Business Interruption Again Top Business Risk in Singapore
Business interruption once again becomes the top business risk in Singapore, according to a recent report.
It is the eighth annual Allianz Risk Barometer published by Allianz Global Corporate & Specialty (AGCS) that has made this revelation about the Singapore business scenario.
South-east Asia’s leading financial daily The Business Times reports, “BUSINESS interruption has re-emerged as the top business risk in Singapore this year, with companies increasingly concerned about more diverse and complex business interruption scenarios coupled with rising costs, a recent report by German insurer Allianz has found.”
Based on responses collected from 200 respondents in Singapore, the Allianz Risk Barometer points out that business interruption (including supply chain disruption) remains the top concern for 43 percent of the respondents. Cyber incidents (cybercrime, IT failure/outage, breaches, fines etc), which had, in 2018, ranked first among business risks, now takes the second slot, with 42 percent of respondents being concerned about it. Business interruption was ranking second in 2018. Natural catastrophes, including flood, storm, earthquakes etc, ranks third, with 29 percent of respondents concerned about this factor.
Among the top 10 risks, there are two new entrants- climate change, which ranks fifth and environmental risks, which ranks ninth. 20 percent of respondents are concerned about climate change while 12 percent are worried about environmental risks. The other risks in the top 10 list are- new technologies (impact of increasing interconnectivity, nanotechnology, AI, 3D printing, blockchain, autonomous vehicles etc) in the fourth position, changes in legislation and regulation (trade wars and tariffs, protectionism, economic sanctions, Brexit etc) in the sixth position, fire and explosion in the seventh position, market developments (volatility, intensified competition/new entrants, M&A etc) in the eighth position and loss of reputation or brand value in the tenth position.
The Business Times quotes Mark Mitchell, regional chief executive, AGCS Asia Pacific as saying- “Businesses across Asia Pacific are deeply concerned about the impact of business interruption, which can be a consequence of the other top risks in the region, cyber and natural catastrophes… As manufacturing shifts east, Asia is increasingly exposed to these losses, reflecting the importance for companies to adopt a holistic approach to risk management.”
On the global level, business interruption continues to remain the top threat for businesses, for the seventh consecutive year. Business interruption ranks top among all risks in Canada, the U.S, Germany, Japan, Spain, China and Italy.
The Business Times says, “Potential business interruption 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, said AGCS.”
A notable thing is that business interruption risks and cyber risks are becoming increasingly interlinked. Accidental IT outages and ransomware attacks, which are cyber risks often result in disruption of operations and services, which happen to be business interruptions. Businesses end up losing millions of dollars to such attacks and disruptions. Many businesses, on the global level, rank cyber as the business interruption trigger that they are concerned about the most.
The executive summary of the eighth annual Allianz Risk Barometer says, “A consequence of many of the other top risks in the Allianz Risk Barometer, business interruption (BI) is the top threat for companies for the seventh year running (37% of responses). According to AGCS, the average BI property insurance claim now totals over €3mn ($3.4mn) at €3.1mn. This is more than a third (39%) higher than the corresponding average direct property damage loss (€2.2mn) with these totals significantly higher than five years ago.”
It further says, “BI is joined at the top of the ranking for the first time by cyber incidents (37%). According to AGCS, even the average insured loss from a cyber incident is now just over €2mn ($2.3mn) compared with almost €1.5mn from a fire/explosion incident, while losses from major events can be in the hundreds of millions or higher. Increasingly, cyber incidents bring their own BI losses. Respondents rank cyber as the BI trigger they fear most, given many companies’ primary assets can often be data, service platforms or groups of customers or suppliers.”
The AGCS executive summary also states that increasing concern over cyber incidents follows a watershed year of activity in 2018. It also notes that there is a growing threat from nation states, “which use technology to steal valuable data and trade secrets, with implications for businesses.” It’s also pointed out that the impact of mega data breaches, privacy scandals and the introduction of the GDPR (General Data Protection Regulation) in the European Union, which has resulted in tougher privacy rules and the threat of large fines, also worry companies greatly. That cyber incidents are increasingly likely to spark litigation (including securities and consumer class actions) is also a prime concern for many companies.
It’s recommended that all companies should adopt an IT security position in accordance with their size, operations and risk profile. Companies should also invest in technological security solutions, proper backup mechanisms and staff training.
The Allianz Risk Barometer, on the international level, is based on the insights and inputs of 2,415 risk experts across 86 countries.