Aviation governance raises risk management stakes

These companies average a market capitalisation of $43b.

About 40 aviation companies spanning aerospace and defence, airport services, and passenger airlines said they still face a complicated risk landscape, driving stricter regulatory reporting, according to a recent study by Marsh Advisory. 

These companies, with an average market capitalisation of $43b, are listed on major stock exchanges, including the FTSE 100, S&P 500, Euronext, and Hang Seng. 

Regulatory and legislative risks emerged as one of the most frequently cited concerns among aviation organizations, reflecting heightened compliance expectations. 

The research reviewed over 800 risks reported between July 2022 and July 2023 and benchmarked findings against the World Economic Forum’s Global Risks Report 2024. It also assessed sustainability and ESG (environmental, social, and governance) performance.

Key risks identified in the analysis fell into three broad categories: risk governance, principal risks, and climate and sustainability risks.

Updates to corporate governance codes, such as the UK Corporate Governance Code, have raised risk management expectations for listed companies, influencing practices globally. Enhanced governance measures have focused on improving boards' ability to manage risks effectively.

Regulatory and legislative compliance was the most frequently cited principal risk, reflecting the strict operational standards in aviation. 

Environmental and sustainability-related risks were prominent but unevenly addressed. Over half of the companies reviewed published standalone ESG reports, whilst only five issued Task Force on Climate-related Financial Disclosures (TCFD) reports.

Marsh categorized the risks into financial, operational, regulatory, and strategic. Operational risks accounted for the largest share (34%), followed by strategic (26%) and financial risks (22%). 

Regulatory risks, despite the aviation industry's high level of oversight, made up just 15% of identified sub-risks.