What are the top risks faced by global businesses?
The top three risks faced by firms are business and supply chain interruption, market developments and cyber incidents. That’s according to the Allianz Risk Barometer 2016, which surveyed more than 800 risk managers and insurance experts from over 40 different countries.
Business and supply chain interruption remained the top risk for the fourth year running while market developments and cyber incidents debuted in the top 3 for the first time in the 2016 survey.
Business interruption could have a number of causal or contributory factors but is often due to weather events or natural disasters. This could involve damage to specific premises but could also involve the disruption of a domestic or international supply chain. It’s important for businesses to have a contingency plan in place to help mitigate the effects of business interruption.
Natural catastrophes, fire/explosions and supplier failure were listed as the major causes of business interruption that were most feared by global businesses. Cyber incidents, and an increasing concentration of production and economic value in areas at high risk of natural catastrophes, were identified as trends that would increase the risk of business interruption in the future.
The recent flooding in the UK is an example of the damage that can be caused to businesses by interruption but it didn’t make the top three as voted for by UK-based respondents. The top three risks in the UK were listed as cyber incidents, changes in legislation and regulation, and disruption resulting from new technologies.
The umbrella term ‘cyber incidents’ incorporates cyber-crime, data breaches and serious IT failures. It was cited by 28% of respondents, whereas three years ago it was listed as a top risk by just 6% of risk specialists, ranking as the 15th biggest risk.
Cyber-crime alone is estimated to cost the global economy $445 billion (£314 billion). The main cause of financial loss for businesses after a cyber incident were listed as loss of reputation (69%), business interruption (60%) and liability claims following a data breach (52%).
By Phil Smith