Lloyd’s Risk Index 2011 Does the location of ‘insurable’ risks at the bottom of the Index suggest that the insurance industry is doing exactly what it aims to – allowing the transfer of risks away from companies? If so, does this mean that insurers can congratulate themselves on a job well done? We believe this is premature The wide take-up – in the West at least – of insurance to manage risks such as floods or earthquakes clearly has a positive impact on boards’ levels of preparedness But neither insurers nor their clients can afford to be complacent about the risks presented by low probability – high impact events Is it credible that so many boards across the world are adequately prepared for climate change, another volcanic ash cloud or a major earthquake? The terrible succession of events in Japan this year illustrates that, while insurance can help rebuild communities and infrastructure, it cannot stop our planet being battered by natural disasters Nor, importantly, can it cover every eventuality After the unfolding events of the last two years, businesses need to give much greater priority to planning carefully for the risks they cannot prevent, as well as being realistic about those they can 27 appendix Annex 1: 2009 RISKS 2011 risks >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> Loss of customers/Cancelled orders >> Talent and skills shortages (including succession risk) >> Reputational risk >> Currency fluctuation >> Changing legislation >> Cost and availability of credit >> Price of material inputs >> Inflation >> Corporate liability >> Excessively strict regulation >> Rapid technological changes >> C yber attacks (malicious) >> High taxation >> Failed investment >> Major asset price volatility >> Theft of assets/Intellectual Property >> Fraud and corruption >> Interest rate change >> C yber risks (non-malicious) >> Poor/Incomplete regulation >> Critical infrastructure failure >> Government spending cuts >> Supply chain failure >> Pollution/Environmental liability >> Sovereign debt >> Increased protectionism >> Industrial/Workplace accident >> Energy security >> Insolvency risk >> Demographic shift (eg ageing population, youth emigration) >> Strikes and industrial action >> Climate change >> Pandemic >> Piracy >> Water scarcity >> Terrorism >> Urbanisation >> Population growth >> Riots and civil commotion >> Food security >> Harmful effects of new technology >> Flooding >> E xpropriation of assets >> Earthquake (including tsunami) >> Abrupt regime change >> Windstorm (eg hurricane, cyclone, typhoon) >> Drought >> Threats to biodiversity >> Impact of space weather (eg solar flares) >> Volcanic eruption (including ash) Cost and availability of credit Currency fluctuation Insolvency risk Loss of customers Major asset price volatility Cancelled orders Risk of excessively strict regulation Corporate liability Reputational risk Project delivery risk Abrupt interest rate change Risk of poor/Incomplete regulation Increasing protectionism Failed investment Fraud and corruption Information security breach Price of material inputs Theft of assets/Intellectual property Rapid technological change Cyber attacks Workforce health Talent and skills shortages Supply chain failure Succession risk Industrial/Workplace accident Energy security Piracy Strikes Pollution (caused by business) Flooding Terrorism Currency inconvertibility Climate change (impact on business) Pandemic Expropriation of assets Earthquake Drought Riots and civil commotion Windstorm (eg hurricane or typhoon) Abrupt regime change Wildlife Lloyd’s Risk Index 2011 28 appendix appendix continued Directly comparable risks 2009 and 2011 >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> >> Abrupt regime change Corporate liability Cost and availability of credit Currency fluctuation Drought Energy security Excessively strict regulation Expropriation of assets Failed investment Flooding Fraud and corruption Increasing protectionism Industrial/Workplace accident Insolvency risk Major asset price volatility Pandemic Piracy Poor/Incomplete regulation Price of material inputs Rapid technological change Reputational risk Riots and civil commotion Supply chain failure Terrorism Theft of assets/Intellectual property Windstorm (eg hurricane, cyclone, typhoon) New risks for 2011 Methodology >> Changing legislation >> Critical infrastructure failure >> Demographic shift (eg ageing population, youth emigration) >> Food security >> Government spending cuts >> Harmful effects of new technology (eg nanotechnology, EMF) >> High taxation >> Impact of space weather (eg solar flares) >> Inflation >> Population growth >> Sovereign debt >> Threats to biodiversity and conservation affecting our operations >> Urbanisation >> Volcanic eruption (including ash) >> Water scarcity The Lloyd’s Risk Index is based on results of a survey of 500 board level executives, carried out by the EIU in August 2011 Respondents rated, on a scale of one to five, how much of a priority each of the 50 risks will be to their business for the next year in the region they are based On a similar scale they rated how prepared they expect their organisation will be to deal with that risk Responses were converted to a one to ten index and averaged to calculate the priority and preparedness scores The 2009 risk survey contained 41 risks and took place in March 2009 It surveyed 570 board level executives spread across major regions of the world Risks included in 2009 survey but removed for 2011 survey >> >> >> >> >> Currency inconvertibility Information security breach Project delivery risk Wildlife Workforce health Table Risks which have changed for the 2011 survey 2009 risk definitions 2011 risk definitions Abrupt interest rate change Cancelled orders Climate change (impact on business) Cyber attacks Earthquake Loss of customers Pollution (caused by business) Strikes Succession risk Talent and skills shortage Interest rate change Loss of customers/cancelled orders (amalgamated) Climate change Cyber attacks (malicious) Cyber risk (non-malicious) Earthquake (including tsunami) Loss of customers/cancelled orders (amalgamated) Pollution/environmental liability Strikes and industrial action Talent and skills shortages, including succession risk (amalgamated) Talent and skills shortages, including succession risk (amalgamated) Lloyd’s Risk Index 2011 29 Annex 2: Chart 13 top 50 priority risk scores in 2011 – Asia-Pacific Risk 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Talent and skills shortage (including succession risk) Currency fluctuation Inflation Loss of customers/cancelled orders Reputational risk Fraud and corruption Changing legislation Interest rate change Corporate liability Excessively strict regulation Failed investment Price of material inputs Cost and availability of credit Poor/incomplete regulation Rapid technological changes Theft of assets/intellectual property High taxation Critical infrastructure failure Pollution/environmental liability Cyber attacks (malicious) Energy security Major asset price volatility Industrial/workplace accident Supply chain failure Demographic shift (eg ageing population, youth emigration) Sovereign debt Climate change Cyber risk (non-malicious) Increased protectionism Water scarcity Pandemic Urbanisation Piracy Insolvency risk Terrorism Government spending cuts Food security Flooding Earthquake (including tsunami) Population growth Strikes and industrial action Harmful effects of new technology (eg nanotechnology, EMF) Abrupt regime change Riots and civil commotion Expropriation of assets Drought Windstorm (eg hurricane, cyclone, typhoon) Threats to biodiversity and conservation affecting our operations Impact of space weather (eg solar flares) Volcanic eruption (including ash) Score – out of 10 Lloyd’s 7.11 6.52 6.43 6.32 6.24 6.10 5.98 5.95 5.93 5.88 5.87 5.86 5.74 5.73 5.62 5.55 5.55 5.49 5.47 5.45 5.45 5.42 5.36 5.30 5.23 5.23 5.17 5.11 5.11 5.06 5.00 5.00 4.98 4.98 4.89 4.89 4.75 4.72 4.72 4.69 4.53 4.53 4.45 4.43 4.28 4.06 3.90 3.59 3.55 3.26 Risk Index 2011 30 appendix appendix continued Chart 14 top 50 priority risk scores in 2011 – europe Risk 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Loss of customers/cancelled orders Talent and skills shortage (including succession risk) Currency fluctuation Cost and availability of credit Changing legislation High taxation Reputational risk Failed investment Excessively strict regulation Corporate liability Inflation Price of material inputs Major asset price volatility Cyber attacks (malicious) Rapid technological changes Government spending cuts Sovereign debt Cyber risk (non-malicious) Theft of assets/intellectual property Fraud and corruption Interest rate change Critical infrastructure failure Poor/incomplete regulation Insolvency risk Supply chain failure Pollution/environmental liability Strikes and industrial action Industrial/workplace accident Increased