Business interruption and supply chain risk are the top concerns of risk managers and corporate insurance agents around the world, but cyber-security and political risks are gathering steam, according to the Allianz Risk Barometer 2015.
The fourth annual such survey by international financial services firm Allianz SE found that 46 percent of respondents cited business interruption and supply chain risk as their firms’ greatest risks, followed by natural catastrophes at 30 percent. However, cyber-risks are quickly moving up on corporate radar screens, cited by 17 percent of those surveyed this year, compared to 12 percent last year. Political risks also saw a spike in growth, up to 11 percent compared to just 4 percent in last year’s survey. Risks from theft, fraud, and corruption dropped slightly, cited by 9 percent of respondents compared to 10 percent in last year’s survey.
“The growing interdependency of many industries and processes means businesses are now exposed to an increasing number of disruptive scenarios. Negative effects can quickly multiply. One risk can lead to several others,” Chris Fischer Hirs, CEO of Allianz Global Corporate & Specialty SE (AGCS), said in a statement. “Natural catastrophes or cyber-attacks can cause business interruption not only for one company, but to whole sectors or critical infrastructure.”
“Risk management must reflect this new reality. Identifying the impact of any interconnectivity early can mitigate or help prevent losses occurring,” Hirs added. “It is also essential to foster cross-functional collaboration within companies to tackle modern risks.”
Munich-based Allianz also said cyber was cited as the top emerging risk for the next five years, and moved into the top five business risks globally, up from 8th last year and 15th in 2013. Cyber- risks landed in the top three for respondents from Germany, Austria, and the United Kingdom, Allianz found. Most respondents feared loss of reputation (61 percent) would be the greatest fallout from a breach or other cyber problem rather than business interruption (49 percent) or loss of customer data (45 percent). Cyber was cited less often by respondents in Switzerland, Spain, and France, and it did not make the top 10 concerns in Russia, Turkey, or Italy.
While cyber-risks are for the most part gaining attention, the survey revealed not all companies have positioned themselves accordingly. Slightly less than three-quarters of respondents (73 percent) said their companies are underestimating the various impacts of cyber-risks. Not surprisingly, budgetary constraints were cited by 59 percent as to why companies are not better prepared. Allianz said cyber is both the most underestimated risk by businesses and the one for which they are least prepared.
“Cyber-risks are very complex. Different stakeholders such as IT security architects and business continuity managers need to share their knowledge to identify and evaluate threat scenarios,” Jens Krickhahn, practice leader of cyber & fidelity at AGCS Financial Lines for Germany and Central Europe, said in a statement. “Previously siloed knowledge needs to be incorporated in one ‘think tank,’ which can look at risks holistically. The human factor should also not be underestimated, as employees can cause IT security incidents, inadvertently and deliberately.”
Another growing area of concern for the risk managers surveyed was political risks and social upheaval, which rose to 9th overall compared to 18th last year. That trend was more pronounced in parts of Europe, ranking as the top business concern in Ukraine, and in the top three for Russia and Switzerland.
While business interruption remained the top concern for the third year in a row overall, Allianz said many multinational companies do not adequately cover their risk exposure in supply chain risk management programs and may not have alternate suppliers ready if needed. Concerns also varied by sector, with business interruption the top risk cited by manufacturers at 68 percent, while the top concern for the financial services sector (at 33 percent) was legislative and regulatory changes.
The survey, conducted in October and November, included 516 respondents from 47 countries.