VIETNAM, August 3, 2023 — Less than one in five (18%) organisations in Vietnam are confident they are ready to face current and future risks, a sign of an urgent need to strengthen business resilience amongst Vietnamese small-and-medium-size enterprises (SMEs). This is according to a survey by WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company.
Conducted among 100 companies in Vietnam with more than a third from the manufacturing industry, the WTW Risk Benchmarking Survey found that almost half (44%) of the organisations only have basic understanding or challenges understanding the current risks they face and their financial impact. This number increases to 58% when they were asked about emerging or new risks that they may face in the next two to five years.
The hindrance to understanding and risk preparedness can be attributed to the lack of relevant empirical data, which 58% of organisations have identified as a potential area of weakness in their risk assessment process. Close to half (42%) also said they do not have a defined methodology in place to quantify the financial impact of their risks to set appropriate risk management measures, while one quarter (26%) said their organisations do not have a formal process in place to formulate risk appetite or tolerance.
In terms of priorities, companies cited intense market competition (39%) as the top source of risk. This is followed by macroeconomic uncertainty (37%) as a result of the ongoing inflationary pressure, as well as communicable disease and contagious disease (35%) as organisations adapt to a post-pandemic business environment
| Rank | Source of risk | Percentage |
|---|---|---|
| 1 | Intense market competition | 39% |
| 2 | Marcroeconomic uncertainty | 37% |
| 3 | Communicable disease & contagious disease | 35% |
| 4 | Changes in regulation and policies | 33% |
| 5 | Talent sourcing and retention | 29% |
“What our study has shown is an urgent need to bridge the protection gap in risk impact and its financial implications, and consequentially, to enhance risk preparedness across organisations. This is especially important for a market like Vietnam, one of the most hazard-prone countries in Asia with growing susceptibility to natural catastrophes and climate change impact. At the same time, the country is now a global hub for manufacturing and an emerging high-tech centre of excellence, attracting significant foreign investments,” said Luke Ware, Head of Corporate Risk & Broking Asia, WTW.
Vietnam’s rapid economic growth over the medium-term outlook and the shift in global manufacturing supply chains towards competitive Southeast Asia manufacturing hubs like Vietnam also means that demand of products and services, as well as pricing pressures, are the two top areas with highest risk impact for local businesses.
| Rank | Areas of risk impact | Percentage |
|---|---|---|
| 1 | Declining demand of products/services | 64% |
| 2 | Pricing pressures | 64% |
| 3 | Cost uncertainties | 30% |
| 4 | Business continuity/interruption | 25% |
| 5 | Business reputation | 24% |
With SMEs forming the backbone of the economy, Vietnam is also uniquely placed to take advantage of increasing multinational corporations’ (MNCs) expansions in the country as a result of the ongoing geopolitical shift. As manufacturing activities ramp up to meet increasing demand, building resilient supply chains is a business critical priority. Insurance has a key role to play in protecting these SMEs from supply chain losses in order to remain attractive to foreign investments,” said My Thien Nguyen, Country Leader and Head of Corporate Risk & Broking, Vietnam at WTW.
Despite the need to enhance risk protection, almost a third of organisations (32%) said that their conventional insurance products are inadequate in meeting their organisation’s risk as there are some risks that may not be covered or sufficiently considered. Organisations are also challenged by pricing, with close to half (48%) considering pricing unpredictability and high cost as the major weaknesses of their current insurance products.
“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,” added Thien.
At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organisations sharpen their strategy, enhance organisational resilience, motivate their workforce and maximise performance.
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