Business interruption (BI) is the most important global risk for the sixth year running, according to the Allianz Risk Barometer 2018. As the risk landscape develops, companies now face an increasing number of scenarios ranging from traditional exposures like water, fire and supply chain disruption, to new intangible risks related to cyber in the ever-digitizing world.
Cyber risk has continued an upward trend in the Allianz Risk Barometer 2018, which surveys 1,900 risk experts from 80 countries and ranks the most pressing business risks keeping executives awake at night. Cyber incidents marched up the ranks to become the second-greatest risk faced, named by 40% of respondents, after placing 15th five years ago. Cyber incidents also ranked as the most feared business interruption trigger for the first time, according to the report.
This is likely due to recent cyberattacks like WannaCry and Petya/NotPetya, which caused significant financial losses to numerous businesses.
In the US, the top risks ranked: cyber #1, business interruption #2 and natural catastrophes #3. Canada had a slight variation with business interruption taking the top spot, followed by cyber and natural catastrophes.
“There’s a clear top three when it comes to risks in North America: business interruption, cyber and natural catastrophes. This also tracks with the global results,” said Thomas Varney, regional manager in the Americas for Allianz Risk Consulting. “To some degree, all the aspects in the Allianz Risk Barometer 2018 are intertwined.
“If you look at business interruption as a top concern, cyber ranks as the most feared trigger and natural catastrophe comes in third, so it’s all interconnected. Business interruption risks now list about a third higher than actual property damage losses in the report. This might have something to do with a gradual switch from tangible assets to intangible assets like data, [which relates back to cyber].”
Other issues to feature in the Allianz Global Risk Barometer 2018 top 10 risks include: market developments (volatility, new entrants, M&A), legislative pressures, new technologies and climate change.
As businesses evolve and continue to automate with new technologies, they open themselves up to a whole new range of business interruption losses, beyond physical triggers like fire and water damage. Non-damage business interruption is on the rise – a trend the US is particularly tuned into, with cyber ranking as the #1 risk.
“Every company has been or will be impacted by cyber risk. It’s not over-hyped. If anything, it’s under-appreciated because the threats are not always well understood,” said Emy Donavan,
global head of cyber at Allianz Global Corporate & Specialty (AGCS), noting that over 50% of Risk Barometer responses rank cyber as the risk most underestimated by businesses. “There are now multiple cyber threats to a company’s digital presence.”
Concerns around market evolution and talent shortage will also continue to rise in North America, according to Varney. As businesses in the US and Canada trend towards the digital realm and service-orientated models, organizations are starting to think about how to transition, where and how future employees will fit into the enterprise.
Natural catastrophes ranked third on the list of most important risks. The report pointed to global insured loss estimates as high as $135 billion in 2017 and noted that “Given the wide-ranging impact of (hurricanes Harvey, Irma and Maria) — from flood damage by Harvey in Houston to business interruption from record power outages in Puerto Rico caused by Maria — it may be some time before the final loss total is known.”
Among small and medium sized enterprises, the results were similar. The report said that small- to medium-sized business experts now account for 47% of Risk Barometer responses.
For enterprises of less than €250 million ($300.8 million) in annual revenue, business interruption topped the list of risks, followed by cyber incidents and natural catastrophes, then market developments and changes in legislation.
For medium-sized firms of between €250 million and €500 million, the first two switched as cyber topped the list and business interruption placed second, followed by natural catastrophes, then fire, explosion and market developments.
Geographical results were similar, as business interruption and cyber jostled for the top two spots in most countries and natural catastrophes often placed third.
One notable difference was Nigeria, which ranked theft, fraud and corruption as the top risk, followed by market developments and changes in legislation and regulation.
This is the seventh Risk Barometer from Allianz Global Corporate & Specialty and the broadest yet, according to the Munich-based insurer.
The survey was conducted during October and November of 2017. Large enterprises provide the largest portion of responses at 53%, followed by small enterprises at 25% and midsize enterprises at 22%.
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