By Chris Dougherty, General Manager, Westlawn Insurance 16 February 2015
What are the biggest risks facing Australian businesses in 2015?
Global insurance company, Allianz, released its annual Allianz Risk Barometer for 2015 in January. The report ranks the biggest risks facing business around the world according to a survey of over 500 risk managers and corporate insurance experts from more than 40 countries, including Australia.
“Business interruption and supply chain, natural catastrophes and fire/explosion are the major risks which occupy the attention of companies at the start of 2015,” the Allianz report begins.
But while business interruption topped both the global and Australian lists of risks, there were, however, some surprising differences between Australia and the rest of the world.
Loss of reputation and intensified competition round out the top 3 Australian risks. Also high on the list of Australian concerns are talent shortages and an ageing workforce. But as can be seen in the table below, these two concerns didn’t even figure in the global top 10 risks.
Top 10 Australian Risks 2015
Top 10 global risks 2015
1. Business interruption/supply chain 47%
1. Business Interruption/supply chain 46%
2. Loss of reputation/brand value 35%
2. Natural catastrophes 30%
3. Intensified competition 35%
3. Fire/explosion 27%
4. Talent shortage/ageing workforce 24%
4. Legislative/regulatory changes 18%
5. Natural catastrophes 24%
5. Cybercrime, IT failures 17%
6. Market stagnation or decline 18%
6. Loss of reputation/brand value 16%
7. Market fluctuations 18%
7. Market stagnation/decline 15%
8. Commodity price increases 18%
8. Intensified competition 13%
9. Legislation/regulation changes 12%
9. Political/social upheaval or war 11%
10. Credit availability 12%
10. Theft, fraud & corruption 9%
Cybercrime not on radar of Aussie businesses
A notable exception from the Australian top 10 list was cybercrime, IT failures, data breaches and espionage which ranked number 5 on the global top 10 list.
When asked whether Australian businesses are taking the threat of cybercrime seriously, Allianz spokesperson, Holger Schaefer, responded: “I would say most of the companies, especially the exposed companies like banks or if you look at insurance companies ourselves, I know we take it very, very seriously…
“If you go to the more SME type of company, maybe not that much. Australia is far away and people think that the evil in the world is not in Australia and it’s all especially in Europe and the US, where the major, blockbuster companies are based but I think it’s coming closer.”
“It is certainly the case that cyber attacks will increase around the world and Australia will be part, and will see that increase as well. I’m 100% certain,” Schaefer said.
So, are Australian small and medium-sized businesses too complacent about cybercrime and other IT-related risks?
Findings from the 2013 Norton Report, released in October 2013, revealed that the total cost of cybercrime in Australia for the previous 12 months amounted to $1.06 billion and that 5 million Australians had fallen prey to cyber criminals. Of concern to business is that the report found nearly 50% of working Australian adults use their personal device for both work and play and that 44% of Wi-Fi users access or send personal emails on public or unsecure Wi-Fi. According to Norton, this “demonstrates a lack of awareness of the dangers associated with sharing and connecting to unprotected internet connections”.
How secure is your business? For resources on protecting your business against cybercrime, check out the following resources:
The Australian Government’s Staysmart Online for Business Owners
While cybercrime may not be on the radar for many Aussie companies as we head into 2015, business interruption and supply chain disruptions certainly are.
Business interruption & supply chain disruption
While Schaefer noted that business interruption is a common cover in Australia, he still warned that there is still an unknown element to the coverage that some clients may not think of.
“What, to a certain extent, is still unknown is the interdependencies of multiple companies involved in a supply chain. We have seen that during the tsunami in Japan where the car manufacturing industry and supply industry were affected and I believe surprise can still be seen here and there in other industries and other countries as well.
“I’m not saying that’s going to happen in Australia or to companies in Australia but, in general, there is still a little bit of an unknown aspect to it which could lead to surprises when we see national catastrophes and a large number of clients are affected,” Schaefer said.
Business interruption cover
Business interruption insurance cover can provide a safeguard against the unexpected loss of profits as you rebuild your business in the months or even years to come following damage caused by flooding, fire, storms or other natural disaster.
Following a natural disaster, affected businesses face many challenges that will impact profitability, and in many cases, lead to the business closing down altogether.
Some of those challenges include:
Operating at below capacity or being unable to operate at all
Loss of profits on damaged or destroyed stock
Breaking of contracts and loss of customers to competitors
Temporarily relocating while premises are repaired or rebuilt
Delays in sourcing replacement parts and in repairing damaged plant and equipment, and
Damage to key suppliers, customers and utility providers.
And while your business is facing disruption, you still need to meet regular expenses such as rent or mortgage payments, repayments on plant and equipment and payroll.
Business interruption insurance can help ensure your business survives during the difficult times by meeting your regular business expenses, including staff salaries and redundancy payments, and restoring your profits to what they were prior to the interruption occurring.
To find out how to protect your business from interruption due to damage caused by flooding, fire, storms or other natural disaster, contact your Westlawn Insurance Broker.
Note: The survey for the Allianz Risk Barometer was conducted among both global businesses and risk consultants, underwriters, senior managers and claims experts within both AGCS and local Allianz entities during October and November 2014, with a focus on the corporate insurance sector for both large industrial and mid-sized companies. There were a record 516 respondents from a total of 47 countries. As multiple answers for up to two industries were possible 709 answers were delivered.