The Professional Services Practice at Aon’s Keith Tracey uses Aon’s Business Decision Maker Survey to further discuss Megatrends and how professional service firms can extend their approach to risk management to help their organizations adapt.

Aon recently published a report detailing the results of its Business Decision Maker Survey. This follows up on the 2024 Client Trends Report that discussed Megatrends and was published earlier this year.

Both Aon reports address the “profound transitions” across Trade, Technology, Weather and Workforce caused by “Megatrends”.

Megatrends are macro political, economic, or social factors representing a major movement, pattern, or trend. They may be current or evolving trends that pose medium term threats but can have consequences in the short term.

Two challenges that emerge and require thought are:

• Risks are increasingly interconnected. The interconnections may not be new, but they are perhaps becoming stronger. Effects can be compounded if the risk consequences come together.
  
  
• Systemic risks may fall outside of traditional risk identification and assessment exercises. Nonetheless, these risks must be recognized and may need to be managed.

Let us briefly examine 3 of the Megatrends and look at overlaps with risks that have been identified in Aon’s survey of Professional Service Firms, and then conclude with some potential responses.

Technology Risks

These rank highly in every survey and commentary on global risk trends. The Aon report mentions some responses including risk quantification, employee training, audit of supplier risks, and the use of AI to counter the threat.

AI risk issues are well documented (IP, bias, data accuracy, need for human oversight). The threats come from several sources, including the use of AI by attackers. AI use also poses new internal challenges for data management, access, and retention. Risk identification and governance structures are key responses.

Trade

Geopolitics has huge implications for some industries. Strategic decisions should address these changing conditions. Today’s geopolitics and conflicts have increased the levels of risk and uncertainty in this area.

There are of course new and old risks under this category for professional firms and their clients, including the consequences of economic downturn, supply chain threats and regulatory exposures.

Workforce

People risks are fundamental to professional service firms. They are embedded in many ways in the top risks identified in Aon’s survey. Technology and cyber risks, attracting talent, and the need to innovate, are clearly in this category.

Added to this is the ever-present risk of reputation damage and the evolving nature of the firm model including the growing potential of outside ownership.

Conclusions

Familiar risk categorizations, such as business risk, strategic risks, and hazards, are still relevant, but if risks are less controllable in today’s world, a different mindset might be needed.

How can organizations respond?

• One perspective is to break risks into categories:
  • Internal and controllable risks
  • Acceptable and manageable strategic risks
  • External risks to be identified, evaluated and mitigated
  
  
• The first two are capable of internal planning and the application of traditional risk management processes and strategies. Strategic risk may sit in the boardroom, but operational risk management will be required.
  
  
• The third category appears to demand different tools. Significant but rare events are difficult to manage. Risk managers can assist by running scenarios and liaising with management to ensure that the risks are owned and being addressed somewhere within the organization.
  
  
• Ultimately for uncertain external risks, mitigation strategies may be the key response, including crisis management planning.
  
  

Risks evolve and new risks emerge. In today’s context the employment of terms such as “Polycrisis” and “risk management overload” are understandable.

The risk function can extend its mandate to help the organization adapt and be more comfortable in the new environment of Megatrends, where slow moving emerging risks, and remote risks with the potential for sudden shocks, both require current monitoring and assessment.