Allianz Risk Barometer 2015
15 January 2015
- Market Stagnation or Decline emerges for the first time as one of the top ten risks facing Australian business.
- Business Interruption & Supply Chain risks remains of most concern.
- Risks to reputation and brand (eg from social media) rises to second position (compared to third in 2014).
- Concerns about government legislation and regulation have fallen dramatically, to ninth spot from second in 2014.
- Globally, Cyber Risks (eg cyber crime, IT failures, data breaches) continues to its rise up the list.
Australian businesses face new challenges from a rise of disruptive scenarios in an increasingly interconnected corporate environment, according to the fourth Allianz Risk Barometer 2015.
Business Interruption and Supply Chain risk (47% of responses) remains in the top spot, while Loss of Reputation and Brand continues its rise up the list, moving into second place (35%) in 2015, up from third in 2014.
Other risks that have moved up in the latest list are Intensified Competition (35%), which has rocketed to third from eight last year in the latest survey, and Talent Shortage/Aging Workforce (24%), which has risen to fourth position from ninth last year.
For the first time, Market Stagnation or Decline (18%) has appeared in the top ten on the Australian list in sixth position, while internationally it has fallen to seventh from fifth in 2014.
Other risks that have remained unchanged or fallen down the list in the Australian Allianz Risk Barometer 2015 are:
- Natural Catastrophes (24%) – remained in fifth spot;
- Market Fluctuations (eg exchange rates or interest rates) (18%) – sixth to seventh;
- Commodity Price Increases (18%) – seventh to eight;
- Changes in Legislation or Regulation (12%) – second to ninth; and
- Credit Availability (12%) – remained in tenth spot.
According to Holger Schaeffer, General Manager of Allianz Global Corporate & Specialty (AGCS) Pacific, the dedicated insurer for corporate and special risks of the Allianz Group, “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. Natural catastrophes or cyber attacks can cause business interruption, not only for one company but for 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. It is also essential to foster cross-functional collaboration within companies to tackle modern risks”, he said.
Interestingly, while Cyber Risk has risen to fifth from seventh position on the international Risk Barometer, it has fallen out of the Australian top ten from fourth position in 2014. Despite this local anomaly, there is no question that the risk of cyber crime, IT failures and data breaches is on the rise. Cyber risk moved up the Risk Barometers of Europe, the Americas, the Middle East and Africa and rose into the top 5 on the overall international Risk Barometer for the first time.
Although awareness of cyber risks is generally high and increasing, many companies are still underestimating the potential impacts, according to 73% of responses from Allianz risk experts located around the world. Budgetary constraints are another reason why companies are not better prepared to combat cyber risks.
“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. Knowledge that previously might have been siloed in businesses, needs to be incorporated into 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,” explained Mr Schaeffer.
For the third year in succession business interruption and supply chain risk is the top peril in the International Allianz Risk Barometer, with almost half (46%) of the responses rating this as one of the three most important risks for companies. This aligns closely with the risk assessment in Australia, where BI is also at the top of the list according to 47% of Allianz’s Australian risk experts.
The subsequent impact of a disruption on a company, its suppliers and customers often outweighs the physical damage that caused the disruption in the first place. At US$1.36m, the average business interruption insurance claim is already 32% higher than the average direct property damage claim (US$1.03m).
According to Mr Schaeffer, “businesses spend a lot of time assessing direct damage and looking at their own BI impact but more work needs to be done analysing the risks associated with suppliers and customers”.
Supply chain risk management remains a gap in many companies’ risk management programs. Many businesses still do not have alternate suppliers. “Collaboration between different areas of the company is necessary in order to develop robust processes which identify break points in the supply chain,” he said.
Concluding, Mr Schaeffer said, “so-called ‘disruptive technologies’ such as 3D-printing or nanotechnology are increasingly dominating the long-term risk agenda. Companies can expect to face further disruption from technological innovation.”
To view or download the full Allianz Risk Barometer 2015 visit: http://www.agcs.allianz.com/about-us/news/press-riskbarometer2015/
Accompanying this release is a graphic of the Australian Allianz Risk Barometer 2015. Various other global, regional, national and sectoral Risk Barometer graphics are available on request.
The Allianz Risk Barometer was conducted among global businesses and risk consultants, underwriters, senior managers and claims experts in the corporate insurance segment of both Allianz Global Corporate & Specialty (AGCS) and national Allianz entities.
Figures represent the number of responses as a percentage of all survey responses (709). More than one risk could be selected by respondents.
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Allianz Australia delivers a wide range of personal, commercial and corporate insurance products and services to more than 2.5 million policyholders. Over 50% of Australia’s top 200 BRW-listed companies have some form of insurance cover with the group and the group provides workers compensation services to around one-fifth of Australian employees.
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