In its 2018 edition, the ‘Allianz Risk Barometer’ surveyed more than 1,900 risk experts from 80 countries about the perils that worry them most, in order to identify the most important risks for companies for the next 12 months and beyond. The video provides insight about the 10 major threats for companies through 2018 and beyond.
The main challenges identified included:
- Business interruption (BI) was the most important global risk for the sixth year in a row (42% of responses), due to its tremendous impact on revenues. Companies face an increasing number of scenarios – from traditional exposures to new triggers stemming from digitalization and interconnectedness that typically come without physical damage, but high financial loss. Cyber incidents is the most feared BI trigger for the first time. BI is also the main cause of economic loss for businesses after a cyber incident.
- Cyber incidents continue an upward trajectory to 2nd most important business risk (40%), while five years ago it ranked 15th. Like a natural disaster, an attack can potentially impact hundreds of companies and incidents have escalated. So-called “cyber hurricane” events, where hackers disrupt large numbers of companies through common internet infrastructure dependencies, are increasing. Meanwhile, the introduction of the General Data Protection Regulation (GDPR) across Europe in May 2018, brings the prospect of more, and larger, fines for businesses who don’t comply. The way in which a business manages a data breach has a direct impact on the final cost. This will become even more the case under the GDPR. Reputational damage is irrevocably linked if the response to a cyber incident is inadequate.
- Natural catastrophes: A record-breaking $135bn in insured losses in 2017 means this issue returns to the top three business risks in 2018 (3rd 30%).
- Market developments: Companies are less concerned about market developments (4th 22%) than 12 months ago.
- Risk perception of changes in legislation and regulation (5th 21%) remains the same, despite a reduction in the number of protectionist measures.
- Concerns about fire, explosion (6th 20%) are up – claims analysis shows the average cost of a BI loss from a large fire incident totals $2m (€1.7m)
- The risk impact of new technologies (7th 15%) is one of the big movers in the rankings year-on-year. It is also the second top long-term risk after cyber incidents, with which it is closely interlinked. Vulnerability of machines to failure or malicious cyber acts will increase in future, potentially causing significant disruption to critical infrastructure. Businesses also have to prepare for new liability scenarios, as responsibility shifts from human to machine.
- Loss of reputation or brand value (8th 13%) is also an increasing worry in an age when a crisis can spread globally within minutes.
- Political risks and violence (9th 11%) is down year-on-year, although businesses are more worried about the impact of terrorism. A general trend of increased political activism is anticipated in 2018.
- Climate change: Businesses worry the activity of the past year with record natural catastrophes could be a harbinger of increasing intensity and frequency, ensuring climate change (10th 10%) is also a new entrant in the top 10 risks.
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Advancements in technology are changing the risk landscape, as on the one hand, technological innovation provides new ways to mitigate risk, but on the other it creates new perils, which ranks as an increasing concern for Risk Barometer respondents. Autonomous machines, Artificial intelligence (AI), digitalized supply chains, and better utilization of data and analytics are expected to offer a wide range of opportunities and enable greater productivity and more tailored customer offerings, while automation is considered as safety enhancement measure to minimize human error. However, recent studies suggest vulnerability of connected systems to system failure or hacking and other malicious cyber acts, such as extortion and espionage, will increase further in future.
Additional information may be found by reading the full report: