According to the 2013 Global Risk Survey produced by Aon, a disturbing trend has emerged. Companies are overall less prepared to deal with risk than they were in 2011. Reported loss of income resulting from the overall top 10 risks has actually increased by 14% over the last two years.
This trend is alarming because after the financial crash of 2008, it was expected companies would need some time to further strengthen and plan their risk management programs. However it would appear that after a few years of heightened focus, in recent months the trend is moving backwards.
Aon examined 28 different business sectors, and found that 25 of the 28 sectors have seen a drop in risk readiness and preparation over the last two years.
Ironically, one of the main reasons for the decline is that companies are now more aware of enterprise risk management, which leads many companies into a false sense of security thinking they have developed a risk strategy when in reality quite often they have instead only begun outlining a risk strategy, but have not fully implemented.
The reason for this is that while companies see reducing TCOR (the Total Cost of Risk) as the "main benefit" of implementing a risk management program, they are not willing to spend enough time and money to accurately identify the true sources of risk within their own organization. By not being able to accurately identify where the risk is coming from, it is subsequently difficult to reduce the cost of that risk.
A large source of risk for many organizations is from vendor risk. Ensuring that vendors are financially stable, are properly insured and have a safe work history is very important in reducing TCOR. In 2014 organizations can begin moving towards a more comprehensive risk strategy by working with vendors to ensure compliance.
Hold harmless language (a/k/a indemnity language) is found in most contracts and agreements, with the purpose of transferring the obligations of one party to another to defend and make whole the other party for legal liability, typically related to the services, work or nature of the contract.