A corporate environment increasingly reliant on digital technology means rising risk, with plenty of opportunities to market new insurance coverage – but which risks are the greatest threats to your commercial clients?
According to the fifth annual
Allianz Risk Barometer, businesses are facing new challenges arising from an array of disruptive scenarios.
“The 2016 Risk Barometer results show businesses are more concerned about a number of operational issues which are placing increasing pressure on their markets and challenging business models,” Allianz writes in its 2016 report. “Increasing digitalization and technological innovation is anticipated to have more of an impact in future… Such benefits [connected to digital technology] are also accompanied by a number of potential new operational, security and strategic risks for businesses.”
Based on the responses of more than 800 risk experts from more than 40 countries, the top three commercial risks facing corporations in 2016 are:
1. Business interruption (including supply chain disruption)
Business interruption is the top peril among global corporations for the fourth year in succession, with 38% of responses rating this as one of the three most important risks companies face.
Indeed, other risks concerning to corporations – including cyber incidents and political risks – also have severe BI implications.
BI losses are also increasing, typically accounting for a much higher proportion of the overall loss than a decade ago, Allianz said.
2. Market developments (volatility, intensified competition, market stagnation)
More than a third of survey respondents (34%) said market developments were one of the three most important risks facing companies in 2016. This is the first time these concerns have ranked among the top three since Allianz began tracking global corporate attitudes.
Corporate risk officers are specifically concerned about market volatility and stagnation and intensified competition.
More long-term concerns relate to companies’ abilities to successfully adapt to and manage challenges to business models posed by increasing automation, digitalization and interconnectivity of industry.
3. Cyber incidents (cyber crime, data breaches, IT failures)
Concern over cyber incidents grew by 11 percentage points this year, moving into the top three risks for the first time (28%). Three years ago, cyber ranked 15th in concern among corporations (6%).
And it’s for a reason – data analyzed by Symantec suggests that cyber crime alone costs the global economy approximately $445 billion a year.
Loss of reputation is the main cause of economic loss of business after a cyber incident, followed by business interruption and liability claims after a data breach. Loss of reputation is also a significant concern.
While concern related to technology and digitalization is growing, corporate risk officers appear to be less concerned with more traditional risks like natural catastrophes. Compared with previous years, storm, flood and earthquake have dropped two positions and natural catastrophe is down six percentage points among survey respondents.
According to Allianz, this “reflect[s] the fact that insurance claims from natural disasters fell to $27 billion during 2015, with natural catastrophe losses as their lowest level since 2009.”
The other six risks in the Allianz risk barometer include:
5. Changes in legislation and regulation (economic sanctions, protectionism)
6. Macroeconomic developments (austerity programs, commodity price increase, inflation/deflation)
7. Loss of reputation or brand value
8. Fire, explosion
9. Political risks (war, terrorism, upheaval)
10. Theft, fraud and corruption
Risks differ by region, with cyber insurance and natural catastrophe ranking higher in the United States and Canada.
