Willis Chief on Non-Traditional Risks Facing Airlines
--Joe Plumeri Says Industry Needs to Build Resilience to Withstand Reputational and Other Threats--
Hong Kong, March 7, 2012 – Air travel in Asia Pacific is set to significantly surpass that
of North America and Europe in the next five years, increasing the exposure of airlines operating
in the region to potentially game-changing risks such as reputational risk, said Joe Plumeri, Chairman and
CEO of global insurance broker Willis Group Holdings (NYSE: WSH) at a major aviation conference in
Plumeri also cited loss of customers, talent and skills shortages, currency and price fluctuations and changing legislation
among the emerging risks facing the global aviation industry. The Willis Asia Pacific Aviation Insurance Conference
is being hosted in Hong Kong this week in conjunction with the International Air Transport Association
(IATA) and the Association of Asia Pacific Airlines (AAPA).
“In aviation, traditional forms of risk, once identified, can be engineered out with redundant systems. Most accidents
in this industry are now due to human error,” said Plumeri, who went on to give
examples of the new risks facing airlines, including:
- Loss of customers – The Icelandic ash cloud of 2010 cost airlines millions of dollars in extended
business interruption, despite the fact that there was no physical damage to assets.
- Talent and skills
shortages – “In next 20 years, airlines will need to hire and train 460,000 pilots and
650,000 maintenance technicians,” said Plumeri who pointed out that Asia is already experiencing delays due to
- Currency and price fluctuation – “Fuel represents nearly 40 percent of an airline’s
cost base and is purchased in dollars,” explained Plumeri who said that airlines could be at
the mercy of unsustainable oil prices, should the political confrontation with Iran over UN and other
- Changing legislation – Plumeri mentioned the EU offsetting charges for CO2 emissions being
imposed unilaterally on airlines not based in Europe.
Focusing on reputational risk as the hardest risk for airlines to manage in a hyperconnected world where
social media is ubiquitous, Plumeri cited Willis research which found that major firms suffer a significant
reputational reversal every seven years, on average. “While a reputational crisis can destroy a company’s value,
massively and almost instantly, they are virtually impossible to predict,” said Plumeri.
In order to prepare for these unpredictable risks, Plumeri urged airlines to focus on building resilience in
their company rather than simply taking the traditional approach of trying to anticipate the risks to
which an organization might be exposed.
“By having a risk management policy based solely on anticipation, a company will find that they are
not fast or flexible enough to respond to a complex, interconnected and rapidly changing world. As
much as any other industry, Aviation needs to anticipate the worst, but to build resilience,” Plumeri
told the audience of industry leaders. “The resilience approach acknowledges that the future is unpredictable and
responds dynamically by having the right expertise and processes in place to make decentralized decisions and
adjustments in real time. This builds organizations more capable of bouncing back from adversity.”
Plumeri called insurance “the bridge between anticipation and resilience” and said that the insurance industry has been
anticipating known risks for decades, while at the same time helping business build resilience against the
“We as an industry own resilience,” Plumeri said. “We’ve proven our own resilience over the years and
our focus on extreme one in 200 year events has made us more resilient to catastrophe
and shocks from Mother Nature and markets.” Calling for a closer partnership between aviation and insurance,
Plumeri said, “Our industry is continuously transforming the scale, depth and quality of insight about the
risks facing our clients and how to manage and transfer them. We will use this insight
to help airlines to build resilience and to prepare for and respond to new and emerging
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers
professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public
entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries,
with a global team of approximately 17,000 employees serving clients in virtually every part of the
world. Additional information on Willis may be found at www.willis.com.