Market uncertainties and political perils are becoming growing concerns for firms but business interruption tops a ranking of risks in 2017.
The 6th annual Allianz Risk Barometer found companies greatly fear the impact of rising protectionism and other potential market shocks.
Cyber risk became the second most important concern in the US and Europe and was within the top three worldwide. This encompasses indirect attacks, regulatory threats and risks of technical employee error in digitalised environments.
“Time is running out for businesses to prepare for the implementation of the new General Data Protection Regulation across Europe in 2018,” warned the report.
“Although the cost of compliance will be high, the penalties of not doing so could be even higher.”
In the UK the possible impact of cyber incidents is the top concern for businesses for the second year running.
Meanwhile, Brexit- related uncertainty rose following the June referendum.
The potential for disruption caused by political violence, strikes and terror attacks, magnified by the ever-greater interconnectivity of machines, companies and their supply chains, added to firms’ worries.
The changing political landscape, exemplified by Brexit, Trump and upcoming EU elections, has led to fears of increasing protectionism and anti-globalisation.
Chris Fischer Hirs, CEO of Allianz Global Corporate & Specialty, said: “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.”
Globally the second most important business peril is market developments and volatility, which was the top concern in the aviation and defense, financial services, marine and shipping and transportation sectors, as well as across the Africa and 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,” said the report.
It said trade credit insurer Euler Hermes, a subsidiary of Allianz, had recorded 600 to 700 new trade barriers introduced globally every year since 2014.
Natural catastrophes and climate change as well as increasing volatility of weather came in at fourth place globally and ranked particularly high in Asia, where the costliest disaster globally of 2016 occurred – the Kumamoto earthquake, in Japan.
Natural catastrophes were the top concern in Japan and Hong Kong and also the number one fear around the world among engineering and construction companies.
“Natural catastrophes and climate change worry our customers and society at large,” says Axel Theis, a board member of Allianz. “We must assume that global warming above 1.5 degrees Celsius would intensify climate damages, for example from heat waves and rising sea levels, significantly.”
Top 10 global business risks in 2017:
- Business interruption
- Market developments
- Cyber incidents
- Natural catastrophes
- Changes in legislation and regulation
- Macroeconomic developments
- Fire, explosion
- Political risks and violence
- Loss of reputation or brand value
- New technologies
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