On a global basis, businesses fear myriad risks, chief among them economic, business interruption and destructive natural catastrophes, such are the results of a study conducted by Allianz Global Corporate & Specialty (AGCS) of its risk consultants.
AGCS, the global corporate and specialty insurer in the Allianz Group, conducted the survey during the second half of 2011 to identify the risks respondents expected to have the greatest impact on their livelihoods. Not surprising, economic risk was cited most frequently (by 21 percent of respondents), with a looming recession and the sovereign debt crisis listed as issues, along with rising commodity prices and foreign currency fluctuations.
Business interruption ranked second (14 percent of respondents). According to AGCS, centralized procurement, global purchasing, increasing outsourcing to suppliers and just-in-time production are known to reduce costs, but also render companies more vulnerable to process interruptions.
Natural catastrophes are ranked third among the greatest business risks for 2012, notes the AGCS survey results. Catastrophes such as floods, torrential rains, hurricanes, typhoons or earthquakes render the costs of economic development and technological progress to multiply. As evidence, notes AGCS, insured claims related to weather-related natural catastrophes have increased from US $5 billion to more than US $40 billion over the last 30 years.
The survey report notes that although individual risks pose a threat to business success, those risks increasingly cannot be seen in isolation.
“In today’s interconnected and globalized world, risks are closely interrelated and create knock-on effects,” explains AGCS risk engineer Michael Bruch. For many companies, the year of 2011 represented a “perfect storm” as different risks occurred together, he says. For example, natural catastrophes caused immense physical damage and widespread business interruption in the Asia-Pacific region. But production lines in Europe also temporarily came to a halt when supplies from Asia failed to arrive on time. At the same time, the sovereign debt crisis has caused the economic environment in many developed economies to deteriorate – along with the sales outlook in many sectors.
One exception may be cyber risks, which, notes the report, remain widely underestimated. Around the world, companies indicated relatively little concern about IT risks (only 1 percent of the surveyed AGCS experts rate this as a key client concern). In fact, however, IT failures – resulting from hacker attacks or deficient internal processes – can quickly entail follow-on costs and revenue losses in the millions.
For the full AGCS Risk Barometer, click here.
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