So, do you know the risks out there this year?
Of all the known beasts out there, regulatory change has, surprisingly perhaps, jumped to near the top of the list for Australian businesses, according to the latest edition of the annual Allianz Risk Barometer. From being only eighth in a list of Top 10 risks, policy and legislation has zoomed to second spot, behind only the universal No. 1 – business interruption, supply chain. A full 29% of risk consultants placed regulatory change much higher up for Australia, higher than in over 30 countries surveyed.
“The survey highlights the increasing complexity of business risks, including a combination of new technological, economic and regulatory risks, potentially creating a systemic threat for businesses,” said Niran Peiris, Managing Director of Allianz Australia.
Policy uncertainties highlighted
“Regulatory change over recent years, as well as foreshadowed reviews or changes in the areas of financial services regulation and carbon taxation/renewable energy might also be impacting here,” he added.
The change in government last year – Tony Abbott’s Coalition coming to power, replacing the Labor Party – has, obviously, given rise to more uncertainties. It might even be the case that Abbott’s government inspires less confidence in business.
Here are the Top 10 risks facing Australian business, according to the Allianz Risk Barometer 2014:
1. Business interruption, supply chain (e.g. machine breakdown) 44%
2. Changes in legislation and regulation 29%
3. Loss of reputation, brand value (e.g. from social media) 24%
4. Cyber crime, IT failures, espionage 22%
5. Natural catastrophes (e.g. storm, flood, earthquake) 18%
6. Market fluctuations (e.g. exchange or interest rates) 16%
7. Commodity price increases 16%
8. Intensified competition 13%
9. Talent shortage, aging workforce 11%
10. Credit availability 11%
Social media threat to brands
Noteworthy from the list is the rise of social media as a risk to brand reputation. This has moved up to third spot, from fifth in 2013, reflecting, equally, the growing power of social media as well as the growing importance of managing brands on social media.
Equally important is the perception of risks from the Internet. While cyber crime and IT outages have been known for a while, this category moved up to fourth spot, reflecting perhaps less confidence in the IT security industry to counter mounting challenges from rogue hackers.
Globally, the Allianz Risk Barometer found the risk landscape “continuing to evolve at pace, becoming increasingly complex due to growing interdependency of different industries and processes.” This, combined with inadequate internal processes, indicates “an increasing need for deployment of holistic, state-of-the art risk management and mitigation strategies,” the survey concluded.
Conducted by Allianz Global Corporate & Specialty, the results are based on responses from over 400 risk consultants, insurance underwriters, senior managers and claims experts in the corporate insurance segment of both AGCS and local Allianz entities in over 30 countries, covering Europe, Asia and North and South America.
