Outside of business interruption, cyber risks and natural catastrophes there are a number of other risks worrying businesses. Among these are changes in legislation and regulation, market developments, fire & explosion, new technologies, climate change, loss of reputation or brand value and shortage of skilled workforce.
TOP BUSINESS RISK 4: CHANGES IN LEGISLATION AND REGULATION
2018 was a turning point for global trade, according to Ludovic Subran, Chief Economist of Euler Hermes and Deputy Chief Economist of Allianz. US tariffs went up to 5.2% from 3.5%, bringing them back to the mid-80s and breaking with a history of preferring more sophisticated protectionism, such as regulation, over tariffs. Yet, the end-of-year trade truce with China is only postponing growing US-China rivalry as the backdrop for multinationals in 2019. As multilateral institutions struggle for a second wind, the rules of the games will be different for companies according to their shareholders, their location or the market they are after.
Some countries have beefed up anti-acquisition legislations (USA, France and Germany), others fear further sanctions (Russia, Iran and Cuba). Supply chains are at risk, and trade diversion starts to be a conversation in the boardroom to avoid negative effects of the new trade regime. In the meantime, in Europe, for example, member states have signed new free-trade agreements (the EU with Canada and Japan) and tried to reinforce their core. In 2019, risks loom for Europe with tense elections, fewer growth prospects for the Euro-zone and Brexit fatigue. What looks like a soft landing could become a forced landing if negative political outcomes and surprising regulatory moves spook investors and companies.
TOP BUSINESS RISK 5: MARKET DEVELOPMENTS
2018 was marked by record volatility, divergence and surprises. 2019 should be under the same auspices, says Ludovic Subran, Chief Economist of Euler Hermes and Deputy Chief Economist of Allianz. Last year high US growth entailed tighter financing conditions especially in emerging markets. Oil prices also ranged between $57/bbl and $87/bbl, creating negative surprises for oil importers over the fall.
Divergence between the US and the rest of the world was very visible with higher growth in the US contrasting with the slowdown in Europe and Asia. Financial markets also went through rough rides as surprises on data breaches and negative news on zombie companies (highly indebted compared to their profits) corrected stock prices. In addition, multinationals, especially exporters, were negatively perceived in the context of trade wars. For example, automotive companies have been through a perfect storm: mobility disruption, trade war, and regulatory shocks. Through 2019, the cost of uncertainty will prevail, as well as rapidly changing political backdrops and possibly the return of risk of expropriation and confiscation. Market consolidation continues in vulnerable sectors (energy, machinery and equipment, retail).
TOP BUSINESS RISK 6: FIRE, EXPLOSION
Insurance industry loss research by AGCS shows that fire and explosion incidents cause the largest claims for insurers and the businesses they cover. Such events account for almost a quarter (24%) of the value of more than 470,000 corporate insurance industry claims analyzed over a five-year period up to 2018, compared with the second major cause of loss which is aviation collision/crash (14%) .
This means that fire and explosion incidents such as building/factory fires, electrical fires and gas explosions (but not including wildfires) have caused in excess of €14bn ($15.9bn) worth of insurance losses from more than 9,500 claims and are responsible for more than half (11) of the 20 largest non-natural catastrophe loss events analyzed over the past five years. As industries such as manufacturing have become more efficient, values at risk per square meter have risen exponentially meaning claims and losses are much more expensive than a decade ago. Even the average claim from a fire/explosion incident totals almost €1.5mn at €1.47mn today.
TOP BUSINESS RISK 7: NEW TECHNOLOGIES
New technologies present fantastic opportunities for business, including new ways to manage and reduce risk. However, new technologies also bring risk, sometimes with unexpected consequences. For example, illegal drone activity led to the cancellation of some 1,000 aircraft at Gatwick airport in the UK in December 2018. By 2025, the “Internet of Things” is expected to comprise more than 100 billion connected devices with sensors collecting data from homes, factories and supply chains. “This means better risk assessment through predictive indicators and more flexible, tailored and timely solutions,” says Michael Bruch, Head of Emerging Risks, AGCS. At the same time, connected devices raise questions around cyber security, data protection, business continuity and third party liability, and increase the potential for critical infrastructure breakdown.
