Allianz Risk Barometer, Top Business Risks for 2018

Article Synopsis :

This report from Allianz identifies and discusses the most important corporate perils for the year ahead and beyond, based on a survey of more than 1,900 risk management experts from 80 countries.

Cyber incidents have come from outside the top ten to dominate this year’s global risk rankings

This review identifies the top ten risks in summary form. The report itself delves into each risk in a fair amount of detail, based on your interest.

Business interruption (BI) and cyber incidents interlink as the major threat for companies through 2018 and beyond. BI ranks as the most important global risk for the sixth year in a row (42% of responses), due to its tremendous effect on revenues.

Companies face an increasing number of scenarios – from traditional exposures, such as the physical damage impact of natural catastrophes and fires on facilities and the supply chain to new triggers stemming from digitalization and interconnectedness that trigger high financial loss without obvious physical damage.

Cyber incidents rank as the most feared BI trigger for the first time. Cyber incidents continue an upward trajectory to the 2nd most important business risk (40%). Five years ago it ranked 15th. Like a natural disaster, a cyber attack can potentially impact hundreds of companies and the frequency of incidents have escalated.

A record-breaking $135bn in insured losses in 2017 ensures natural catastrophes remain in the top three business risks in 2018 (3^rd, 30%). Businesses worry the activity of the past year could be a harbinger of increasing intensity and frequency, making climate change (10^th, 10%) a new entrant in the top 10 risks. Loss potential related to natural catastrophes is further exacerbated by rapid urbanization in coastal areas

Rounding out the top ten:

Businesses are less concerned (4th, 22%) about market developments (e.g. volatility, intensified competition/new entrants, M&A, market stagnation, market fluctuation) than twelve months ago.

Risk related to changes in legislation and regulation (5^th, 21%) remains the same as last year, despite a net reduction in the number of protectionist measures.

Concerns about fire and explosion (6^th, 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 (7^th, 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 sources.

Loss of reputation or brand value (8^th, 13%) is also an increasing worry in an age when a crisis can spread globally within minutes.

Political risks and violence (9^th, 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.

Stretching out the time frame to the long-term (10+ years) has an impact on the survey results, with the top three identified risks:

1. Cyber incidents (48%)
2. New technologies (26%)
3. Climate change/increasing volatility of weather (24%)

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