Sustainability In Times Of Volatility – What Aon’s 2022 Executive Risk Survey Means For Your Business

Confident Leader Responding to Changing Conditions and Analyzing Risks

GaudiLab Via Shutterstock.com

Nearly 4 out of 5 business leaders expect a recession, but only 1 out of 3 feel “very prepared” for it. That doesn’t sound very sustainable.

Those are key findings from Aon’s 2022 Executive Risk Survey, an annual survey of C-suite leaders and senior executives from the U.S., the EU and the UK. With this survey, Aon seeks to understand how CEOs make critical decisions and how they are preparing for emerging risks and threats in the face of economic volatility. Conducted in September 2022, the survey included 800 leaders representing companies with at least 500 employees.

More key findings:

79% of business leaders surveyed expect a recession within the next year, and nearly half (43%) believe a recession is very likely; 35% feel “very prepared” for the economic downturn; 47% feel “somewhat prepared” and 18% feel little or not prepared at all.

These findings were top of mind when I recently was in Puerto Rico for business.

Puerto Rico’s Resilience: A Model for Sustainable Planning in Volatile Markets

Many people associate Puerto Rico with volatility. There was the devastating category 5 Hurricane Maria in 2017. There’s been what the Center for Disaster Philanthropy calls “an unprecedented series of ongoing earthquake swarms, with more than 9,000 earthquakes since December 2019 in the Ponce region of Southern Puerto Rico.”

San Juan, Puerto Rico/USA – November 9, 2017: Streets in the Ocean Park sector of San Juan remain … [+] flooded weeks after Hurricane María utterly devastated the entire island of Puerto Rico.

Alessandro Pietri via Shutterstock.com

Add to that the local government bankruptcy and the effects of a global pandemic. There’s no doubt that it has been an intense several years in paradise.

If you don’t already, you should also associate Puerto Rico with resilience. The island is much more than hurricanes, quakes and debt. It also has a thriving industrial ecosystem and private sector with highly qualified, bilingual professionals.

I was there for several days, meeting with executive leaders, entrepreneurs and employees, to discuss resilience in the face of adversity and how to successfully adapt to change and grow. The context was adversity in business – how organizations and individuals can prepare themselves and those they lead to face volatility and remain resilient.

By the time I left the island, I was in awe of nature’s innate ability to recover. While there are some lingering effects from the island’s series of calamities, nature recovers.

And so do people.

We’ve all been through volatility over the past several years. And, based on the survey results mentioned above, most of us are expecting that volatility to continue.

How are you preparing yourself, your teams and your organization to be resilient? How would you answer the question: Do you feel prepared? How do you think those you lead would answer that question?

The discussions in Puerto Rico centered around the themes of risk and how to increase resilience by focusing on leadership, workforce, supply chain and – perhaps most important – changing our perspective on change.

Sustainable Leadership For A Volatile World

Whether or not an organization is ready for adversity depends on its leaders. To effectively assess and prepare for risks, a new type of leadership is needed: the sustainable leadership.

What might that look like? Here’s what the “very prepared” leaders (from Aon’s report) have in common:

62% percent of very prepared leaders agree that their company’s appetite to address risk has increased in response to the current economic climate. 61% percent of those same very prepared leaders also agree that all risks are interconnected, and that the most successful companies can handle risk regardless of where it comes from. The COVID-19 pandemic taught leaders how to respond quickly to emerging risks, which gives them confidence as they head into a recession.

This style of leadership requires that top leaders change the ways they lead or risk becoming obsolete. Leaders must become more flexible, inclusive, adaptable, and able to make better decisions, prioritizing people’s wellbeing.

We must open our minds to new ideas and new ways of doing things. Leaders need to be more collaborative and more interconnected with the workforce. The leader who will succeed in this era will identify strengths and highlight employee personalization to achieve greater engagement, cooperation and retention. Leaders must truly and authentically know employees, their motivations, their individuality, and how they contribute to the overall purpose of the company.

As leaders, we must identify external and internal risks and recognize the opportunity to adapt to new realities in order to turn our organizations around if needed – or to get ahead of the risk and of the competition.

We must also support our employees to sustain themselves in the face of any adversity.

Preparing the Workforce for Developing Resilience in Volatile Times

Preparing the workforce to be strong and agile during volatile times is paramount. According to another report by Aon, The Rising Resilient:

“There is nothing that businesses need more right now than workforce resilience. They need people who can weather storms, who feel secure, productive and motivated in their jobs, and can rapidly adapt to change.”

How do you create that? Here’s more from that report:

“Workforce resilience is a product of investing in the health and wellbeing of your people, but it is not just about making the financial investment. To foster resilience in your people, your approach to wellbeing needs to be intelligently aligned to the needs of the workforce, well communicated, and within an environment at work that allows resilience to thrive.”

You foster a sustainable workforce capable of handling disruption by being aligned to the needs of the workforce. People want to be seen and known – and then empowered to achieved at their fullest capacities.

An organization will be as resilient as its people. A resilient workforce gives an organization the ability to rapidly recover from difficulty.

Understanding Supply Chain Risks

According to another recent Aon report: 79% of companies said they’ve lost 4% or more of their revenue due to supply chain interruptions in the last three years.

Supply chain disruptions are frequent, costly, complex and varied. Global economies have become dependent on intricate supply chains and this has made them fragile.

Do you know where the threats of your supply chain lay and how much those threats could cost you? How resilient is your supply chain? Never before it has been more difficult and necessary to balance company needs with flexible, cost-effective and safe processes around risk mitigation to manage potential disruptions.

Back to Aon’s 2022 Executive Risk Survey: just 39% of leaders said their company is spending a great deal of time on supply chain disruptions. That could be one reason why more leaders didn’t claim to be “very prepared” for potential recession: if your company isn’t focused on supply chain issues, you know there’s a vulnerability that you might not be ready to handle.

Defining a risk strategy is a challenge that we must recognize and address in order to be ready to adapt to volatility. Knowing where and how risk affects your supply chains can help you prepare and respond to unexpected events.

The Bottom Line: Change is an Opportunity, Not a Threat

Volatility is scary because it’s unpredictable and it forces us to change. And change is often what scares people the most.

A company might undergo changes for many reasons; some merge, some sell to become more stable, some cut prices to be more competitive, or they reduce resources to survive. But how a company handles change is critical to its success and can sometimes be the tipping point between growth and failure.

Change may be disturbing for many, but transformation conversations have everything to do with our mindset on how we see opportunity.

One of the biggest mistakes I see companies make is how they handle change.

Change is an interruption of normalcy that can bring fear and uncertainty of the unknown. But we must start seeing change as a friend – a friend who encourages us to grow, to be better, to dare, but at the same time to take care of ourselves and be prepared. This is how we should also view business risks. We must see them, recognize them and walk with them, knowing that things can change from one moment to the next, and we’ll need to be ready to act.

In times of volatility, change is inescapable. If you see it as a threat, it will be a threat. But if you see and treat it as an opportunity, it will be an opportunity. Your choice.

The way organizations approach risks today will help them build resilience for tomorrow.