Expert Risk Articles

Allianz Risk Barometer 2017: Response Findings

BI tops the list

The impact of business interruption (incl. supply chain disruption), market developments (volatility, intensified competition/new entrants, M&A and market
stagnation), cyber incidents (cyber crime, IT failure, data breaches), natural catastrophes and changes in legislation and regulation (goverment change, economic sanctions, protectionism, etc.) are the major risks occupying the attention of companies at the start of 2017, according to the sixth annual Allianz Risk Barometer, which surveys over 1,200 risk managers and corporate insurance experts from more than 50 countries.


Businesses are more concerned about the impact of climate change year-on-year. A report by the ClimateWise coalition warns of a $100bn “protection gap” as a result of the rising impact of climate risks. Photo: iStockPhoto

Business interruption (BI) remains the top peril for the fifth year in succession, with 37% of responses rating it as one of the three most important risks companies face in 2017. Many of the top 10 risks in this year’s barometer can have severe BI implications; evidence that a shift in BI risk is occurring. In today’s interconnected industrial world, the reasons for BI are expanding from damage-driven events, such as natural catastrophe or fire incidents, to intangible hazards or formerly uninsurable events. For example, a cyber incident, or the indirect impact of a terrorism or political violence event, such as denial of access to the affected location afterwards, can result in a large loss of income for companies, without them actually suffering a physical loss.

Market developments remains a priority concern for businesses, occupying second position in the Risk Barometer rankings (31% of responses). In addition to the concerns expressed about impact of volatile and stagnant markets and M&A, increasing digitalization and deployment of new technologies is also impacting existing business models and industry risk profiles, results show.

For example, the new liability scenarios and changes in loss activity patterns anticipated from deployment of new technologies, means this risk appears in the top 10 global risks for the first time with 12% of responses, up year-on-year. Meanwhile, more than half of responses (53%), across all industries, cited increasing digitalization and use of new technologies as the most prominent
trend currently transforming their business sector.

Cyber incidents continues its rapid recent climb up the Risk Barometer rankings, occupying third position with 30% of responses, again up year-on-year. Four years ago this peril ranked 15th in the top global risks, with just 6% of responses. Today, the results indicate that cyber risk occupies a significant portion of a company’s exposure map. The risk now goes far and beyond the issue of privacy and data breaches. A single incident, be it a technical glitch, human error or an attack, can lead to severe business interruption, loss of market share and cause reputational damage. Of the top 10 global risks in the 2017 Allianz Risk Barometer, a cyber incident could be a potential root cause or trigger for 50% of them.

In addition, the toughening of data protection regulation regimes around the world is also contributing to this risk being at the forefront of risk managers’ minds, as penalties for non-compliance are increasingly severe. The growing sophistication of cyber-attacks is the impact of increasing digitalization companies fear most (45% of responses), while cyber risk is also the top long-term peril (42%), results show. However, cyber incidents ranks just sixth for small-sized companies (<€250m revenue). Many companies underestimate their exposure and are not prepared for, or are able to respond to, an incident, with a lack of resources to do so a contributing factor.

A perennial concern for businesses is the impact of natural catastrophes, which ranks fourth in this year’s Risk Barometer (24% of responses). Natural catastrophes accounted for $175bn in economic losses in 2016, a four-year high, with insured losses totaling some $50bn [1]. At the same time, businesses are also more concerned about the impact of climate change/increasing weather volatility year-onyear, with this risk climbing to 14th position (6% of responses). A report by the ClimateWise coalition, which comprises 29 insurers including Allianz, warns of a $100bn “protection gap” in the global insurance sector as a result of the rising impact of climate risks [2].

“Natural catastrophes and climate change worry our customers and society at large,” says Axel Theis, Board Member of Allianz SE. “We must assume that global warming above 1.5 degrees Celsius would intensify climate damages, for example from heat waves and rising sea levels, significantly. It is our task as an insurer to develop solutions for these scenarios and establish prevention and insurance protection for, and together with, our customers and public partners.”

In addition to the above threats, the 2017 Allianz Risk Barometer results also show that businesses are increasingly concerned about the ongoing uncertainty, and potential intangible risks, posed by the changing legal and political environment around the globe. Changes in legislation and regulation (goverment change, economic sanctions, protectionism, etc.) [5th position], political risks and violence (war, terrorism) [8th position] and Brexit, Euro-zone disintegration (16th position), rank higher year-on-year, accounting for over 40% of responses collectively. Fear of protectionism or government intervention in business is perceived to be an increasing threat, leading to worries over access to markets and import and export restrictions; presenting a potential business interruption threat of a different kind. Terrorism risk is also rising; ranking as the number one concern for businesses in the political risk and violence category.

“Companies worldwide are bracing for a year of uncertainty,” says Chris Fischer Hirs, CEO, Allianz Global Corporate & Specialty (AGCS). “Unpredictable changes in the legal, geopolitical and market environment around the world are constant items on the agenda of risk managers and the C-suite. A range of new risks are emerging beyond the perennial perils of fire and natural catastrophes which require rethinking of current monitoring and risk management tools.”

[1] Munich Re NatCatSERVICE
[2] Investing for Resilience, ClimateWise