There is an urgent need to strengthen business resilience amongst Vietnamese small-and-medium-size enterprises (SMEs) as only one in five (18) companies in the country are prepared against major risks, a WTW report has revealed.
Conducted among 100 companies in Vietnam with more than a third from the manufacturing industry, the WTW Risk Benchmarking Survey found that 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 survey also found that the lack of empirical data is the main obstacle to understanding and risk preparedness for Vietnamese SMEs, with 58% of organisations highlighting this as a potential area of weakness in their risk assessment process.
Additionally, 42% 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 26% said their organisations do not have a formal process in place to formulate risk appetite or tolerance.
In terms of priorities, 39% of companies cited intense market competition as the top source of risk. This is followed by macroeconomic uncertainty, with 37%, as a result of the ongoing inflationary pressure, as well as communicable disease and contagious disease, with 35%, as organisations adapt to a post-pandemic business environment.
Luke Ware, Head of Corporate Risk & Broking Asia, WTW, said: “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.”
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.
The report highlighted that, despite the need to enhance risk protection, 32% of surveyed businesses 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 48% considering pricing unpredictability and high cost as the major weaknesses of their current insurance products.
Thien Nguyen, Country Leader and Head of Corporate Risk & Broking, Vietnam at WTW, said: “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.”