protectionism Energy security Demographic shift (eg ageing population, youth emigration) Climate change Pandemic Piracy Riots and civil commotion Urbanisation Terrorism Water scarcity Population growth Expropriation of assets Harmful effects of new technology (eg nanotechnology, EMF) Abrupt regime change Food security Flooding Earthquake (including tsunami) Windstorm (eg hurricane, cyclone, typhoon) Threats to biodiversity and conservation affecting our operations Drought Volcanic eruption (including ash) Impact of space weather (eg solar flares) Score – out of 10 Lloyd’s 6.00 5.66 5.53 5.34 5.33 5.20 5.18 5.12 5.12 5.06 5.01 4.99 4.97 4.94 4.94 4.90 4.88 4.82 4.80 4.77 4.69 4.57 4.56 4.56 4.54 4.32 4.32 4.26 4.22 4.12 3.95 3.73 3.68 3.55 3.45 3.45 3.40 3.28 3.16 3.13 3.06 3.01 2.99 2.91 2.59 2.57 2.49 2.38 2.27 2.24 Risk Index 2011 31 Chart 15 top 50 priority risk scores in 2011 – Rest of the world Risk 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Talent and skills shortage (including succession risk) Fraud and corruption Loss of customers/cancelled orders Currency fluctuation Reputational risk Price of material inputs Cost and availability of credit Inflation Failed investment Rapid technological changes Corporate liability Critical infrastructure failure Changing legislation Excessively strict regulation Supply chain failure Major asset price volatility Poor/incomplete regulation Energy security Cyber risk (non-malicious) High taxation Theft of assets/intellectual property Increased protectionism Cyber attacks (malicious) Interest rate change Pollution/environmental liability Industrial/workplace accident Riots and civil commotion Water scarcity Urbanisation Climate change Strikes and industrial action Insolvency risk Government spending cuts Food security Demographic shift (eg ageing population, youth emigration) Population growth Terrorism Pandemic Flooding Expropriation of assets Sovereign debt Harmful effects of new technology (eg nanotechnology, EMF) Piracy Abrupt regime change Earthquake (inc tsunami) Drought Threats to biodiversity and conservation affecting our operations Windstorm (eg hurricane, cyclone, typhoon) Volcanic eruption (including ash) Impact of space weather (eg solar flares) Score – out of 10 Lloyd’s 6.94 6.18 6.16 6.11 6.11 5.75 5.56 5.52 5.51 5.46 5.42 5.42 5.37 5.37 5.28 5.23 5.14 5.09 5.05 4.95 4.91 4.90 4.81 4.81 4.81 4.76 4.72 4.53 4.38 4.33 4.25 4.21 4.21 4.10 4.10 4.01 3.98 3.96 3.61 3.44 3.43 3.37 3.35 3.30 3.24 3.11 2.59 2.13 1.94 1.90 Risk Index 2011 32 risk index 2011 appendix continued Chart 16 top 50 priority risk scores in 2011 – north america Risk 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Loss of customers/cancelled orders Reputational risk Changing legislation Cyber attacks (malicious) Price of material inputs Talent and skills shortage (including succession risk) Rapid technological changes Cost and availability of credit Corporate liability Theft of assets/intellectual property Major asset price volatility Cyber risk (non-malicious) Excessively strict regulation Government spending cuts High taxation Inflation Poor/incomplete regulation Interest rate change Currency fluctuation Supply chain failure Failed investment Critical infrastructure failure Increased protectionism Pollution/environmental liability Fraud and corruption Demographic shift (eg ageing population, youth emigration) Sovereign debt Industrial/workplace accident Insolvency risk Energy security Strikes and industrial action Population growth Windstorm (eg hurricane, cyclone, typhoon) Piracy Pandemic Terrorism Climate change Harmful effects of new technology (eg nanotechnology, EMF) Water scarcity Flooding Food security Urbanisation Earthquake (including tsunami) Drought Riots and civil commotion Expropriation of assets Threats to biodiversity and conservation affecting our operations Impact of space weather (eg solar flares) Abrupt regime change Volcanic eruption (including ash) Score – out of 10 Lloyd’s 6.18 5.94 5.71 5.63 5.54 5.51 5.46 5.35 5.35 5.34 5.33 5.30 5.22 5.22 5.13 5.09 4.93 4.83 4.70 4.67 4.67 4.59 4.54 4.42 4.41 4.40 4.31 4.25 3.99 3.93 3.82 3.69 3.63 3.61 3.56 3.56 3.53 3.52 3.43 3.37 3.23 3.21 2.99 2.93 2.91 2.83 2.70 2.57 2.57 1.95 Risk Index 2011 33 Chart 17 top 50 preparedness scores in 2011 – asia-pacific Risk 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Reputational risk Corporate liability Industrial/workplace accident Loss of customers/cancelled