This year, business interruption tops the risk list both globally and in Australia.
Market developments, such as increased volatility, intensified competition and market fluctuations are equally worrying for Australian and international businesses, coming in second place on the list.
And rounding out the top three, again both in Australia and globally, is the growing threat of cyber incidents. Threats in this category include cybercrime, IT failures and data breaches. It’s interesting to note that cyber-related incidents didn’t even make the top 10 list of Australian business risks back in 2015, as we reported here. While last year, cyber incidents ranked fourth in Australia.
This year, human error makes it into the Australian top 10 list of risks for the first time.
Another risk moving up the Australian rankings is the threat of legislation and regulation changes, rising from seventh spot last year up into joint fourth position this year (tied with macroeconomic developments).
Here’s the top 10 list for Australia and globally.
|Top 10 Australian business risks||Top 10 global business risks|
|1. Business interruption (supply chain disruption & vulnerability)||1. Business interruption|
|2. Market developments (volatility, intensified competition/new entrants, M&A, market stagnation, market fluctuation)||2. Market developments|
|3. Cyber incidents (cybercrime, IT failure, data breaches, etc.)||3. Cyber incidents|
|4. Changes in legislation* (government change, economic sanctions, protectionism, etc.)||4. Natural catastrophes|
|5. Macroeconomic developments* (austerity programs, commodity price increase, deflation, inflation)||5. Changes in legislation and regulation|
|6. Natural catastrophes (e.g. storm, flood)||6. Macroeconomic developments|
|7. Loss of reputation or brand value||7. Fire, explosion|
|8. New technologies** (impact of increasing interconnectivity, nanotechnology, artificial|
intelligence, 3D printing, drones, etc.)
|8. Political risks and violence|
|9. Human error**||9. Loss of reputation or brand value|
|10 Fire, explosion||10 New technologies|
* Changes in legislation & Macroeconomic developments ranked equal fourth.
** New technologies & Human error ranked equal eighth.
All roads lead to business interruption
It’s no real surprise to see business interruption as the most worrying for Australian and international businesses as many other risks can also result in costly disruptions to business. As noted in the report:
“Business interruption remains the top peril for the fifth year in succession [globally], with 37% of responses rating it as one of the three most important risks companies face in 2017. Many of the top 10 risks in this year’s barometer can have severe business interruption implications …”
Last September’s blackouts in South Australia highlight the risks of costly business interruptions, and the value of business interruption insurance.
Read our advice on continuity planning to help your business survive a crisis.
Threat of cyber incidents on the rise
The increasing threat from cyber incidents was demonstrated back in October last year when a massive Distributed Denial of Service (DDOS) cyber-attack affected some of the world’s biggest websites including Twitter, PayPal, Spotify and Netflix. Popular Australian websites were also targeted in the cyber-attack with a number of banking, media and retail websites affected.
You can read about it here in Massive cyber-attack is a wake-up call for small business.
The risk of cyber incidents now goes far beyond the issue of privacy and data breaches, according to the 2017 Allianz Risk Barometer.
“A single incident, be it a technical glitch, human error or an attack, can lead to severe business interruption, loss of market share and cause reputational damage. Of the top 10 global risks in the 2017 Allianz Risk Barometer, a cyber incident could be a potential root cause or trigger for 50% of them.
“In addition, the toughening of data protection regulation regimes around the world is also contributing to this risk being at the forefront of risk managers’ minds, as penalties for non-compliance are increasingly severe.”
The Australian Securities and Investments Commission (ASIC) is also concerned about the threat of cyber incidents on Australian businesses.
According to ASIC commissioner, Cathie Armour, company directors should improve their knowledge about cyber security, assess technology vulnerabilities more regularly than other business risks and develop more comprehensive plans for responding to attacks.
You can find more information on protecting your business from cyber incidents here.
To find out how to protect your business in 2017, contact Westlawn Insurance Brokers on 1300 WESTLAWN (1300 937 852) or email us email@example.com.
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Westlawn Insurance Brokers Pty Ltd ABN 65 075 847 291 AFSL No. 246520
About the Allianz Risk Barometer
The sixth annual Allianz Risk Barometer was conducted among Allianz corporate clients and brokers. It also surveyed risk consultants, underwriters, senior managers and claims experts of Allianz entities around the globe. Respondents were questioned during October and November 2016. The survey focused on large and small to mid-sized companies.
There were a record 1,237 respondents from a total of 55 countries. As multiple answers for up to two industries were possible, 4,679 answers were delivered. Participants were asked to select industries about which they are particularly knowledgeable and name up to three risks they believe to be of most importance.