For the Philippine executives surveyed in the recent Allianz Risk Barometer, business interruptions and natural catastrophes are the major risk factors for companies operating in the country in 2020.
The Allianz Risk Barometer lists “the most important corporate perils for the next 12 months and beyond.” It surveyed more than 2,700 risk management experts from 102 countries and territories, which included 19 executives from the Philippines. It was conducted by Allianz Global Corporate & Specialty (AGCS), a leading global corporate insurance carrier and a key business unit of Allianz Group. Nineteen top executives from the Philippines participated in the survey.
Forty-two percent of the Philippine respondents listed business interruption, which includes supply chain distribution, as the top business risks in the country. Thirty-seven percent, meanwhile, said that natural disaster such as storms, floods, and earthquakes are the top perils.
Cyber incidents, which include cyber crime, IT failure/outage, data breaches, fines, and penalties, ranked third at 32%.
Cyber Incidents Overtake Business Interruption as Top Risk Factor Globally
For most businesses around the world, cyber incidents ranked first among all the countries and territories surveyed.
According to the Allianz report, “Seven years ago cyber risk ranked only 15th with just 6% of responses.”
“The costs of a cyber incident are rising across the board, a product of growing complexity, more stringent regulation and the damaging consequences to a business from a loss of data or critical systems,” Marek Stanislawski, Deputy Global Head of Cyber at AGCS, said in the report.
He pointed out that “more and more events – from leaving a laptop with confidential data on a train to losing a customer list – can constitute a data breach.”
“It is estimated that anywhere between 50% and 90% of breaches are caused or abetted by employees, be it by simple error or by falling victim of phishing or social engineering. Well- trained and vigilant employees can become an extension of a company’s cybersecurity team and help form a much firmer perimeter around the company’s assets,” Stanislawski said.
Business Interruptions Can Range from Environmental Factors to Political Risks
Business interruption, meanwhile, used to rank first in the previous years.
“For seven years in a row the impact of business interruption (incl. supply chain disruption) has ranked as the most important risk for companies in the Allianz Risk Barometer. In 2020 it is finally replaced in top position by cyber incidents, a peril of millions of losses throughout the industry,” the report said.
It likewise noted that “fires and natural catastrophes are the major causes of business interruption losses – which can cost as much as 45% more than the corresponding property damage from such incidents” and that “more exotic triggers like digital platforms and supply chains, political risks and environmental factors are also becoming more relevant for businesses.”
“Companies can suffer major BI losses due to the unavailability of critical data or technology, either through a technical glitch, cyber-attack or a physical event, such as fire or flood,” the report said.
Apart from the Philippines, business interruption remains a top risk for Austria, Brazil, Canada, China, Colombia, Germany, Indonesia, Italy, Malaysia, Netherlands, Poland, Singapore, and Tanzania.
Other Risk Factors for PH Businesses
Climate change/increasing volatility of weather, as well as fire and explosion, were listed as the 4th risk factors in the Philippines, at 26% each.
The other risk factors for the country in 2020 included changes in legislation and regulation (e.g., trade wars and sanctions, protectionism, Brexit, Eurozone integration), critical infrastructure blackouts (e.g., disruption of power), health issues (e.g., pandemic outbreaks), and market developments (e.g., volatility, intensified competition, new entrants, M&A, market stagnation, and market fluctuation) —at 11% each.
About the 2020 Allianz Risk Barometer
The Allianz Risk Barometer is an annual corporate risk survey conducted by the AGCS.
The 2020 report was conducted among Allianz customers (global businesses), brokers and industry trade organizations, risk consultants, underwriters, senior managers, and claims experts in the corporate insurance segment of both AGCS and other Allianz entities between October and November 2019.
The survey focused on large and small- to mid-sized enterprises. Respondents were asked to select the industry about which they were particularly knowledgeable and to name up to three risks they believed to be of the most importance.