orders Fraud and corruption Cost and availability of credit Insolvency risk Theft of assets/intellectual property Failed investment Rapid technological changes Pollution/environmental liability Supply chain failure Cyber attacks (malicious) Piracy Cyber risk (non-malicious) Critical infrastructure failure Currency fluctuation Energy security Talent and skills shortage (including succession risk) Demographic shift (eg ageing population, youth emigration) Interest rate change Increased protectionism High taxation Strikes and industrial action Government spending cuts Poor/incomplete regulation Inflation Major asset price volatility Population growth Excessively strict regulation Price of material inputs Urbanisation Changing legislation Expropriation of assets Sovereign debt Terrorism Pandemic Climate change Abrupt regime change Water scarcity Food security Riots and civil commotion Flooding Earthquake (including tsunami) Harmful effects of new technology (eg nanotechnology, EMF) Windstorm (eg hurricane, cyclone, typhoon) Drought Threats to biodiversity and conservation affecting our operations Volcanic eruption (including ash) Impact of space weather (eg solar flares) Score – out of 10 Lloyd’s 7.06 6.89 6.73 6.67 6.60 6.48 6.48 6.45 6.35 6.35 6.35 6.31 6.28 6.26 6.23 6.22 6.15 6.09 6.09 6.07 6.05 6.00 6.00 6.00 5.98 5.91 5.90 5.86 5.81 5.76 5.76 5.73 5.70 5.70 5.68 5.66 5.57 5.51 5.51 5.47 5.38 5.38 5.32 5.19 5.19 4.74 4.70 4.62 4.36 4.34 Risk Index 2011 34 risk index 2011 appendix continued Chart 18 top 50 preparedness scores in 2011 – europe Risk 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Reputational risk Corporate liability Cost and availability of credit Loss of customers/cancelled orders Cyber risk (non-malicious) Insolvency risk Fraud and corruption Industrial/workplace accident Cyber attacks (malicious) Failed investment Currency fluctuation Talent and skills shortage (including succession risk) Theft of assets/intellectual property Rapid technological changes Supply chain failure Interest rate change Critical infrastructure failure Energy security Pollution/environmental liability Strikes and industrial action Price of material inputs Excessively strict regulation Major asset price volatility High taxation Government spending cuts Changing legislation Inflation Piracy Increased protectionism Sovereign debt Poor/incomplete regulation Urbanisation Expropriation of assets Demographic shift (eg ageing population, youth emigration) Riots and civil commotion Flooding Food security Climate change Water scarcity Terrorism Pandemic Harmful effects of new technology (eg nanotechnology, EMF) Population growth Abrupt regime change Windstorm (eg hurricane, cyclone, typhoon) Threats to biodiversity and conservation affecting our operations Drought Earthquake (including tsunami) Volcanic eruption (including ash) Impact of space weather (eg solar flares) Score – out of 10 Lloyd’s 6.26 6.17 6.13 6.11 6.10 6.09 5.94 5.90 5.90 5.86 5.83 5.81 5.81 5.80 5.80 5.75 5.67 5.54 5.54 5.52 5.52 5.45 5.38 5.25 5.25 5.23 5.09 5.09 4.85 4.81 4.78 4.75 4.69 4.68 4.54 4.52 4.51 4.49 4.48 4.47 4.46 4.46 4.38 4.26 3.92 3.85 3.71 3.68 3.65 3.33 Risk Index 2011 35 Chart 19 top 50 preparedness scores in 2011 – rest of the world Risk 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Cost and availability of credit Corporate liability Reputational risk Fraud and corruption Supply chain failure Interest rate change Loss of customers/cancelled orders Failed investment Critical infrastructure failure Industrial/workplace accident Energy security Theft of assets/intellectual property Rapid technological changes Cyber attacks (malicious) Major asset price volatility Price of material inputs Talent and skills shortage (including succession risk) Insolvency risk Cyber risk (non-malicious) Poor/incomplete regulation Strikes and industrial action Currency fluctuation Excessively strict regulation Changing legislation Inflation Piracy High taxation Increased protectionism Government spending cuts Sovereign debt Flooding Riots and civil commotion Terrorism Food security Population growth Expropriation of assets Pollution/environmental liability Urbanisation Earthquake (including tsunami) Water scarcity Abrupt regime change Demographic shift (eg ageing population, youth emigration) Drought Climate change Windstorm (eg hurricane, cyclone, typhoon) Harmful effects of new technology (eg nanotechnology, EMF) Pandemic Threats to