Business interruption and supply chain risk, natural catastrophes, and fire/explosion top the list of company risks in 2015, according to the fourth annual Allianz Risk Barometer, which surveyed more than 500 risk managers and corporate insurance experts from 47 countries.
Business interruption and supply chain risk came in as the top peril for the third year in a row, with 46 percent of respondents rating it as one of the three most important risks for companies.
“The growing interdependency of many industries and processes means businesses are now exposed to an increasing number of disruptive scenarios,” Chris Fischer Hirs, CEO of Allianz Global Corporate & Specialty, said in a statement. He cautioned: “Negative effects can quickly multiply. One risk can lead to several others. Natural catastrophes or cyber attacks can cause business interruption not only for one company but to whole sectors or critical infrastructure.”
The most significant movers on this year’s barometer were cyber and political risks.
Cyber risk—including cyber crime, IT failures, espionage and data breaches—moved into the top 5 business risks globally for the first time, up from the eighth spot in 2014 and 15th in 2013. But despite growing awareness of the danger, cyber risk continues to be underestimated by businesses, with budget constraints cited as one of the main reasons companies are still unprepared for the disruption.
Cyber attacks often impact a company’s reputation, which can have a dramatic effect on balance sheets. In fact, the barometer cited the Edelman Privacy Risk Index, which found that 71 percent of customers say they would leave an organization after a data breach.
Political/social upheaval rose nine positions from 2014’s survey, coming in ninth overall, thanks in large part to the uptick in geo-political tension—for example, recent events in Russia, Ukraine, the Middle East, Hong Kong and Thailand. Adding to the political tension, lower oil prices may strain the budgets of countries heavily dependent on oil revenues.
Future Risks
For the first time, the 2015 barometer also examined emerging risks for businesses over the short and long term.
Cyber risks will continue to be a problem, the barometer found, with more than a third (37 percent) of respondents rating it as a top risk for the next five years. Political/social upheaval and war moves into second place, cited by 21 percent of respondents, followed by natural catastrophes, terrorism, and business interruption and supply chain risk.
For longer-term risks, climate change takes the lead, followed by natural catastrophes, political risks, technological innovation and cyber risks.
Business concerns about the impact of the changing climate have increased significantly year-on-year, with climate change doubling its share to 6 percent, climbing eight places to 15th in the 2015 Risk Barometer.
“Climate change is moving coastlines, affecting rainfall patterns and storm frequencies and is expected to increase the exposure of cities to floods, windstorms and heatwaves,” according to Michael Bruch, head of Emerging Trends at AGCS.
Source: Allianz Global Corporate & Specialty