Only 18% of firms in Vietnam – less than one in five – are confident in their ability to face current and business risks, a figure which presents a challenge to becoming more resilient in the face of emerging risks across small and medium size enterprises (SMEs) in the country.
According to a survey conducted by WTW among 100 companies in Vietnam, 44% of respondents said that their organizations only have a basic understanding of the current risks they face as well as its financial impact. This figure grows to 58% when asked about emerging or new risks that businesses can come across in the next two to five years.
The biggest hurdle to understanding and risk preparedness for these Vietnam firms come from the lack of relevant empirical data; 58% of respondents said that this is a potential area of weakness in their risk assessment process. Nearly half (42%) said that they do not have a methodology in place to quantify the financial impact of risks to set appropriate risk management measures. Finally, one in four said that their organizations do not have a formal process in place to formulate risk appetite or tolerance.
When it came to figuring out the most likely sources of risks, 39% pointed to intense market competition as the top priority. It is closely followed by macroeconomic certainty (39%), with communicable and contagious disease (35%) rounding out the top three.
Meanwhile, the decline in demand for products and services as well as pricing pressures have been named the areas with highest risk impact for Vietnam businesses, with the two aspects garnering 64% each.
WTW Vietnam country leader and head of corporate risk and broking My Thien Nguyen said that building resilient supply chains is a critical priority because of the ongoing geopolitical shift being felt across the world.
“While most organisations recognise the importance of insurance, the challenge now will be to develop an equitable approach that allows them to identify and fill the gaps where they are un- or under-insured while at the same time balance the cost of their coverage. Addressing the lack of data to assess the operational risks and their impact will be key to achieving this. Companies need to work with their risk advisors using data, technology and analytics to support proactive risk management and smarter decision making so that they can be better prepared with sufficient insurance coverage to keep their businesses afloat and resilient to future risks,” Thien said.
Recently, the insurer also announced the launch of Climate Vista, a new engagement tool that aims to assist company boards and senior management in comprehending their exposure to environmental, social, and governance (ESG) and climate-related risks and opportunities.
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