biodiversity and conservation affecting our operations Volcanic eruption (including ash) Impact of space weather (eg solar flares) Score – out of 10 Lloyd’s 6.81 6.79 6.76 6.60 6.34 6.20 6.16 6.11 5.88 5.87 5.83 5.79 5.74 5.69 5.65 5.65 5.65 5.65 5.61 5.60 5.58 5.46 5.46 5.46 5.37 5.37 5.23 5.05 5.05 5.00 4.86 4.81 4.54 4.43 4.41 4.39 4.38 4.33 4.31 4.10 4.06 4.04 3.84 3.61 3.58 3.56 3.27 3.21 2.69 2.27 Risk Index 2011 36 appendix appendix continued Chart 20 top 50 preparedness scores in 2011 – north america Risk 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Corporate liability Reputational risk Cost and availability of credit Fraud and corruption Cyber risks (non-malicious) Rapid technological changes Insolvency risk Cyber attacks (malicious) Interest rate change Theft of assets/intellectual property Strikes and industrial action Loss of customers/cancelled orders Industrial/workplace accident Major asset price volatility Supply chain failure Failed investment Talent and skills shortage (including succession risk) Currency fluctuation Pollution/environmental liability Energy security Flooding Critical infrastructure failure Price of material inputs Excessively strict regulation Inflation Piracy Expropriation of assets Poor/incomplete regulation Increased protectionism Population growth High taxation Sovereign debt Riots and civil commotion Demographic shift (eg ageing population, youth emigration) Urbanisation Windstorm (eg hurricane, cyclone, typhoon) Government spending cuts Changing legislation Water scarcity Abrupt regime change Terrorism Drought Climate change Earthquake (including tsunami) Harmful effects of new technology (eg nanotechnology, EMF) Pandemic Threats to biodiversity and conservation affecting our operations Food security Volcanic eruption (including ash) Impact of space weather (eg solar flares) Score – out of 10 Lloyd’s 6.67 6.52 6.42 6.41 6.41 6.38 6.21 6.17 6.15 6.15 6.15 6.15 6.11 6.07 6.06 6.01 6.00 6.00 5.98 5.97 5.93 5.91 5.88 5.81 5.72 5.69 5.65 5.60 5.58 5.55 5.53 5.47 5.47 5.47 5.40 5.32 5.28 5.26 5.25 5.23 5.22 5.13 5.10 5.04 5.00 4.90 4.87 4.85 4.53 4.44 Risk Index 2011 37 references References: Lloyd’s 360 Risk Insight ‘Global Business Leader Survey: Risk Priorities and preparedness’ www.lloyds.com ISAE Italian Index of Consumer Confidence, October 2011 Insee Index of business confidence, September 2011 Conference Board sentiment index, September 2011 Federal Reserve Bank San Francisco Economic Letter, January 2010 Chinese Ministry of Industry and Information Technology, August 2010 www.theengineer.co.uk, March 2011 Dan Karpenchuk, ABC Australia, May 2011 nexxt.org 10 Andrew Monahan et al, Wall Street Journal, wsj.com, February 2011 11 Keidanren Growth Strategy 2011, www.keidanren.or.jp 12 Oxford Metrica Reputation Review, 2010 13 http://www.guardian.co.uk/business/2011/feb/03/ shell-nigeria-analysis-environmentalist-criticisms, http://www.globalsecurity.org/military/world/war/ nigeria-2.htm 14 Martin Feldstein, China Daily, March 2011, www.chinadaily.com.cn 15 Financial Markets Law Committee, October 2011, www.fmlc.org 16 China.org.cn, June 2011 17 BBC, August 2011, Insurance Daily, August 2011, www.insurancedaily.co.uk 18 Symantec Internet Security Threat Report Volume 16, Sept 2011 19 PwC Information Security Breaches Survey 2010, www.pwc.co.uk 20 Lloyd’s and RAND, Litigation and business: transatlantic trends, 2008, www.lloyds.com 21 Lloyd’s, Andrew Rees, David Sharp, Drilling in Extreme Environments, 2011, www.lloyds.com 22 Munich Re 2011 half-year natural catastrophe review, http://www.munichre.com/app_pages/www/@res/pdf/ media_relations/press_dossiers/hurricane/2011-halfyear-natural-catastrophe-review-usa_en.pdf 23 ‘Scientists in the dock’, The Economist, September 2011 24 RMS (www.rms.com), EQECAT (www.eqecat.com) and AIR Worldwide (www.air-worldwide.com) estimates, April 2011 Disclaimer Except for the Executive Summary (pages 3-8), which was written by the Economist Intelligence Unit (EIU), the Lloyd’s Risk Index has been prepared by Lloyd’s based upon the results of a survey carried out for Lloyd’s by the EIU in August 2011 and is published for general information purposes only While care has been taken in producing this document, Lloyd’s does not make any representations or warranties as to its accuracy or completeness and accepts no responsibility or liability for any loss occasioned in reliance upon it Lloyd’s Risk Index 2011 Lloyd’s One Lime Street London EC3M 7HA Telephone +44 (0)20 7327 1000 Fax +44 (0)20 7626 2389 www.lloyds.com [...]