News

Allianz Risk Barometer 2020: Cyber top peril for Asia-Pacific companies for the first time

  • 9th annual
    survey on top business risks attracts record participation of 2,700+ experts
    from over 100 countries
  • Cyber incidents have
    become more damaging and expensive for companies -- and often result in lawsuits
    and litigation after the event
  • Business
    interruption ranks second, but remains
    a key challenge with digitalization and civil unrest creating new causes of disruption
    and loss of income
  • Climate change rises to third top risk, while political
    risks and violence makes first appearance in top 10.

SINGAPORE - Media OutReach - 14 January 2020 - For the first time ever, Cyber incidents
(35% of responses) ranks as the most important business risk in Asia-Pacific in
the ninth Allianz Risk Barometer 2020, relegating perennial top peril Business interruption (BI) (34% of
responses) to second place. The region's results mirror a global trend
that has seen awareness of the
cyber threat growing rapidly in recent years, driven by companies increasing
reliance on data and IT systems and a number of high-profile incidents. It is a
stark change from seven years ago when it did not even feature in the top 10
risks on the mind of risk managers regionally.

                                                                                                                    

Climate change (#3 with 25%) and Political risks and
violence
(debuting in the top 10 at #10 with 9%) are the biggest climbers
regionally, underlining global warming and the business interruption that
accompanies civil unrest as increasing concerns for companies and nations. The
annual survey on global business risks from Allianz Global Corporate &
Specialty (AGCS) incorporates the views of a record 2,718 experts in over 100
countries including CEOs, risk managers, brokers and insurance experts.

 

"For the first time, Cyber overtakes Business
Interruption
as the top risk for businesses in Asia Pacific. While 2019 saw
no major global cyber-incidents in the vein of past events like WannaCry and
NotPetya, businesses are increasingly cognizant of the costs associated with
being a victim of a cyber-attack, with IBM estimating the average cost of a
data breach being slightly under US$4m," says Mark Mitchell, Regional CEO, Asia
Pacific of AGCS.

 

He added: "Rounding up the top 3 risks in the region is Climate
Change
. In a year which saw Greta Thunberg address the United Nations,
Climate Change was a big riser, having only ranked 8th in the
previous edition, reflecting the increased scrutiny and pressure that
businesses are under to operate in a sustainable manner."

 

Cyber risks continue to evolve

In addition to being the top risk regionally and globally, Cyber
incidents
is among the top three risks in 80% of the countries surveyed in
Asia Pacific, with India and South Korea ranking it as the top business risk. Businesses
face the challenge of larger and more expensive data breaches, an increase in
ransomware and spoofing incidents, as well as the prospect of privacy-driven
fines or litigation after any event. A mega data breach - involving more than
one million compromised records - now costs on average $42mn[1], up 8%
year-on-year.

 

"Incidents are becoming more damaging, increasingly targeting large
companies with sophisticated attacks and hefty extortion demands. Five years
ago, a typical ransomware demand would have been in the tens of thousands of
dollars. Now they can be in the millions," says Marek Stanislawski, Deputy
Global Head of Cyber, AGCS.

 

Extortion demands are just one part of the picture: Companies can suffer
major BI losses due to the unavailability of critical data, systems or technology,
either through a technical glitch or cyber-attack. "Many incidents are the
results of human error and can be mitigated by staff awareness trainings which
are not yet a routine practice across companies," says Stanislawski.

 

Business interruption -- an undiminished threat with new causes

After seven years at the top, BI
drops to the second position in the Allianz Risk Barometer. However, the trend
for larger and more complex BI losses continues unabated. Causes are becoming ever
more diverse, ranging from fire, explosion or natural catastrophes to digital
supply chains or even political violence. In Australia, the total damage and
economic loss caused by wildfires from September 2019 and into 2020 is
estimated to cost $110 billion[2].

 

Businesses are also
increasingly exposed to the direct or indirect impact of riots, civil unrest or
terrorism attacks. Escalating civil unrest in Hong Kong has resulted in
property damage, BI and general loss of income for both local and multinational
companies as shops closed for months, customers and tourists stayed away or
employees couldn't access their workplace due to safety concerns. The
consequence is a business interruption without physical losses but high
financial ones.

