Aviation C-Suite executives perceive a business landscape in which primary risks are multiplying, increasingly interconnected and unique to each sector of the industry, according to preliminary findings from this year’s Willis Towers Watson Transportation Risk Index.
The most severe and hardest-to-manage risk expressed across the wider aviation industry – which includes airlines, airports, aircraft lessors, aerospace manufacturers, general aviation and space companies – was the legal scrutiny associated with mergers and acquisitions.
The ‘failure of critical IT systems’ and an ‘over-dependence on national infrastructure’ are the second and third most significant risks, respectively, according to the preliminary findings. The ‘impact of natural disasters, epidemics or armed conflict’ and ‘changes in seasonal demand’ rounded out the top five risks overall.
The aviation industry is at an inflection point. Regulation and technological advancements are demanding new operating models whilst, simultaneously, the industry also faces the growing problem of both physical and digital attacks from hostile actors targeting the sector’s strategic position in the movement of people, goods and commerce. This is all set against an unstable geopolitical and economic backdrop, and an ultra-competitive global labour market.
From a ratings perspective, aviation executives saw little quantitative difference between their top 5 stated risks, effectively suggesting a business environment where primary risks (those that are both highly disruptive and hard to manage) are congregating.
Their opinions also told of an environment where it is increasingly difficult to prioritise single risk strategies, highlighting enterprise-wide and community mitigation strategies as the way forward.
Sub-Sectors Differ in Assessments of Top Risks
The comprehensive research project also found startling differences between how sub-sectors and regions of the aviation industry view risk: the top perceived risk differed in each sub-sector and in four of the five regions polled.
In other words, aviation is seen as a risk environment that lends itself to tailor-made rather than global solutions.
For example, an inability to keep up with the pace of technological change emerged as the number-1 risk among airlines, with social unrest, involuntary migration and terrorism also ranking in the top 5 rated risks as seen by their top business leaders.
Companies in the space sub-sector ranked the ‘increased security threat from cyber and data privacy breaches’ as their number-one issue.
For general aviation (e.g. civil aviation operations such as gliders and corporate jets, etc.), the top threat is perceived to be the ‘escalating costs of ensuring workplace safety and security’.
Regional Differences in Perceived Risks
Europe, Russia and Central Asia
In Europe, Russia and Central Asia, the three highest-ranked perceived risks were
- an over-dependence on national infrastructure
- the potential failure of IT systems
- overdependence on third-party suppliers
In North America, the picture shifts, and industry leaders appear to be more openly concerned by changes in seasonal demand, as well as the regulatory threat posed by competition or anti-trust law infringements.
Latin America, Asia, Australasia
In Latin America as well as Asia and Australasia, the top perceived threat was social unrest, involuntary migration and terrorism (this ranked markedly higher in Latin America than in Asia and Australasia).
Middle East and Africa
The same issue also appears in the top five risks in the Middle East and Africa, where it is joined by fears of failing IT systems and protectionist policies and regulations that restrict open competition.
Respondents’ main centres of business varied widely:
- North America (30%)
- Europe, Russia or Central Asia (33%)
- Asia and Australasia (25%)
- Middle East and Africa (7%)
- Latin America (5%)
Findings from the Index’s aviation preview, which compiled the opinions of 147 C-Suite executives from across the industry, were unveiled in Singapore at Willis Towers Watson’s annual Aviation Conference in front of some 300 clients.
Most of respondents (76%) in the survey worked for organisations with annual revenues above US$1.5bn.
Some 350 C-suite and board-level executives will be surveyed for the full Willis Towers Watson Transportation Risk Index this year, from a range of companies in the air, sea, rail and road-transport industries. All respondents will work for companies whose annual revenue exceeds $750 million each year.
Guest blogger Mark Hue Williams is CEO of International for Willis Towers Watson’s Aerospace division and Global Head of Transportation, based in London. Mark has been with Willis’s Aerospace division since 1991.