In the wake of mega data breaches and privacy scandals, major IT outages and the introduction of tighter data protection rules in the European Union, South Africa and other countries, cyber risk is now a core concern for businesses in 2019 and beyond. According to the Allianz Risk Barometer 2019, Cyber incidents (37% of responses) are neck-and-neck with Business interruption (BI) (37% of responses) as the top business risks globally Climate change (#8 with 13% of responses) and Shortage of skilled workforce (#10 with 9% of responses) are the biggest climbers globally. At the same time companies are more worried year-on-year about changes in legislation and regulation (#4 with 27% of responses) resulting in impacts such as Brexit, trade wars and tariffs. The annual survey on global business risks from Allianz Global Corporate & Specialty (AGCS) incorporates the views of a record 2,415 experts from 86 countries including CEOs, risk managers, brokers and insurance experts
“Companies need to plan for a wide range of disruptive scenarios and triggers as this is where their big exposure lies in today’s networked society,” says Chris Fischer Hirs, CEO of AGCS. “Disruptive risks can be physical, such as fire or storms, or virtual such as an IT outage which can occur through malicious and accidental means. They can stem from their own operations but also from a company’s suppliers, customers or IT service providers. Whatever the trigger, the financial loss for companies following a standstill can be enormous. New risk management solutions, analytical tools and innovative partnerships can help to better understand and mitigate the modern myriad of business interruption risks and prevent losses before they occur.”
Leading risks in Africa
The report shows a major concern about the unpredictable business environment where markets are volatile (#1) and political perils, such as civil commotion or terrorism are on the rise at #2 with 30% responses. Other emerging risks include digital dilemmas arising from new technologies and cyber incidents (#3), as well as changes in legislation and regulation (#4) with 26% responses.
“Businesses in Africa are faced with political instability and policy uncertainty, which are among the key risk factors that have an impact on business confidence and investor sentiment. In addition to these, fire and explosion as well as changes in legislation and regulation remain major concerns for companies in 2019. For Africa to stay globally competitive, the business community needs to be on the cutting edge of technological advancement and innovation. However, new technologies such as the impact of increasing interconnectivity, and artificial intelligence could result in increased cyber incidents, which is the second largest risk in South Africa. Therefore, it is vital for companies to mitigate against risks through modern and traditional risk management and transfer methods as well as trusted and reliable insurance solutions,” says AGCS Africa CEO Thusang Mahlangu.
BI threats continue to evolve
Business interruption remains the top threat for businesses worldwide for the seventh year running and is the top risk in countries such as the South Africa, US, Canada, Germany, Spain, Italy and China. Potential BI scenarios are becoming ever more diverse and complex in a globally connected economy, including breakdown of core IT systems, product recalls or quality issues, terrorism or political rioting or environmental pollution. Both cyber and business interruption risks are increasingly interlinked as ransomware attacks and accidental IT outages often result in disruption of operations and services costing over a hundred of millions of dollars. For Africa, BI received 23% responses dropping by 8% to move from #1 to #5. This business risk is fueled by the increasing interdependencies between companies, the global supply chain and lean production processes.
“BI can lead to significant income losses, but also because multiple new triggers are emerging, especially non-physical damage or intangible perils, such as cyber incidents, and disruption caused by political violence and strikes. This trend is driven, in part, by the rise of the ‘Internet of Things’ (IoT) and the ever-greater interconnectivity of machines, companies and their supply chains which can easily multiply losses in case of an incident,” explains Mahlangu.
When Theft, fraud and corruption (#6 with 19% responses) are rife, the general business climate is tremendously affected, resulting in business trust being at jeopardy, which in turn robs the business of profits and credibility in the eyes of their customers. Fire, explosion is one of largest cause of losses for businesses in Africa. It accounts for a quarter of the value of all claims at #7 with 17% responses as a concern for businesses in Africa. Natural catastrophes such as floods, storms and earthquakes is a rising concern for businesses in Africa at #8 with 14% responses.
More information on the findings of the Allianz Risk Barometer 2019 are available here: