Business interruption and cyber incidents remain the top two business risks, but other challenges such as tariffs and Brexit are gaining ground, according to the 2019 Allianz Risk Barometer.
Approximately 37 percent of business ranked business interruption and cyber incidents equally as the most important risks for the year, with cyber having gained ground over the last 12 months to climb from second place to tying for first.
Allianz noted that business interruption is the top threat for businesses globally for the seventh year in a row, and is the biggest business risk worry in countries such as the U.S., Canada, Germany, Spain, Italy and China. But cyber incidents are drawing even more attention as they’ve gained ground after an eventful 2018, Allianz said. Allianz Global Corporate & Specialty conducts the annual survey on business risks, with findings based on the views of 2,415 experts from 86 countries, including CEOs, risk managers, brokers and insurance experts.
“Cyber risk has been a major risk for a number of years, but as with any new risk it has struggled with awareness,” Marek Stanislawski, Deputy Global Head of Cyber, Allianz Global Corporate & Specialty, said in prepared remarks. “We have now reached a point where cyber is as equally concerning for companies as their major traditional exposures.”
Cyber related crimes now cost approximately $600 billion annually, up from $445 billion in 2014, according to data cited by Allianz. By comparison, the 10-year economic loss from natural catastrophes cost $208 billion. AGCS noted that cyber incidents are costly in multiple ways, sparking litigation such as securities and consumer class action lawsuits. Data breaches or IT outages can also generate significant third party liabilities with both affected customers and shareholders pursuing companies to recoup their losses.
Business interruption still ranks supreme, however, in part because of the ways this risk manifests diversifies and spreads. AGCS said that some of the new BI risk avenues include the breakdown of core IT systems, product recalls and quality issues, terrorism, political rioting and environmental pollution.
Other business risks are moving up the ranking. Placing at number 5 in 2018, changes in legislation grabbed the number 4 slot a year later, with 27 percent of respondents saying that trade wars and tariffs, economic sanctions, protectionism, Brexis and Euro-zone disintegration rank as a significant risk.
In third place for 2018 and 2019, natural catastrophes such as storms, floods and earthquakes remain a significant concern in a global economy, with 28 percent of respondents to the AGCS ranking naming this as a major business risk.
Climate change and increased weather volatility is climbing the list quickly. Ranked in 10th place in 2018, it is now number 8, with 13 percent viewing this as a significant business risk.
Here are the other leading risks on the AGCS 2019 list, rounding out the top 10:
- Market developments such as M&A, volatility and intense competition ranked as the 5th most serious risk, with 23 percent of respondents viewing it as a major problem.
- Fire and explosions came in at 6, according to 19 percent of respondents.
- At seventh place, new technologies such as nanotechnology, artificial intelligence and blockchain drew 19 percent of respondents who saw this as a major risk heading into 2019.
- At number 9, loss of reputation or brand value is a major business risk according to 13 percent of business respondents.
- A shortage of a skilled workforce is at number 10, with 9 percent of respondents viewing it as a problem. Political risks and violence drew the same percentage of votes.