Businesses Bracing for Year of Uncertainty, According to Allianz Risk Barometer 2017

Companies increasingly worry about the unpredictable business
environment
where markets are volatile (#2) and political perils,
such as protectionism or terrorism, are on the rise. Other
growing concerns are digital dilemmas arising from new technologies and
cyber risks (#3), as well as natural catastrophes (#4). However, what
continues to trouble them most, are losses from business interruption
(#1). These are the key findings of the 6th annual Allianz
Risk Barometer
analyzing corporate risks globally, as well as by
region, country, industry and size of business.

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(Graphic: Allianz Global Corporate & Specialty)

(Graphic: Allianz Global Corporate & Specialty)

Business interruption (BI) continues to lead the ranking for the
fifth year in a row (37% of responses), primarily because it 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 as well as disruption caused by political
violence, strikes and terror attacks. 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. Companies are also
facing potential financial losses with the changing political landscape (Brexit,
Trump, upcoming EU elections
etc.) leading to fears of increasing
protectionism and anti-globalization.

“Companies worldwide are bracing for a year of uncertainty,” says Chris
Fischer Hirs, CEO of Allianz Global Corporate & Specialty SE.
“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 re-thinking of
current monitoring and risk management tools.”

Market developments and volatility (31% of responses) is the
second most important business peril in 2017 and the top concern in the
aviation/defense, financial services, marine and shipping and
transportation sectors, as well as across the Africa & Middle East
region in general. In order to anticipate any sudden changes of rules
that could impact markets, companies will need to invest more resources
into better monitoring politics and policy-making around the world in
2017. According to trade credit insurer, Euler Hermes, a subsidiary of
Allianz SE, since 2014, there have been 600 to 700 new trade barriers
introduced globally every year.

At the same time, increasing reliance on technology and automation is
transforming, and disrupting, companies across all industry sectors.
While digitalization is bringing companies new opportunities, it
is also shifting the nature of corporate assets from mostly physical to
increasingly intangible, bearing new hazards, above all cyber risks (30%
of responses). Companies ranked cyber threats a close #3 globally,
climbing to
#2 across the Americas and
Europe
and the top risk in Germany, the Netherlands, South Africa
and the UK. At the same time, it is the top concern globally for
businesses in the information and telecommunications technology and the
retail/wholesale sectors.

The threat now goes far beyond hacking and privacy and data breaches,
although new data protection regulations will exacerbate the fallout
from these for businesses. Increasing interconnectivity and
sophistication of cyber-attacks pose not only a huge direct risk for
companies but also indirectly via exposed critical infrastructures such
as IT, water or power supply. Then there is the threat posed by
technical failure or human error, which can lead to long-lasting and
widespread BI exposures. In the digitalized production or Industry 4.0
environment, a failure to submit or interpret data correctly could stop
production. Businesses need to think about data as an asset and what
prevents it from being used. Results also show that smaller companies
may be underestimating cyber risk: in this category (revenues <€250
million), cyber ranks only #6. However, the impact of a serious incident
could be much more damaging for such firms.

Natural catastrophes (#4) and climate change/ increasing
volatility of weather
(respectively 24% and 6% of responses) also
rank high on the agenda of businesses this year, particularly in Asia
where the costliest disaster globally of 2016 occurred – the Kumamoto
earthquake (Japan). Natural catastrophes rank as the top concern in
Japan and Hong Kong, as well as globally among engineering/construction
and power and utilities companies.

Across the Americas, fear of BI, cyber incidents and natural
catastrophes are the three major concerns for businesses. “Each of these
issues at times may be an unknown or hidden risk exposure, but an
exposure that could create potentially both short and long-term
consequences to a company’s bottom line,” says Thomas Varney, Regional
Manager, Americas, Allianz Risk Consulting. “Understanding of a supply
chain exposure requires a partnership between client and carrier.” Fears
over macroeconomic developments and the new risk impact of increasing
interconnectivity are also rising.

Methodology

The sixth annual Allianz Risk Barometer published by Allianz
Global Corporate & Specialty SE
(AGCS) is based on a survey
conducted among 1,237 risk experts from 55 countries.

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About Allianz Global Corporate & Specialty

Allianz Global Corporate & Specialty (AGCS) is the Allianz Group’s
dedicated carrier for corporate and specialty insurance business. AGCS
provides insurance and risk consultancy across the whole spectrum of
specialty, alternative risk transfer and corporate business: Marine,
Aviation (incl. Space), Energy, Engineering, Entertainment, Financial
Lines (incl. D&O), Liability, Mid-Corporate and Property insurance
(incl. International Insurance Programs).

Worldwide, AGCS operates in 30 countries with own units and in more than
160 countries through the Allianz Group network and partners. In 2015,
it employed more than 5,000 people and provided insurance solutions to
more than half of the Fortune Global 500 companies, writing a total of
€8.1 billion gross premium worldwide annually.

AGCS SE is rated AA by Standard & Poor’s and A+ by A.M.Best.

For more information please visit www.agcs.allianz.com
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