Allianz finds cyber and business interruption are top global threats

Business interruption remains the top threat worldwide for the seventh year running and is the top risk in countries such as the US, Canada, Germany, Spain, Italy and China, according to the Allianz Risk Barometer for 2019, which is based on the views of 2,415 experts from more than 86 countries.

More than a third of respondents identified business interruption (37 percent) and cyber incidents (also 37 percent) as the top business risks globally. These were followed by natural catastrophes (rated second by 28 percent), and ongoing uncertainty over Brexit, global trade wars and tariffs fuel corporate concerns about changes in legislation and regulation.

In the wake of major data breaches and privacy scandals, serious IT outages and the introduction of tighter data protection rules in the European Union and other countries, cyber risk is now a core concern for businesses in 2019 and beyond.

At the same time, BI is seen as the biggest cause of financial loss for businesses after a cyber incident, said 69 percent of respondents. According to the report, potential BI scenarios are becoming ever more diverse and complex in a globally connected economy, including breakdown of core IT systems, product recalls or quality issues, terrorism or political rioting or environmental pollution.

The report highlighted that both cyber and BI risks are increasingly interlinked as ransomware attacks or accidental IT outages often result in disruption of operations and services costing hundreds of millions of dollars. Cyber crime costs are estimated at $600 billion a year – up from $445 billion in 2014.

“Cyber risk has been a major risk for a number of years, but as with any new risk it has struggled with awareness. We have now reached a point where cyber is as equally concerning for companies as their major traditional exposures,” explained Marek Stanislawski, deputy global head of cyber, AGCS.

Furthermore, shortages of skilled workforce (9 percent) appeared for the first time among the top 10 business risks globally as well as for many countries in Central and Eastern Europe, the UK, the US, Canada and Australia. It is driven by factors such as changing demographics, Brexit uncertainty and a shallow pool of talent in the digital economy.

Nearly 13 percent of respondents rated climate change as the biggest climbers globally in this year's ranking, along with the shortage of skilled workforce.

The report found that climate change might not only be a harbinger of increasing losses and disruption from extreme weather events and natural catastrophes but is also likely to have big implications for regulation and liability considering rigid emission targets and new reporting and disclosure requirements in many sectors.

Ludovic Subran, deputy chief economist of Allianz, said: “Skilled workforce — and human capital more generally — has become the scarce resource of the digital economy. Competition is fierce between companies to get new recruits with competencies in artificial intelligence, data science, or ‘frontier risk management’ such as managing cyber or reputational risk as most of these jobs did not exist 10 years ago. Even attractive salaries do not suffice as the pool of recruits with the needed skill set is limited and the urgency to onboard them does not allow for on-the-job training.”

Chris Fischer Hirs, CEO of AGCS, said: “Companies need to plan for a wide range of disruptive scenarios and triggers, as this is where their big exposure lies in today’s networked society. Disruptive risks can be physical, such as fire or storms, or virtual, such as an IT outage, which can occur through malicious and accidental means. They can stem from their own operations but also from a company’s suppliers, customers or IT service providers. Whatever the trigger, the financial loss for companies following a standstill can be enormous. New risk management solutions, analytical tools and innovative partnerships can help to better understand and mitigate the modern myriad of BI risks and prevent losses before they occur.”