The top ten risks were revealed yesterday in the 2017 Allianz Risk Barometer report, which surveys over 1200 risk professionals from 55 countries.
In Europe, the top 3 were Business Interruption, Market Developments (volatility, intensified competition/new entrants, M&A and market stagnation) and Cyber Incidents (cyber-crime, IT failure, data breaches).
Europe’s Top 10 Risks
Business interruption is seen as the highest risk for a 5th year with 35% of responses rating it as one of the three most important risks companies face in 2017. Once dominated by damage-driven events, such as natural catastrophe or fire incidents, there is the emergence of intangible hazards for Business Interruption such as cyber incidents, the indirect impact of terrorism or political violence. So, Business Interruption can be seen increasingly as an umbrella consequence of many of the other risks in the top 10 shown below.
Cyber incidents continues its recent climb up the Risk Barometer rankings, occupying joint second position with 32% of responses, again up year-on-year. Four years ago Cyber ranked 15th in the top global risks, with just 6% of responses. Today, the results indicate that cyber risk occupies a substantial portion of an organisation’s risk profile. It has significant implications for business continuity, loss of market share and causes reputational damage whether that be the result of a technical issue, human error or deliberate external or internal attack.
Market developments remain a priority concern for businesses, occupying joint second position in the Risk Barometer rankings (32% of responses).
Companies are concerned about the potential risk impact of factors such as intensified competition, mergers and acquisitions and market slowdown. The deployment of new digital technology and automation is a large area of focus and is transforming, and disrupting markets, particularly in the Financial Services sector. Digital innovation brings both opportunities and risks and organisations need to have the tools to analyse and assess both when considering new technical investment.
“Companies that don’t want to become a victim of disruption but rather shape their industry, must be able to innovate, change and adapt their business model,” says Solmaz Altin, Chief Digital Officer, Allianz. “Today’s customers want simple and convenient solutions that are tailored to their needs and accessible anywhere, anytime.”
Focus for Financial Services
Looking at the survey results for the Financial Services market in particular there seems to be significant emphasis on its ability to compete and innovate so therefore rates market developments as its prime risk, closely followed by Cyber incidents. Over the past few years, Financial Institutions have been the target of several high profile cases including in 2016, the hacking of the banking arm of supermarket chain Tesco. This led to money being stolen from thousands of accounts and it is cases like this which have raised fresh concerns about the methods used to detect this risk.
In the UK market specifically, two rapidly rising risks, not unsurprisingly, were derived from the volatile political climate; Macroeconomic concerns and Brexit.
Brian Kirwan, CEO, AGCS UK explains: “Inflexibility in the face of change is the biggest risk to our customers and us. Technological change is impacting our clients’ business models, from where and how they earn revenue, to the blurring of old business segment definitions.”
Implications for Risk Managers
Organisations are currently facing a difficult balance sheet with a whole range of risks from political and market uncertainty to cyber threats on one side and significant opportunities in areas of market development and innovation on the other. Risk Managers are ideally placed to be able to offer fundamental insights on both the current state of the business as well as predictions for the successful outcomes of new ventures.
If armed with the right tools and mindset, Risk Managers should have visibility in real time of risk across the business and if combined with external news intelligence, be able to provide valuable input and better influence business decisions.
Source: Allianz Risk Barometer 2017