What are the top emerging and principal/material risks by sector?

Recognising both the threats and opportunities that exist just over the horizon for your sector stands your business in good stead for reaching its objectives and shaping its risk appetite. In this article, we highlight the top emerging risks (along with the principle/material risks) for four key sectors: construction, metals & mining, utilities and retail.

This data has been collated from Risk Leadership Network's interactive tools, which monitor over 600 emerging risks, and the principle/material risks reported for 130+ leading companies, broken down by sector. The full interactive dashboards are available exclusively to members of our network, to provide risk leaders with a head start on identifying future threats and opportunities, and helping them benchmark their risk reporting approaches with their peers. In this article, we're sharing just a few of the highlights with the wider risk community.

Please note this article was written in 2021 and refers to data from that year. We're currently working on updated figures for 2022.

Climate change is one of the top emerging risk categories identified by companies across all sectors. Of more than 40 FTSE 100/250 organisations that discuss emerging risks in their latest annual report, nearly 60% identify climate change as an issue to watch.

One-third of the construction companies listed in our analysis discuss emerging risks in their annual reports. Climate change or extreme weather is listed by every one of these companies as one of their top categories of emerging risk.

Extreme weather, as specified by FTSE 100-listed housebuilding company Taylor Wimpey, is a climate change risk that refers to the specific risk of unpredictable weather patterns. For other companies, the emerging risk category of climate change covers a range of specific risks. For example, Barratt Developments – one of the largest residential property development groups in the UK – identifies the risk that government and consumer expectations around sustainability may require the group to “further enhance its sustainable business practices”.

Highlighting the difference in how companies consider principal/material versus emerging risks, climate change is a top principal/material risk for the mining sector. And while it also appears as one of the top emerging risks for this sector, “natural resources, licenses and land tenure” is also a common – and potentially overlapping – emerging risk category for mining and metals groups.

For example, both Rio Tinto and Anglo American discuss the potential impact of resource depletion on both future company growth (Rio Tinto) and also on exploration, projects and acquisitions (Anglo American).

Take a look at our feature article:
Emerging risks: how are businesses managing their blind spots?
We take a look at how leading risk leaders identify, monitor and control their emerging risks.

Covid-19 is another key issue that presents many unknowns for most industries. The need to anticipate its long-term impact can be seen both directly and indirectly across the utility sector, for example. Cyber security is one of the top three principal/material risk categories for this sector, possibly as a result of increased awareness around the pros and cons of digitalisation during the pandemic as well as the increase in cyber-attacks taking place.

Some utilities also include Covid-19 in their emerging risk categories. For British water utility company Pennon Group, this concerns the uncertainty around the pace and scale of the long-term implications of the pandemic on the economy and its business. And while water services group United Utilities also highlights this, its annual report includes detail about the risk of reduced recovery of charges to households and businesses as a result of the pandemic. In addition, United points out that employee illness or self-isolation could affect service and capital project delivery.

According to our data, companies in the retail sector see new technology as a key emerging risk. While multinational retailer Kingfisher’s annual report points out that technology is evolving for both back-office and consumer-facing business areas, the latter is likely to be a huge focus for retailers going forward given the boost in online retail delivered by the pandemic and the speed with which technology evolves these days. 

In line with this, cyber security is the most popular principal/material risk for the retail sector. This is unsurprising given the boost in both personal and work-related internet usage since the start of the pandemic – retail firms are clearly keen to manage the risk of an online attack on both employees and customers.

We've pulled out some key data from four of the twenty sectors covered in our interactive tools, which are updated regularly and available exclusively to Risk Leadership Network members.

Need more data? Track 130+ companies by principal/material and emerging risk for over 20 sectors using our interactive tools Horizon Scanning Tool Risk Reporting Comparison Tool Drill down into over 600 emerging risks identified by leading risk professionals, helping you to identify and analyse emerging risks that may be applicable to your business. Discover how other companies are reporting their principal/material risks in their annual reports, allowing you to validate your methods for external risk reporting and uncover your blind spots. Find out more >>  Find out more >>

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