The impact of disruptive events, fierce market competition and cyber incidents ranked as top concerns, according to the fifth annual survey on corporate risks published by Allianz Global Corporate & Specialty (AGCS), which surveyed over 800 risk managers and insurance experts from more than 40 countries.
The findings indicate the risk landscape for businesses is substantially changing in 2016.
According to the Allianz Risk Barometer, business and supply chain interruption (BI) remains the top risk for businesses globally for the fourth year in succession. However, many companies are concerned that business interruption (BI) losses, which usually result from property damage, will increasingly be driven by cyber-attacks, technical failure or geo-political instability as new “non-physical damage” causes of disruption.
Market developments, which consist of market volatility, intensified competition and market stagnation, together with cyber incidents, debuted in the top three global business risks; cyber incidents also was cited as the most important long-term risk for companies in the next 10 years. In contrast, natural catastrophes dropped two positions to fourth year-over-year, reflecting the fact that in 2015 losses from natural disasters reached their lowest level since 2009.
In the U.S., BI was cited by 39 percent of respondents as the top business risk, followed by natural catastrophes (33 percent) and cyber (32 percent).
“Business interruption continues to be the primary concern of risk managers and how well a company responds will determine how well it survives to compete,” said Hugh Burgess, global head of mid-corporate and head of corporate lines, North America. “As global supply chains continue to grow and increase in complexity, the threat of BI continues to incubate in numerous and increasing areas, which in turn, continues to weigh on the minds of risk managers today.”
Rising sophistication of cyber attacks
Another area of increasing concern for businesses globally is the threat of cyber incidents, which include cyber crime, data breaches and technical IT failures. Cyber incidents gained 11 percentage points year-over-year, to move from fifth position to debut into the top three risks (28 percent of global responses). Five years ago, Cyber Incidents were identified as a risk by just 1 percent of responses in the inaugural Allianz Risk Barometer; Loss of reputation (69 percent) is cited as the main cause of economic loss for businesses after a cyber incident, followed by BI at 60 percent and liability claims after a data breach at 52 percent.
While the cyber insurance market is still in its infancy in Europe albeit developing quickly, the U.S. market has already reached maturity and has experienced substantial losses.
“The U.S. is unique in that we have already paid losses in the hundreds of millions to cover cyber loss. Breaches happen everywhere, but the U.S. has complex regulatory regimes and an extremely active plaintiff’s bar. These dynamics have driven the price of loss higher in the U.S. than anywhere else,” said Emy Donavan, national practice leader – cyber. “Boards and C-suites in the U.S. are acutely aware of the individual risk they may have if a cyber event occurs on their watch. Litigation trends and case law are developing so quickly that potential liability associated with clients’ normal operations can change literally overnight.”
Source: Allianz Global Corporate & Specialty