Environmental, business travel and D&O liability top the list of
risk concerns
LONDON--(BUSINESS WIRE)--
Luxury goods companies believe that they face greater reputational risk
than those in other industries, according to a report published today by
ACE Group in Europe. Following a survey with a concentrated sample of 45
European luxury goods firms and a series of in-depth expert interviews,
the report also concludes that environmental, business travel and
directors and officers liability (D&O) are three emerging risks for the
industry to watch.
Reputation the hardest risk to manage
Some 75% of senior risk executives from the industry sample state that
reputation is their company’s greatest asset and 80% agree that
reputational risk is the most difficult individual risk category to
manage. Almost six in ten respondents report that globalisation has
increased the interdependency of risks they face and rank lack of risk
management tools and processes, insufficient budget and lack of
management time as well as human resources and skills as the greatest
barriers to effective management of reputational risk.
Olivier Roussel, Director, Major & International Accounts for ACE in
France said:
“Despite a recent slowdown, growth of the luxury goods industry has been
impressive. However, with growth has come new exposure and unexpected
risks. In our globalised world events do not respect neat categories.
Today’s risk challenges demand a cross-disciplinary approach. A factory
fire in India or China can set off a chain of events leading to
financial loss and personal liability for individual directors, as well
as significant brand damage. These risks have been exacerbated by social
media and the 24/7 news cycle. This scale of the threats demands highly
sophisticated risk management.”
The ‘Big Three’ risks
According to ACE’s industry sample, the three emerging risk categories
most likely to cause luxury goods companies significant financial impact
over the next two years could be environmental, business travel and D&O
liability.
Environmental risk tops list of potential threats for luxury good
companies
More than seven out of ten respondents agree that their customers and
shareholders are taking environmental risk more seriously. Companies
must demonstrate that they are taking the right steps to manage
environmental risk exposures. Key areas of concern are air pollution,
the destruction of habitats and protected species and water scarcity.
Nicolas Givelet, Environmental Engineering Manager for ACE in
Continental Europe said:
“Many European luxury goods companies have invested heavily in the
world’s emerging consumer markets over recent years. Expanding or
opening a new market typically means acquiring new property, which may
have an unknown environmental history. It is very important then that
companies undertake strict due diligence on assets, and evaluate the
current and future environmental regulatory regime.”
Business travel risk is growing for luxury goods firms
More than nine in ten respondents say that, despite the development of
new technologies such as videoconferencing, their company’s reliance on
business travel remains as high as ever. At the same time, luxury goods
firms are expanding into new markets, particularly Asia, Latin America
and the Middle East. As European employees spend more time and effort
building business relationships in these less familiar markets, they
face an increasing volume and complexity of travel risks.
Management liability risk high on the luxury goods corporate risk
agenda
More than 70% of the respondents in the survey agree that directors feel
increasingly exposed and are placing the company’s D&O insurance
arrangements under greater scrutiny. Still in spite of this increased
level of scrutiny, around two-thirds of the companies polled say that
they do not have a specific D&O policy in place, and do not know if it
the risk is covered by another policy.
-ENDS-
About the research
ACE has published this research report in collaboration with Longitude
Research. The report derives from two primary sources.
A detailed survey was carried out with a concentrated sample of 45
respondents with responsibility for risk management at companies from
across the luxury goods sector, with annual revenues ranging from
US$250m to well over US$1bn in Europe. Participants spent an average of
20 minutes on the survey. They were not compensated for their
participation and ACE was not identified as the research sponsor.
Qualitative interviews were also undertaken with a variety of senior
corporate risk managers in the luxury goods industry and others with
expertise in the area of reputational risk.
About ACE
ACE Group is one of the world’s largest multiline property and casualty
insurers. With operations in 54 countries, ACE provides commercial and
personal property and casualty insurance, personal accident and
supplemental health insurance, reinsurance and life insurance to a
diverse group of clients. ACE Limited, the parent company of the ACE
Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a
component of the S&P 500 index.
Visit: www.acegroup.com/eu
Source: ACE Group