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Willis Towers Watson - Transportation Risk Index

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6 willistowerswatson.com T he world economy has surged over the last half century, and that growth has been largely driven by globalization and the consequent increase in trade. International trade in goods and services has increased from around $4 trillion in 1990 to $24 trillion in 2014, according to 2015 data from the United Nations Conference on Trade and Development. This increase in trade would not have been possible without an equivalent rise in the capabilities of the global transportation sector. More than just a mover of goods and people, transport is a key driver of economic and social development. It brings opportunities for the poor and helps economies to be more competitive. According to the World Bank, "transport infrastructure connects people to jobs, education and health services; it enables the supply of goods and services and allows people to interact and generate the knowledge and solutions that foster long-term growth." The transportation sector's intimate relationship with the global economy means that the risks faced by the industry are influenced by factors such as increasingly complex markets, transient workforces, disparate regulatory frameworks, the inexorable march of technology and geopolitical shifts. Far from being isolated in silos, these factors interact with each other in complex ways that are difficult to understand, let alone predict. To better understand the hazards and opportunities inherent in this dynamic landscape, we asked 350 senior executives in the transport industry to rank the greatest Executive summary Transportation keeps the global economy moving. Any operational disruptions have wider consequences for society, making the management of the associated risks a priority that should transcend industry boundaries threats to their businesses over a ten-year horizon. Participants were surveyed about their attitudes to 50 specific risks from five broad categories, or megatrends: geopolitical instability and regulatory uncertainty complex operating models in an interconnected world digital vulnerability and rapid technological advancement talent management and the complexities of a global workforce changing market dynamics and business model insecurity In-depth interviews were then conducted with executives from each mode of transport – across passenger and freight services – to gain deeper insights into the challenges they face. In a world where the so-called Islamic State, Brexit, European migration and US elections are dominating headlines, few may find it surprising that risks from the geopolitical instability and regulatory uncertainty megatrend (see page 10) rate most highly among respondents. The digital vulnerability and rapid technological advancement megatrend (page 14) runs a very close second, and the effects of changing market dynamics and business model insecurity (page 30) rank third. The top four rated individual risks in the geopolitical megatrend were the domain of government, regulators or the judiciary; indicating that transport providers are at least as worried about a state's potential to disrupt their business as they are about non-state forces. But there are also clear and influential dissenters. Sir Jeremy Greenstock, the UK's former permanent representative at the United Nations, warns of the perils of ignoring the "fragmentation of the political identity." He says: "Politics, the construction of states and the organization of human affairs in structures is not behaving as we have been used to for the last 70 years." No one size fits all While the megatrends give a broad overview of the threat landscape, the specific sector and regional Impact (/10) Ease of risk management (/10) Change in impact over next ten years (/5) Geopolitical instability and regulatory uncertainty 3.6 Digital vulnerability and rapid technological advancement 3.9 Changing market dynamics and business model insecurity 3.8 Complex operating models in an interconnected world 2.7 Talent management and the complexities of a global workforce Rank order determined by combined risk score (severity of impact × ease of risk management) 3.5 7.2 6.9 6.9 7.2 6.6 7.1 5.7 6.1 6.1 5.5 Fig. 1 | Megatrend rank order 1 Failure of critical IT systems Top two risks: AIR 4 3 .7 * Competition/ antitrust law scrutiny associated with M&A 1 2 4 3 . 2 *

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