... Score – out of 10 Lloyd’s Risk Index 2011 23 03 RIsK awaRENEss RIsEs IN thE East An escalated appreciation of risk Lloyd’s 24 Risk Index 2011 24 section three Risk awareness rises in the East An escalated appreciation of risk Business leaders in the Asia-Pacific region have significantly raised their assessment of the seriousness of all five categories of risk since 2009 Business risks rise from a priority... 3.35 3.30 3.24 3.11 2.59 2.13 1.94 1.90 Risk Index 2011 1 2 3 4 5 6 7 8 32 risk index 2011 appendix continued Chart 16 top 50 priority risk scores in 2011 – north america Risk 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Loss of customers/cancelled orders Reputational risk Changing legislation Cyber attacks... 4.36 4.34 Risk Index 2011 1 2 3 4 5 6 7 8 34 risk index 2011 appendix continued Chart 18 top 50 preparedness scores in 2011 – europe Risk 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Reputational risk Corporate liability Cost and availability of credit Loss of customers/cancelled orders Cyber risk (non-malicious)... Cyber risk (non-malicious) Earthquake (including tsunami) Loss of customers/cancelled orders (amalgamated) Pollution/environmental liability Strikes and industrial action Talent and skills shortages, including succession risk (amalgamated) Talent and skills shortages, including succession risk (amalgamated) Lloyd’s Risk Index 2011 29 Annex 2: Chart 13 top 50 priority risk scores in 2011 – Asia-Pacific Risk. .. Lloyd’s Risk Index 2011 18 SECTION two mind the (reality) gap continued Facing up to the cyber threat While many types of risk may be industry or regionally specific, cyber risk is universal Yet its ranking in the overall Index at only 12 (malicious attacks) and 19 (non-malicious) appears relatively low given the frequency and potential impact of the risk It is interesting, however, that this year the risk. .. 2.24 Risk Index 2011 1 2 3 4 5 6 7 8 31 Chart 15 top 50 priority risk scores in 2011 – Rest of the world Risk 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Talent and skills shortage (including succession risk) Fraud and corruption Loss of customers/cancelled orders Currency fluctuation Reputational risk. .. there were 41 risks whereas in 2011 there were 50 Lloyd’s Risk Index 2011 2011 RANK 2009 Ranking 12 16 17 19 31 34 36 39 43 45 Cyber attacks rated 20 18 15 Cyber attacks rated 20 28 27 31 38 35 40 19 Chart 6 Environmental risk priority and preparedness scores by industry Priority Preparedness GLOBAL 5.0 6.1 manufacturing 5.6 6.5 energy and natural resources 5.6 7.3 5.2 5.8 ENvIRoNmENtaL RIsKs – a baLaNcINg... security risks 16 Environmental risks – a balancing act for business 19 The ‘selective invisibility’ of natural hazards 20 Lloyd’s Risk Index 2011 16 SECTION two mind the (reality) gap Mind the (reality) gap Risks from three of the five categories do not feature at all in the Index top ten; these are ‘political, crime and security’, ‘environmental and health’ and ‘natural hazard’ Indeed, natural hazard risks... Lloyd’s Risk Index 2011 Does the location of ‘insurable’ risks at the bottom of the Index suggest that the insurance industry is doing exactly what it aims to do – allowing the transfer of risks away from companies? If so, does this mean that insurers can congratulate themselves on a job well done? We believe this is premature The wide take-up – in the West at least – of insurance to manage risks such...09 01 thE top FIvE RIsKs Loss of customers 10 Talent and skills shortages 11 Reputational risk 13 Currency fluctuation 13 Changing legislation 14 Lloyd’s Risk Index 2011 10 SECTION one the top five risks Then and now – what has changed? In 2009, the top three risks prioritised by business leaders were direct responses to the liquidity crisis ... Preparedness Score – out of 10 Lloyd’s Risk Index 2011 23 03 RIsK awaRENEss RIsEs IN thE East An escalated appreciation of risk Lloyd’s 24 Risk Index 2011 24 section three Risk awareness rises in the East... 3.35 3.30 3.24 3.11 2.59 2.13 1.94 1.90 Risk Index 2011 32 risk index 2011 appendix continued Chart 16 top 50 priority risk scores in 2011 – north america Risk 10 11 12 13 14 15 16 17 18 19 20... Overall risks, 2011 versus 2009 * 2011 Priority Rank Overall Risks Business and strategic risk Economic, regulatory and market risk Political, crime and security risk Environmental and health risk