‘Changes in legislation and regulation’ the leading risk for Australian businesses in 2019: report

• 8th annual Allianz Risk Barometer survey on top business risks sees record participation of 2,415 insurance and risk experts from 86 countries, including Australia
• ‘Changes in legislation and regulation’ rises to top business risk in Australia – pushing last year’s top risk – ‘Cyber incidents’ – to third place behind ’Business interruption’
• Globally, business interruption scenarios are becoming more diverse and complex with costs rising – cyber incidents is the most feared trigger outplacing fire and natural catastrophes

‘Business Interruption’ remains the top threat for businesses worldwide for the seventh year running and is the top risk reported in countries such as the US, Canada, Germany, Spain, Italy and China. Business interruption and cyber incidents are tied at the top of the ranking on 37% of all responses. However, business interruption received more responses by number: 1,078 to 1,052. Potential BI scenarios are becoming ever more diverse and complex in a globally connected economy, including breakdown of core IT systems, product recalls or quality issues, terrorism, political rioting or environmental pollution. Both cyber and business interruption risks are increasingly interlinked as ransomware attacks or accidental IT outages, often resulting in a disruption of operations and services costing hundreds of millions of dollars. In alignment to the Australian findings, ‘cyber incidents’ rank as the BI trigger most feared by businesses globally (50% of responses), followed by fire (40%) and natural catastrophes (38%). At the same time, BI is seen as the biggest cause of financial loss for businesses after a cyber incident – both globally (69%) and in Australia (65%).

Increasing concern over ‘cyber incidents’ follows a watershed year of activity in 2018. “Cyber risk has been a major risk for a number of years, but as with any new risk it has struggled with awareness,” explains Marek Stanislawski, Deputy Global Head of Cyber, AGCS.

“We have now reached a point where cyber is equally concerning for companies as their major traditional exposures.”

Cybercrime now costs an estimated $600bn a year, up from $445bn in 2014 (Center for Strategic and International Studies, Economic Impact of Cybercrime – No Slowing Down). This compares with a 10-year average economic loss from natural catastrophes of $208bn (Swiss Re, Preliminary sigma estimates for 2018) - three times as much. While criminals use more innovative methods to steal data, commit fraud or extort money, there is also a growing cyber threat from nation states and affiliated hacker groups targeting critical infrastructure providers or stealing valuable data or trade secrets from companies. Cyber incidents are increasingly likely to spark litigation, including securities and consumer class actions. Data breaches or IT outages can generate large third party liabilities as affected customers or shareholders seek to recoup losses from companies.

‘Natural catastrophes’ again ranked third (28% of responses) in this year’s top 10 ranking of global business risks with 2018 being a more benign version of 2017 with its peak catastrophe losses, although economic losses still totalled close to $150bn (Swiss Re, Preliminary sigma estimates for 2018). In comparison to Australia’s top business risk ranking, ‘changes in legislation and regulation’ was ranked #4 globally (27% of responses), fuelled by uncertainty over Brexit and corporate concern around global trade wars and tariffs.

‘Climate Change’, ranked #8 both globally and in Australia, and ‘shortage of skilled workforce’ (#10 globally, #9 in Australia) are the biggest climbers globally in this year’s survey. ‘Climate change’ could not only be a harbinger of increasing losses and disruption from extreme weather events and natural catastrophes, but is also likely to have big implications for regulation and liability considering rigid emission targets or new reporting and disclosure requirements in many sectors.

‘Shortage of skilled workforce’ appears for the first time among the top business risks globally as well as for many countries in Central and Eastern Europe, the UK, US, Canada and Australia (#9). It is driven by factors such as changing demographics, Brexit uncertainty and a shallow pool of talent in the digital economy.

“Skilled workforce — and human capital more generally — has become the scarce resource of the digital economy,” says Ludovic Subran, Deputy Chief Economist of Allianz. “Competition is fierce between companies to get new recruits with competencies in artificial intelligence, data science, or ‘frontier risk management’ such as managing cyber or reputational risk as most of these jobs did not exist 10 years ago. Even attractive salaries do not suffice as the pool of recruits with the needed skillset is limited and the urgency to onboard them does not allow for on-the-job training.”

More information on the findings of the Allianz Risk Barometer 2019:

• Allianz Risk Barometer 2019 Full Report
• Appendix Results for 34 countries 
• Snapshot Top 10 Business Risks Around the World in 2019 (PDF, 2.1MB)

Allianz Global Corporate & Specialty (AGCS) is the Allianz Group's dedicated carrier for corporate and specialty insurance business. AGCS provides insurance and risk consultancy across the whole spectrum of specialty, alternative risk transfer and corporate business: Marine, Aviation (incl. Space), Energy, Engineering, Entertainment, Financial Lines (incl. D&O), Liability, Mid-Corporate and Property insurance (incl. International Insurance Programs).

Worldwide, AGCS operates with its own teams in 34 countries and through the Allianz Group network and partners in over 210 countries and territories, employing almost 4,700 people of 70 nationalities. AGCS provides insurance solutions to more than three quarters of the Fortune Global 500 companies, writing a total of €7.4 billion gross premium worldwide in 2017.

AGCS SE is rated AA by Standard & Poor’s and A+ by A.M. Best.

For more information, visit AGCS Allianz or follow us on Twitter @AGCS_Insurance and LinkedIn.

The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words "may", "will", "should", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" and similar expressions identify forward-looking statements.

Actual results, performance or events may differ materially from those in such statements due to, without limitation,

1. general economic conditions, including in particular economic conditions in the Allianz Group’s core business and core markets, 
2. performance of financial markets, including emerging markets, and including market volatility, liquidity and credit events 
3. the frequency and severity of insured loss events, including from natural catastrophes and including the development of loss expenses, 
4. mortality and morbidity levels and trends, 
5. persistency levels, 
6. the extent of credit defaults, 
7. interest rate levels, 
8. currency exchange rates including the Euro/U.S. Dollar exchange rate, 
9. changing levels of competition, 
10. changes in laws and regulations, including monetary convergence and the European Monetary Union, 
11. changes in the policies of central banks and/or foreign governments,
12. the impact of acquisitions, including related integration issues, 
13. reorganization measures, and 
14. general competitive factors, in each case on a local, regional, national and/or global basis. 

Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

The matters discussed herein may also be affected by risks and uncertainties described from time to time in Allianz SE’s filings with the U.S. Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statement.

For any media enquiries, journalists can contact our contact our Media team.