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Pace of technological change, social unrest top risks for global airline C-suite executives: Willis Towers Watson


March 9, 2016   by Canadian Underwriter


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An inability to keep up with the pace of technological change is the number one risk for global airlines, according to the preliminary findings of a new survey of senior executives by Willis Towers Watson.

North American 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.”Social unrest, involuntary migration and terrorist threats also ranked highly as a risk in the minds of airline business leaders, the global advisory, broking and solutions company said in a press release on Wednesday. These are the first findings to be released in 2016 in a series of industry specific risk indexes by Willis Towers Watson, which reveal how C-suite executives rank the most significant risks impacting their businesses.

Approximately one-third of the respondents declared their main centre of business in North America (30%), a further third in Europe, Russia or Central Asia (33%) and one-quarter (25%) are headquartered in Asia and Australasia. The remaining respondents are based in either the Middle East and Africa (7%) or Latin America (5%). Most of respondents to date (88%) indicated that they work for organizations with annual revenues over US$1.5 billion.

Through the lens of the aviation industry’s various sub-sectors and regions, the survey painted a consistent picture of emerging primary risks (those that are both potentially impactful and difficult to manage) but differing priorities, Willis Towers Watson said in the release. Across the aviation sector as a whole – which includes airlines, airports, aircraft lessors, aerospace manufacturers, general aviation and space companies – legal scrutiny associated with mergers and acquisitions is the most severe and hardest to manage risk.

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 aviation risk index, which to date has surveyed the views of 147 C-suite executives (including 69 chief executives and 46 chief financial officers). The “impact of natural disasters, epidemics or armed conflict” and “changes in seasonal demand” rounded out the top five risks overall.

The research also found startling differences between how sub-sectors of the aviation industry view risk: the number one perceived risk differed in each sub-sector. For airlines, it was an “inability to keep up with the pace of change and technological advancement,” the release said, while space companies ranked the “increased security threat from cyber and data privacy breaches” as their number one issue. For general aviation (e.g. industrial aid, charter management and rotor wing operations etc.), the top threat is perceived to be “escalating costs of ensuring workplace safety and security.”

Geographically, North American 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.” In Europe, Russia and Central Asia, the three highest-ranked risks were perceived to be an “over-dependence on national infrastructure,” “failure of IT systems” and “overdependence on third party suppliers.” In Latin America, as well as Asia and Australasia, concerns appeared to shift to the threat of “social unrest, involuntary migration and terrorism” (this risk is ranked markedly higher in Latin America than in Asia and Australasia). The same issue also appears in the top five ranked risks in the Middle East and Africa, where it is joined by the perceived risk “failing IT systems” and “protectionist policies and regulations that restrict open competition.”

“The aviation industry is at an inflection point,” said Mark Hue Williams, head of transportation for Willis Towers Watson, in the release. “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, products and ideas. This is all set against an unstable macro geopolitical and economic backdrop, and an ultra-competitive global labour market.”


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