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Non-physical risks of growing concern among businesses, says Allianz study
Written by staff reporter
Companies are increasingly worried about the unpredictable business environment where markets are volatile and political perils, such as protectionism or terrorism are on the rise. Other growing concerns are digital dilemmas arising from new technologies and cyber risks, as well as natural catastrophes. However, what continues to trouble them most, are losses from business interruption. These are the key findings of the 6th annual Allianz Risk Barometer analysing corporate risks globally.
With almost 40% in agreement, BI continues to lead the ranking for the fifth year in a row, primarily because of the potentially significant income losses it brings about, but also because multiple new triggers are emerging, especially non-physical damage or intangible perils, such as cyber incidents, and disruption caused by political violence, strikes and terror attacks.
There is also a growing concern among businesses around the risks associated with the Internet of Things and the ever-greater interconnectivity of machines, companies and their supply chains.
Firms are also facing potential financial losses with the changing political landscape -- including Brexit, Trump, and upcoming EU elections leading to fears of increasing protectionism and anti-globalisation.
Allianz's sixth annual Risk Barometer is based on a survey conducted among 1,237 risk experts from 55 countries. CEO of AGCS, Chris Fischer Hirs, says companies worldwide are bracing for a year of uncertainty. "Unpredictable changes in the legal, geopolitical and market environment around the world are constant items on the agenda of risk managers and the C-suite," he explains. "A range of new risks are emerging beyond the perennial perils of fire and natural catastrophes which require re-thinking of current monitoring and risk management tools.”
With 31% of responses, market developments/volatility is the second most significant business peril in 2017 and the top concern in the aviation/defence, financial services, marine and shipping and transportation sectors, as well as across the Africa & Middle East region in general.
Meanwhile, trade credit insurer, Euler Hermes points out that since 2014, there have been 600 to 700 new trade barriers introduced globally every year. Authors of the report at Allianz say that in order to anticipate any sudden changes of rules that could impact markets, companies will need to invest more resources into better monitoring politics and policy-making around the world in 2017
At the same time, increasing reliance on technology and automation is transforming, and disrupting, companies across all industry sectors. While digitalisation is bringing companies new opportunities, it is also shifting the nature of corporate assets from mostly physical to increasingly intangible, bearing new hazards, above all cyber risks (30% of responses). Companies ranked cyber threats a close #3 globally, climbing to #2 across the Americas and Europe and the top risk in Germany, the Netherlands, South Africa and the UK. At the same time, it is the top concern globally for businesses in the information and telecommunications technology and the retail/wholesale sectors.
The threat now goes far beyond hacking and privacy and data breaches, although new data protection regulations will exacerbate the fall-out from these for businesses. Time is running out for businesses to prepare for the implementation of the new General Data Protection Regulation across Europe in 2018 – although the cost of compliance will be high, the penalties of not doing so could be even higher.
Natural catastrophes (#4) and climate change/increasing volatility of weather (respectively 24% and 6% of responses) also rank high on the agenda of businesses this year, particularly in Asia where the costliest disaster globally of 2016 occurred – the Kumamoto earthquake (Japan). Natural catastrophes rank as the top concern in Japan and Hong Kong, as well as globally among engineering/construction companies.
“Natural catastrophes and climate change worry our customers and society at large,” says Axel Theis, Board Member of Allianz SE. “We must assume that global warming above 1.5 degrees Celsius would intensify climate damages, for example from heat waves and rising sea levels, significantly. It is our task as an insurer to develop solutions for these scenarios and establish prevention and insurance protection for, and together with, our customers and public partners.”