Aon’s Global Risk Management Survey Reveals Supply Chain and Distribution Failure as the Top Business Risk for Organisations in Japan

TOKYO (25 January 2024) – Aon plc (NYSE: AON), a leading global professional services firm, today announced the findings from its 2023 Global Risk Management Survey for Japan. Now in its 17th year, the biennial survey gathered input from nearly 3,000 risk managers, executives and human resource managers in 61 countries and territories to identify their most critical business challenges.

Top Risks in Japan

Supply chain or distribution failure ranked as the top risk for organizations in Japan this year, after placing tenth in the 2021 edition of the survey. This increase in the perceived risk could be attributed to the production delays caused by the semiconductor shortage in recent years. In addition, the impact of heightened geopolitical tensions in the region along with anticipation of the limitation of overtime hours for truck drivers, which starts in April 2024, are likely why businesses perceive it to be their top challenge.

The number two risk for Japanese businesses’ is rapidly changing market trends, which was in the top spot in the 2021 survey. A complicated political situation in Japan, technological advancements such as artificial intelligence (AI)-driven innovation and the accompanying digital regulations, are considered unpredictable risks for businesses in Japan.

After placing fifth in the 2021 survey, cyber-attack/data breach moved to the number three business risk for Japan. This speaks to the pervasiveness of cyber risk and mirrors a global trend of growing awareness of the cyber threat landscape as it is recognized as the top risk globally. As evidenced by the steady upward progression of the risk in the top 10 rankings and how closely it is connected to supply chain risk (#1),business interruption ranked fourth four in the survey.

The results show that four of the top five risks for organisations in Japan are similar to the top 10 risks globally, however the percentage of organisations with response plans in place for these four risks is lower than global organisations.

Shinichi Kandatsu, head of Commercial Risk for Aon in Japan said, "The survey highlights that the insurance protection gap of Japanese companies is due to the lack and or delay in their response to complex interlinked high-level risks compared to companies in Europe and the U.S. For instance, business interruption losses are a result of supply chain and distribution failure, weather/natural disasters and cyber attacks/data breach all of which in the top 10 risks for businesses in Japan. Japanese companies must therefore consider protecting not only physical damage to the company's assets, but also business interruption caused by the company's supply chain, changing market trends and cyber risks.”

Human Capital in the top 10

The study found that Japanese businesses recognize human capital as a key business risk in a time where lifetime employment is virtually disappearing and being driven by competition for talent, labor shortages, the need for highly specialized talent and sustained wage increases. In 2023, "attracting and retaining top talent" ranked fourth globally and fifth in Japan while it didn’t appear in the top 10 risks globally or in Japan in 2021, demonstrating a shift in how risk managers perceive human capital today. The ongoing borderless economy, the promotion of digital transformation / employee experience and reskilling, rising wages due to inflation, and recruiting and retaining talented people are unavoidable issues. The aging of skilled engineers in the manufacturing sector highlights hiring and retaining talent as a critical issue for companies.

Tomoyuki Yamashita, head of Talent Solutions for Aon in Japan, said, “While the decline in the workforce can be addressed by streamlining operations through artificial intelligence and digitalization, companies need to hire and retain talented people through proactive investment to build resilient workforces. Lack of talent and specialized skills can stifle innovation and increase the risk of supply chain and business disruptions. It is also imperative for Japanese companies to rethink their long-standing lifetime employment and seniority-based systems to create a more balanced compensation and evaluation system that treats talented people well, and to consider how to improve work-related wellbeing and benefit programs designed to accommodate diverse lifestyles.”

The Top Ten Business Risks for Japan:

1. Supply Chain or Distribution Failure
2. Rapidly Changing Market Trends
3. Cyber Attacks/Data Breach
4. Business interruption
5. Failure to Attract or Retain Top Talent
6. Weather/Natural Disasters
7. Economic Slowdown/Slow Recovery
8. Geopolitical Volatility
9. Environmental Social Governance/ Corporate Social Responsibility
10. Product Liability/ Recall

The Top Ten Global Risks Are:

1. Cyber Attack/Data Breach
2. Business Interruption
3. Economic Slowdown/Slow Recovery
4. Failure to Attract or Retain Top Talent
5. Regulatory/Legislative Changes
6. Supply Chain/Distribution Failure
7. Commodity Price Risk/Scarcity of Materials
8. Damage to Reputation/Brand
9. Failure to Innovate/Meet Customer Needs
10. Increasing Competition

About the Global Risk Management Survey

Aon's Global Risk Management Survey, a biennial web-based research report, was conducted in June to July 2023. The research gathered the responses from 2,842 decision makers including risk managers, c-suite leaders, treasurers, human resources and talent professionals from 16 industry clusters, which include small, medium and large companies in 61 countries/territories around the world. The key findings from the Global Risk Management Survey for Japan are available here.

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