Risk management has always been important to maintaining business continuity, but in an age when businesses are facing complex and simultaneous challenges and the continuation of a hard market cycle, it can be the difference between success or failure.

Across Asia's diverse landscape, where business resilience has often competed with the immediate demands presented by growth or expansion opportunities, resilience is no longer a choice, but an essential contributor to business success.

Whether it’s the lingering impact of inflation, damaging supply chain interruptions, or cyber-attacks, business leaders are encouraged to prepare for a year ahead that promises to be no less unpredictable and disruptive as the last.

As we head into 2024, we offer thoughts on the five most pressing the risks to business continuity in Asia.

1. Ensuring supply chain continuity

COVID-19, transportation and logistics issues showed how severe a supply chain problem can be for businesses operating across the region’s diverse geographies, where the range and complexity of exposures can vary greatly.

The fallout from these experiences and the continued uncertainty generated by ongoing global conflicts will continue to preoccupy industries in Asia, ranging from semi-conductor and technology manufacturing to fashion and textiles. In response, companies will look to diversify supply chains to alleviate single-market risk and build greater supply chain resilience.

With the growing frequency and severity of extreme weather events across the region – where floods wreaked havoc across Southeast Asia, China, Japan, India and Hong Kong at various points during 2023 – and with an unpredictable geopolitical landscape likely to remain, understanding your businesses exposure along every aspect of your supply chain is key to managing this risk.

When it comes to supply chain risk in Asia, many companies often overlook the need to have an up-to-date and robust business continuity plan that clearly outlines options if supply of materials is disrupted. This may include having alternative suppliers or supply routes or adjusting stockpiles or inventory levels during a period of increased risk.

Insurance coverage alone is not always enough – companies need to seek to build resilience into their operations.

2. Assessing the cyber risk to operational networks

With the increasing digitalisation of businesses boosted further by the rapid adoption of AI-driven technologies applications, the rising frequency of ransomware attacks and data breaches are likely to continue in 2024. Managing cybersecurity exposure remains high on the agenda of boards and leadership teams.

Typically, discussions on cybersecurity have centered on protecting information technology (IT) networks, such as avoiding data breaches and customer data leaks. These are important, but as the cyber-risk landscape evolves, urgent attention is also needed to protect operational technology (OT) networks.

The OT network hardware and software that monitors and controls the devices, processes, and infrastructure often used in manufacturing and heavy industry used to be isolated. But increased connectivity and digitalisation to generate valuable performance data has at the same time made business networks more vulnerable to cyber-attack.

We know that OT attacks aren’t just about financial gain or data theft, they can also result in significant physical damage or disruption to critical services due to the increased connectivity. As cyber threats continue to evolve, companies need to allocate resources and implement proactive measures to stay ahead and mitigate the costly impact of an OT network attack.

3. Understanding your exposure to climate-related risks

We’ve all observed the increase in exposure to climate-related risks and specifically the impact of flooding on business, but also to communities across the region. It is a level of risk and impact that is unlikely to recede in the coming year. Climate changes are specifically giving rise to increased frequency of flooding in Asia.

To minimise the potential impact of climate change, organisations need to understand how these climate-related risks can affect their operations and then invest in appropriate mitigation of those exposures. This can include actions such as installing mesh on building openings to prevent bushfire embers from getting into buildings, installing physical barriers to prevent flow of floodwater or better securing a roof that is exposed to wind.

The identification and management of such exposures can also assist companies with any climate risk-related reporting obligations that they may have. For example, reporting on acute and chronic physical risk within the Task Force on Climate-related Financial Disclosures (TCFD) reporting framework.

4. Managing the risks of energy transition

Transitioning your current energy sources to sources of renewable energy has been identified as a key action to reduce emissions at scale, and there is growing pressure from many business stakeholders and governments to embrace cleaner energy alternatives.

The benefits of reduced carbon emissions, improved energy security and reduced energy costs are well known, but these advancements in technologies can create new exposures that can threaten business operations. Well-intentioned transition efforts can be undone by the unmitigated introduction of new fire, cyber or extreme weather risks. Insurers have a role to play to help build resilience into their clients’ transition strategies.

As industries embrace renewable energy sources and electrification, working with your insurance company to better understand and mitigate these risks is critical.

Companies that plan carefully to understand and implement appropriate strategies to protect their assets, minimise their exposures to avoid potential downtime will be at a significant competitive advantage.

5. Improving risk quality

While the impact of inflation appears to be dimming, the costs of claims have risen due to factors like higher building material and labour costs, resulting in some cases in higher insurance premiums.

Property owners can expect continued fluctuations of the reinsurance market in the short term before stabilising. To minimise the impact of rising costs, companies can invest in better risk management to improve the risk quality of their business. This can include constructing or leasing locations with better risk quality building materials or installing correct fire protection at existing locations.

To ensure optimal insurance coverage, companies should also submit up-to-date, accurate values at the time of their insurance renewal. If the declared values are correct, the insurer will be more confident that there won’t be a discrepancy between expected and actual loss amounts if there is a claim.