According to the 8th Annual Allianz Risk Barometer survey on business risks, ‘changes in legislation and regulation’ has been identified as the leading risk, ranked by 32% of Australian businesses. The report, which considers 2,415 insurance and risk experts from 86 countries is pushing ‘cyber incidents’ (28%) to third place behind ‘business interruption’ (30% of respondents).
What Australian businesses are worrying about
Even though cyber incidents are less of a concern, this is only slight. Cyber incidents remains an important concern for Australian businesses (with 61% of respondents stressing this as a core worry). Particularly when it comes to the disruption these sorts of attacks cause. Business interruption is seen as the biggest cause of financial loss for businesses after a cyber incident – both globally (69%) and in Australia (65%). Regardless of the cause, disruptions can cause companies vast amounts of time, money and energy. New risk management solutions, analytical tools, and innovative partnerships can help to better understand and mitigate the many risks facing business and prevent losses before they happen.
In fifth place is the impact of ‘new technologies’. This is a double-edged sword for companies. According to Allianz Risk Barometer 2019, “When asked which new technologies are the most useful or valuable for a company, the top answer by Australian respondents was Artificial Intelligence (80%). Yet when asked which new technologies pose the greatest risk to a business, Australians again answered with Artificial Intelligence (66%).” Demonstrating the conundrum of this particular area.
“The increased pace of change, both in terms of legislation, regulation, market disruption, and new technologies, is heavily influencing business risk concerns within the Australian market,” says Willem Van Wyk, CEO of Allianz Global Corporate & Specialty Pacific. His advice suggests that businesses make sure they scenario plan for a range of disruptions before they occur. This should happen across the business from supplier engagement to IT to HR and operational scenarios.
‘Business Interruption’ ranks highest globally
‘Business interruption’ hails as the highest threat for businesses globally for the seventh year in a row. Flagged by the US, Canada, Germany, Spain, Italy, and China. The nature of ‘Business Interruption’ is that the scenarios reach far and wide. Including break-down in IT systems, terrorism, political rioting, pollution, ransomware attacks, IT outages and more. It really refers to anything that can halt normal operations or shift focus unnecessarily. In line with this, ‘Business Interruption’ by cyber incidents ranks highest internationally (50%), followed by fire (40%) and natural catastrophes (38%).
Cyber – Increased understanding, increased losses
In the past, cyber incidents were happening, but quietly. However since the watershed of activity in 2018 awareness is on the up. Companies are now educating and arming themselves for cybercrime as much as they would for any traditional exposure. In fact, cybercrime now costs an estimated $600bn a year, up from $445bn in 2014. This compares with a 10-year average economic loss from natural catastrophes of $208bn – three times as much.
Top 10 Risks for Australian Businesses
- (36%) Changes in legislation and regulation (e.g. trade wars and tariffs, economic sanctions, protectionism, Brexit, Euro-zone disintegration).
- (32%) Business interruption (incl. supply chain disruption)
- (30%) Cyber incidents (cybercrime, IT failure/ outage, data breaches, fines and penalties
- (30%) Market developments (e.g. volatility, intensified competition/ new entrants, M&A, market stagnation and fluctuation).
- (27%) New technologies (e.g. Impact of increasing interconnectivity, nanotech, AI, 3D printing, autonomous vehicles, blockchain).
- (23%) Natural disasters (e.g. storm, floods, earthquakes).
- (22%) Loss of reputation or brand value.
- (18%) Climate change and increasing weather volatility
- (11%) Shortage of skilled workforce.
- (9%) Fire, explosion
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