The report, Willis Towers Watson’s 2016 Transportation Risk Index, was commissioned to measure the industry’s risk environment as seen through the eyes of 350 senior executives working in the air, sea, rail and road-transport sectors. Respondents rated 50 risks for their disruptive potential and management difficulty over a 10-year horizon, and five broad megatrends. According to the index, failure of critical IT systems and dependence on third-party suppliers are the next leading risks to the industry. Third-party security vulnerabilities, competition law scrutiny associated with M&A activity, and the increased complexity of regulation rank fourth, fifth and six, respectively.
“The transportation providers’ world is perpetually changing, so risk strategies need to be responsive and dynamic,” said Mark Hue-Williams, head of Transportation, Willis Towers Watson. “Regulation and technological advances demand new operating models while, simultaneously, hostile actors mount attacks to undermine the industry’s role in the global economy. This is set against an unstable geopolitical and economic backdrop and ultracompetitive labor market. Knowing how these shifting forces should shape a company’s risk response is critically important as well as a great opportunity.”
The geopolitical megatrend narrowly edged out its digital counterpart as the highest-rated category, highlighting the impact of world events on operations and, ultimately, profitability. Similarly, actions of government, regulators and the judiciary—often taken in response to such events—were found to have the same potential to be disruptive. As supply chains—both digital and physical—become more connected, the Index reveals a growing recognition that risk resilience needs to be built at the community level. No company, no matter how diligent, is an island any longer. While the research identified common fears (e.g., half of the top 10 risks came from the digital and technological megatrend), stark differences arose, too.
When viewed through a geographical lens, four of the five regions returned different primary risks, reflecting the importance of building local solutions. “Understanding your risks and knowing how to respond provides a competitive advantage, which is why we believe risk is a path to growth,” said Hue-Williams. “We commissioned this research to help our clients unlock their potential.”