Property Casualty 360
By Phil Gusman
January 16, 2012
Economic risk is the top concern on business professionals’ minds, according to a survey of Allianz Global Corporate & Specialty risk experts, but the same professionals say businesses are underestimating cyber risks.
The AGCS survey of 153 of the company’s risk experts was designed to gauge the mood of business clients toward global risks. In the survey, 21 percent of respondents mentioned the economic situation as one of the top-three risks on the minds of clients. Business interruption was the next most-frequently mentioned risk, cited by 14 percent of respondents, and 9 percent mentioned natural catastrophes.
Rounding out the top-10 were legal/regulatory risks, reputational risks, business-inherent risks, political risks, staff-related risks, environmental risks and fire risks.
Cyber risks did not crack the top-10 list, and the ACGS professionals say the most underestimated risks relate to IT. “Despite a broad awareness of the increasing risk, only 1 percent of risk experts say that their clients are concerned with cyber risks,” an analysis of the survey says. “Cyber risks are characterized by constant innovation and change and are therefore difficult to control.”
And the issue with cyber risks extends beyond just IT systems, according to Jose Fidalgo, AGCS risk consultant, liability. “After a claim notification we see very often that we are not dealing with a pure system failure but that there was a lack of understanding around the entire process,” he says in the analysis. “We have to continue putting a lot of emphasis on education and know-how transfer. IT risks are quickly evolving and becoming more complex by the minute.”
Regarding the top-cited risk, the economic situation, Michael Heise, Allianz group chief economist, says in the analysis, “In the current climate we have all become acutely aware of the pervasiveness of economic risk.”
He adds, “Nervousness and volatility in the financial markets eventually undermine confidence and business activities in the real economy, which in turn further unsettles investors and the markets.”
On business interruption, AGCS experts say vulnerable supply chains should be their clients’ highest priority, even though the economy is the risk on most of their minds.
Paul Carter, head of property risk consulting at AGCS, explains in the survey analysis that the increasing trend to source globally has reduced costs along the supply chain, but has “significantly increased risk of disruption within companies’ overall supply chains.”
He notes, “The very flexibility that provides the supply chain with its cost advantages has also caused its inherent vulnerability.”
For the third most-cited risk, natural catastrophes, AGCS says concern among businesses in this area is actually lower than expected given the high-profile Asia-Pacific catastrophes in 2011. AGCS also says global trends like urbanization and coastal/flood-plain development increase overall losses from windstorms and floods.
Michael Bruch, a risk expert from AGCS Risk Consulting, says, “In today’s interconnected world, we cannot see the risk of natural catastrophes in isolation, but have to ask ourselves what happens when disaster strikes and what kind of knock-on effects this may have in other parts of the world.”
http://www.propertycasualty360.com/2012/01/16/businesses-see-economy-as-greatest-2012-risk-under
