15 January 2014 | Gurjit Degun
Supply chain disruption, natural catastrophes, and fires or explosions are the risks that global insurance companies are most concerned about in the coming year.
The Allianz Risk Barometer 2014 found that 43 per cent of corporate insurance experts are worried about business interruption and supply chain risk. This is down slightly from last year’s 46 per cent.
Natural catastrophes (storms, floods, earthquakes) are second on the business risks list. They worried one third of respondents compared with the 44 per cent that highlighted them in the previous survey. Fires or explosions are the third biggest concern, worrying 24 per cent of respondents.
The report said that business interruption and supply chain losses account for around 50 per cent to 70 per cent of all insured property losses.
“As supply chains are becoming increasingly complex in a global sourcing world, any disruption – for example due to natural catastrophes, IT/telecom outages, transportation issues, a supplier’s bankruptcy or civil unrest – can lead to a snowball effect,” said Paul Carter, global head of risk consulting at Allianz Global Corporate & Specialty (AGCS).
“Business continuity planning is key and should be part of any company’s procurement and supplier selection process. Yet, to ensure appropriate mitigation measures can be implemented, it is no longer sufficient to know your ‘critical’ suppliers; you also need to have a grasp of how they manage their own supply chain exposures.”
AGCS CEO Axel Theis added: “Identifying the impact of interconnectivity between different risks is a top priority for risk managers. Today’s business continuity plans must prepare for an increasing range of risk scenarios, which need to reflect the sometimes hidden knock-on effects. For example, a natural catastrophe can result in [business interruption], IT-systems failure and power blackouts, among other perils.”
Cyber and loss of reputation challenges are the most significant movers in this year's risk barometer rankings. Cyber was ranked eighth, up from 15th in last year’s risk barometer and reputational challenges moved up to sixth from 10th.
AGCS warned that amid rising cyber crime, IT security is “not enough”. It said: “A comprehensive set of information and network security policies and procedures backed by the board of directors is essential. They also need to be properly implemented, tested and updated on a regular basis.”