“There is the opportunity to create greater transparency in the security and reliability of new technologies,” says Bruch. “The insurance industry, with new innovative partners, can drive the development of risk-based services. In an increasingly networked world, the aim must be to understand and manage risks more quickly and prevent losses before they occur.” AGCS already partners with a number of insurtechs on initiatives such as utilizing machine learning to identify next generation litigation risks.
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Digital ecosystems and platforms will provide the basis for a range of risk mitigation services that prevent damage before it occurs. At the same time, concerns about the use, accuracy and security of data are increasing.
TOP BUSINESS RISK 8: CLIMATE CHANGE/INCREASING VOLATILITY OF WEATHER
Hurricanes, tropical cyclones and wildfires broke records in 2017 and 2018 – insured losses from global catastrophes were $150bn in 2017, the highest ever. The US National Climate Assessment warned that inaction over climate change will lead to more intense storms, floods, droughts, heatwaves and wildfires, generating hundreds of billions of dollars in annual losses by the end of the century. The rising cost of climate change is already noticeable. Analysis shows the number of weather-related/flood loss events has increased by a factor of three to four since 1980 .
Left unchecked, climate change is likely to have huge economic, political and social impacts – with implications for food and water security, health, migration and conflicts. Indirect consequences include cultural and behavioral change (for example, the sudden shift in consumer opinion around plastics or investors’ views on fossil fuels). Climate change will also have big implications for regulation and liability. Emissions regulations and targets are already shaping industries like aviation and shipping, while growing climate change reporting and disclosure requirements will increase exposures for directors and officers.
TOP BUSINESS RISK 9: LOSS OF REPUTATION OR BRAND VALUE
A company’s reputation is its most valuable asset. Product recalls, cyber incidents, industrial disputes and executive conduct have all tainted the reputations of organizations in recent years, affecting the likes of airlines, car manufacturers and banks. The value of Facebook fell almost 40% in 2018 after a turbulent year which included it being embroiled in a privacy scandal and a massive data breach .
Protecting reputation and brand has taken on urgency in the social media age. There are an estimated three billion social media users worldwide, while Facebook Messenger and WhatsApp handle 60 billion messages a day ensuring a reputational incident can quickly escalate out of control, but social media can also help companies monitor and engage with customers. A study of 125 reputational events over the past decade by Pentland Analytics and Aon  found the impact of reputation events on stock prices has doubled since the introduction of social media. Effective planning and crisis management has become essential.
It is estimated a company could add as much as 20% of value or lose up to 30% depending on its reputation risk preparedness and management in the immediate aftermath of a crisis. Insurance can also provide tangible assistance to an intangible risk, such as funding advisory and crisis response costs.
TOP BUSINESS RISK 10: SHORTAGE OF SKILLED WORKFORCE
Shortage of skilled workforce appears in the top 10 global risks for the first time with many factors such as changing demographics, a shallow pool of talent in the digital economy and Brexit uncertainty contributing to its rise.
“Skilled workforce — and human capital more generally — has become the scarce resource of the digital economy,” says Ludovic Subran, Chief Economist of Euler Hermes and Deputy Chief Economist of Allianz. “Competition is fierce to get new recruits with competencies in artificial intelligence, data science, or ‘frontier risk management’ such as managing cyber or reputational risk as most of these jobs did not exist 10 years ago. Even attractive salaries do not suffice as the pool of recruits with the needed skillset is limited and the urgency to onboard them does not allow for on-the-job training.”
Regulatory change can also negatively impact. A UK study  found that nine in 10 employers were struggling to recruit the skilled staff they need, with Brexit set to make this worse. New talent must be recruited quickly. “Managers must embrace the technological acuity of younger employees,” says Scott Steinmetz, Global Head of MidCorp Risk Consulting, AGCS. “They must also focus on disruptive technologies and ideas, as these may bring beneficial innovations. Machine learning and automation can offset worker attrition, but requires significant investment.”
 Allianz Global Corporate & Specialty, Global Claims Review, The Top Causes of Corporate Insurance Losses
 Munich Re, Trends in weather-related disasters - consequences for insurers and society, March 2016
 CNBC, Here are the scandals and other incidents that have sent Facebook’s share price tanking in 2018, November 20, 2018
 Pentland Analytics and Aon, Reputation Risk In The Cyber Age - The Impact On Shareholder Value, August 2018
 The Independent, Nine in 10 UK employers struggling to find skilled workers with Brexit set to make shortage worse, survey finds, June 12, 2018