SINGAPORE (Jan 14): Cyber incidents has toppled business interruption to be ranked the top business risk in Asia Pacific for the first time.
Some 35% of respondents in the Allianz Risk Barometer 2020 study – comprising more than 2,700 CEOs, risk managers, brokers and insurance experts from over 100 countries – named cyber incidents as the key challenge, mirroring a global trend that has seen awareness of the cyber threat growing rapidly in recent years.
This is a stark change from seven years ago, when cyber incidents did not even feature in the top 10 risks on the mind of risk managers regionally.
Business interruption, which has topped the list for seven years, dropped to second place with 34% of the votes.
The Allianz Risk Barometer is an annual survey on global business risks from global corporate insurance carrier Allianz Global Corporate & Specialty (AGCS)
“For the first time, Cyber overtakes Business Interruption as the top risk for businesses in Asia Pacific. While 2019 saw no major global cyber-incidents in the vein of past events like WannaCry and NotPetya, businesses are increasingly cognisant of the costs associated with being a victim of a cyber-attack,” says Mark Mitchell, AGCS’ Asia Pacific regional CEO.
Mitchell notes that IBM estimates the average cost of a data breach at slightly under US$4 million.
Apart from becoming more damaging and expensive for companies, Allianz also points out that cyber incidents often result in lawsuits and litigation after the event.
“Incidents are becoming more damaging, increasingly targeting large companies with sophisticated attacks and hefty extortion demands. Five years ago, a typical ransomware demand would have been in the tens of thousands of dollars. Now they can be in the millions,” says Marek Stanislawski, Deputy Global Head of Cyber, AGCS.
Meanwhile, while business interruption fears drop to second place, Allianz notes that the trend for larger and more complex losses continues.
Causes are becoming ever more diverse, ranging from fire, explosion or natural catastrophes to digital supply chains or even political violence, the group says.
In Australia, for instance, the total damage and economic loss caused by wildfires from September 2019 and into 2020 is estimated to cost US$110 billion.
Businesses are also increasingly exposed to the direct or indirect impact of riots, civil unrest or terrorism attacks. Escalating civil unrest in Hong Kong, for example, has resulted in property damage and general loss of income for both local and multinational companies.
Rounding off the top three risks in the Allianz Risk Barometer this year was climate change, which garnered 25% of votes.
“The Allianz Risk Barometer 2020 highlights that cyber risk and climate change are two significant challenges that companies need to watch closely in the new decade,” says Joachim Müller, CEO of AGCS.
“Of course, there are many other damage and disruption scenarios to contend with but if corporate boards and risk managers fail to address cyber and climate change risks this will likely have a critical impact on their companies’ operational performance, financial results and reputation with key stakeholder,” he adds. “Preparing and planning for cyber and climate change risks is both a matter of competitive advantage and business resilience in the era of digitalisation and global warming.”
