A recent study by Marsh Advisory reveals that around 40 aviation companies, spanning aerospace and defense, airport services, and passenger airlines, continue to navigate a complex risk landscape. The report highlights the increasing pressures these companies face in terms of regulatory compliance and risk governance.
These companies, with an average market capitalization of $43 billion, are listed on prominent stock exchanges, including the FTSE 100, S&P 500, Euronext, and Hang Seng. Despite their robust financial standing, they are confronted with a range of evolving risks, prompting stricter regulatory reporting.
Regulatory and legislative compliance emerged as a top concern among these organizations, reflecting heightened expectations for adherence to operational standards. This was one of the most frequently cited risks in the study, underscoring the increasing scrutiny the aviation sector faces.
The analysis reviewed more than 800 risk reports from July 2022 to July 2023 and compared the findings with the World Economic Forum’s Global Risks Report 2024. In addition to regulatory risks, the study examined sustainability and environmental, social, and governance (ESG) performance, with a focus on climate-related issues.
The risks identified in the report were categorized into three main areas: risk governance, principal risks, and climate and sustainability risks. Changes to corporate governance codes, such as the UK Corporate Governance Code, have heightened risk management expectations for listed companies, influencing global practices. These updates aim to enhance boards’ ability to manage risks effectively and ensure long-term corporate sustainability.
While environmental and sustainability risks were significant, the study found that they were addressed inconsistently across the sector. Over half of the companies in the review published standalone ESG reports, but only five issued Task Force on Climate-related Financial Disclosures (TCFD) reports, a key benchmark for transparency in climate-related financial reporting.
The study further categorized the identified risks into financial, operational, regulatory, and strategic risks. Operational risks were the most prevalent, comprising 34% of the identified risks, followed by strategic risks (26%) and financial risks (22%). Despite the aviation industry’s stringent regulatory oversight, regulatory risks accounted for just 15% of the identified sub-risks.
This comprehensive review underscores the evolving challenges the aviation sector faces in managing a wide range of risks, from regulatory compliance to sustainability, and highlights the increasing importance of robust governance practices.
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