New York City (Jan. 15, 2019)—In the wake of mega data breaches and privacy scandals, major information technology (IT) outages and the introduction of tighter data protection rules in the European Union (EU) 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 are neck-and-neck with business interruption (BI) as the top business risks globally. Climate change and the shortage of a skilled workforce are the biggest climbers globally. At the same time, companies are more worried about changes in legislation and regulation, 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 chief executive officers, risk managers, brokers and insurance experts.
BI Threats Continue to Evolve
BI remains the top threat for businesses worldwide for the seventh year running and is the top risk in countries, such as the United States, 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/quality issues, terrorism, political rioting or environmental pollution.
Both cyber and BI risks are increasingly interlinked as ransomware attacks or accidental IT outages and often result in disruption of operations and services, costing hundreds of millions of dollars. Cyber incidents rank as the BI trigger most feared by businesses (50 percent), followed by fire (40 percent) and natural catastrophes (38 percent). At the same time, BI is seen as the biggest cause of financial loss for businesses after a cyber incident (69 percent).
Cyber—Growing Awareness, Growing Losses
Increasing concern over Cyber incidents follows a watershed year of activity in 2018. Cybercrime now costs an estimated $600 billion a year—up from $445 billion in 2014.This compares with a 10-year average economic loss from natural catastrophes of $208 billion (three times as much).
While criminals use more innovative methods to steal data, commit fraud or extort money, there is also a growing cyber threat from nation states and affiliated hacker groups targeting critical infrastructure providers, stealing valuable data and/or trade secrets from companies.
Cyber incidents are increasingly likely to spark litigation, including securities and consumer class actions. Data breaches or IT outages can generate large third-party liabilities, as affected customers or shareholders seek to recoup losses from companies.
Natural catastrophes (28 percent) again ranked third in this year’s top 10 ranking of global business risks, with 2018 being a more benign version of 2017’s peak catastrophe losses, although economic losses still totaled close to $150 billion. Ongoing uncertainty over Brexit, global trade wars and tariffs fuel corporate concerns about changes in legislation and regulation (No. 4 with 27 percent).
Climate change (No. 8 with 13 percent of responses) and the shortage of a skilled workforce (No.10 with 9 percent of responses) are the biggest climbers globally in this year’s survey. Climate change could not only be a harbinger of increasing losses and disruption from extreme weather events and natural catastrophes, but is also likely to have big implications for regulation and liability considering rigid emission targets and new reporting/disclosure requirements in many sectors.
Shortage of a skilled workforce appears for the first time among the top 10 business risks globally. It is driven by factors, such as changing demographics, Brexit uncertainty and a shallow pool of talent in the digital economy.
For the full Allianz Risk Barometer 2019 report, visit agcs.allianz.com.