Climate change brings added risk
complexity

Climate change is a huge riser regionally, jumping to third from
eighth last year, driven by risk management experts in countries and
territories such as Australia, Hong Kong, India and Indonesia. Ongoing
wildfires engulfing Australia, as well as severe floods in Jakarta have
certainly hammered home the consequences of increasingly volatile weather for
businesses. 

An increase in physical losses is the exposure businesses fear most (49% of
responses) as rising seas, drier droughts, fiercer storms and massive flooding
pose threats to factories and other corporate assets, as well as transport and
energy links that tie supply chains together. Further, business are concerned
about operational impacts (37%), such as relocation of facilities, and
potential market and regulatory impacts (35% and 33%). Companies may have to
prepare for more litigation in future -- climate change cases targeting 'carbon
majors' have already been brought in 30 countries around the world, with most
cases filed in the US.

 

"There is a growing awareness
among companies that the negative effects of global warming above two degrees
Celsius will have a dramatic impact on bottom line results, business operations
and reputation," says Chris Bonnet, Head of ESG Business Services at AGCS.
"Failure to take action will trigger regulatory action and influence decisions
from customers, shareholders and business partners. Therefore, every company
has to define its role, stance and pace for its climate change transition -- and
risk managers need to play a key role in this process alongside other
functions."

 

Global results largely mirror
the region's, with Climate change (#7
with 17%) also moving up the rankings vis-à-vis the previous year, though not
as drastically as Asia-Pacific, a reflection of how the effects of global
warming have been more severely felt closer to home. Changes in legislation and regulation (#3 with 27%) rounds up the
top 3 globally as businesses are increasingly concerned over the US-China trade
war and Brexit.

 

"The Allianz Risk Barometer
2020 highlights that cyber risk and climate change are two significant
challenges that companies need to watch closely in the new decade," says
Joachim Müller, CEO of AGCS. "Of course, there are many other damage and
disruption scenarios to contend with but if corporate boards and risk managers
fail to address cyber and climate change risks this will likely have a critical
impact on their companies' operational performance, financial results and
reputation with key stakeholders. Preparing and planning for cyber and climate
change risks is both a matter of competitive advantage and business resilience
in the era of digitalization and global warming."

 

More information on the
findings of the Allianz Risk Barometer 2020 is available here:

  • Top
    10 global business risks
  • Full
    report
  • Individual
    country and industry sector results


[1]
IBM
Security, Ponemon, Cost Of A Data Breach Report 2019

[2] https://www.accuweather.com/en/business/australia-wildfire-damages-and-losses-figure-to-reach-5-billion-to-6-billiob-accuweather-estimates/657235

About Allianz Global Corporate & Specialty

Allianz
Global Corporate & Specialty (AGCS) is a leading global corporate insurance
carrier and a key business unit of Allianz Group. We provide risk consultancy, Property-Casualty insurance solutions and alternative risk
transfer
for a wide spectrum of commercial, corporate and specialty risks across 12
dedicated lines of business.

 

Our customers are as
diverse as business can be, ranging from Fortune Global 500 companies to small
businesses, and private individuals. Among them are not only the world's largest
consumer brands, tech companies and the global aviation and shipping industry,
but also wineries, satellite operators or Hollywood film productions. They all
look to AGCS for smart answers to their largest and most complex risks in a
dynamic, multinational business environment and trust us to deliver an
outstanding claims experience.

 

Worldwide, AGCS
operates with its own teams in 33 countries and through the
Allianz Group network and partners in over 200 countries and territories,
employing over 4,400 people. As one of the largest Property-Casualty units of
Allianz Group, we are backed by strong and stable financial ratings. In 2018, AGCS
generated a total of €8.2 billion gross premium globally.

 

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contained herein may include statements of future expectations and other
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performance of financial markets, including emerging markets, and including
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(v) persistency levels, (vi) the extent of credit defaults, (vii) interest rate
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