News & Press Releases
Allianz Risk Barometer 2015: Businesses exposed to increasing number of disruptive scenarios
Business interruption & supply chain, natural catastrophes, fire & explosion top risks for companies in 2015, and for the third consecutive year.
Companies across Asia are more concerned about the trading environment than a year ago with the prospect of market stagnation or decline, a new entry in the top 10 risks. A shortage of skilled talent also remains a concern and more pronounced than before.
For the first time, this year the Risk Barometer includes the top 10 risks from China, where fire/explosion is ranked top risk, natural catastrophe 2nd and market stagnation or decline as 3rd.
In the long term, companies worldwide face the dual challenge of managing the impact of climate change and technological innovation.
PRESS RELEASE - London/Munich/New York/Paris/Rio de Janeiro/Singapore, January 14, 2015.
Businesses face new challenges from a rise of disruptive scenarios in an increasingly interconnected corporate environment, according to the fourth Allianz Risk Barometer 2015. In addition, traditional industrial risks such as business interruption and supply chain risk (46% of responses), natural catastrophes (30%), and fire and explosion (27%) continue to concern risk experts, heading this year’s rankings. Cyber (17%) and political risks (11%) are the most significant movers globally, but not listed within Asia Pacific Top 10 risks. The survey was conducted among more than 500 risk managers and corporate insurance experts from both Allianz and global businesses in 47 countries.
“The growing interdependency of many industries and processes means businesses are now exposed to an increasing number of disruptive scenarios. Negative effects can quickly multiply. One risk can lead to several others. Natural catastrophes or cyber attacks can cause business interruption not only for one company, but to whole sectors or critical infrastructure,” says Chris Fischer Hirs, CEO of Allianz Global Corporate & Specialty SE (AGCS), the dedicated insurer for corporate and special risks of Allianz SE. “Risk management must reflect this new reality. Identifying the impact of any interconnectivity early can mitigate or help prevent losses occurring. It is also essential to foster cross-functional collaboration within companies to tackle modern risks.”
More severe business interruption implications
Given companies can sometimes take years to fully recover from the knock-on effect of disruptive events it is unsurprising this remains the number one concern in the Allianz Risk Barometer across the Europe, Middle East and Africa (EMEA), Americas and Asia Pacific regions for the third year running.
Almost half (46%) of responses rate business interruption (BI) and supply chain risk as one of the three most important risks for companies, up 3% year-on-year. Fire/explosion (43%) and natural catastrophes (41%) are the major causes of BI companies fear most.
The impact of the subsequent disruption potentially affecting a company, its suppliers and customers often outweighs the physical damage itself. At $1.36m, the average business interruption insurance claim is already 32% higher than the average direct property damage claim ($1.03m).
The fact catastrophes and supply chain risks still rank highly on the 2015 Risk Barometer shows companies are reminded of how devastating these extreme events can be on their balance sheet said Mark Mitchell, Regional CEO, Asia, AGCS.
The Asia Pacific region suffered $294bn in economic losses in 2011 from natural catastrophes, accounting for 80% of all losses worldwide and continues to have an impact.
“The lessons from 2011 have resulted in growing awareness from businesses of the knock-on effects from catastrophes. Companies now have a greater understanding of the need to monitor risk aggregations, not just geographically, but also in business interruption exposures,” added Mitchell.
Businesses spend a lot of time assessing direct damage and looking at their own BI impact but more work needs to be done analyzing the risks associated with suppliers and customers. Supply chain risk management remains a gap in many multinational companies’ risk management programs. Many businesses still do not have alternate suppliers. “Collaboration between different areas of the company is necessary in order to develop robust processes which identify break points in the supply chain,” explains Mitchell.
Interconnectivity of risks create challenges
For the first time, this year the Risk Barometer includes the top 10 risks from China, where fire/explosion was ranked top risk, natural catastrophe 2nd and market stagnation or decline as third.
The growing interconnectivity of risks creates more challenges for businesses, observes Patrick Zeng, Head of AGCS Operations, within Allianz China. “It means that one event, like a fire which is the top risk in China, or a flood in a specific region, will generate many claims from large numbers of companies, who can often be affected by the same loss event,” he added.
Regional trends: Talent shortage fears increasing
Across the Asia Pacific region companies are more concerned about the trading environment than 12 months ago with the prospect of market stagnation or decline, a new entry in the top 10 risks, and ranking 3rd in China.
“For instance, companies in China are facing various risks originating from sharper-than-envisaged slowdown and financial sector vulnerabilities and uncertainty,” added Zeng.
A shortage of skilled talent also remains a concern in Asia Pacific, with awareness of this risk even more pronounced than a year ago. Competition remains fierce to secure the best talent and poaching is common practice, particularly in the insurance industry.
“One concern about poaching is the risk of artificially inflating the cost of talent. There is a need for insurers to strike a balance between recruiting and nurturing talent at a level that manages costs and makes it sustainable,” said Mitchell.
Industry trends: Competition worries shipping, regulation concerns financial services
The impact of natural catastrophes (42%) such as earthquakes remains the top risk for the Engineering and Construction sector. BI (68%) continues to be the top risk with manufacturers even more concerned than 12 months ago (60%), driven by the fact that the potential for large claims in certain sectors such as semiconductor or automotive is increasing. Changes in legislation and regulation (33%) remains the top concern for financial services, reflecting increasing supervisory intervention around the globe. The shipping sector is concerned about intensified competition (29%), while theft (47%) worries the transportation industry.
Dual challenge: climate change and disruptive technologies
Climate change and natural catastrophes and so-called “disruptive technologies” such as 3D-printing or nanotechnology dominate the long-term risk agenda. “Companies can expect to face further disruption from technological innovation, while also being exposed to climate change impact as an underlying risk which is not within their direct control”, says Axel Theis, Member of the Board of Management, Allianz SE. “Individual best practice, along with collaboration across companies, industries and regions can help mitigate environmental damage and create future safety, growth and innovation in a more sustainable world.”