Allianz Risk Barometer 2019: Business interruption and cyber still top risks amongst South Korea companies

• 8^th
  annual survey on top business risks sees record participation of 2,415 experts
  from 86 countries, including South Korea
• Business
  interruption is top risk again, followed by cyber incidents
• 2019
  edition sees new entrants in local top 10: Environmental risks and loss of
  reputation or brand value

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SEOUL, SOUTH KOREA - Media
OutReach - February 21, 2019 – Business interruption (BI) will be the
top business risk in South Korea this year with companies increasingly
concerned about more diverse and complex business interruption scenarios with
rising costs, according to the eighth
annual Allianz Risk Barometer. Published by Allianz Global Corporate
& Specialty (AGCS), the 2019 report is based on the insights of 2,415 risk
experts across 86 countries, including South Korea.

 

In South Korea, BI (45% of responses) remains the top
risk ahead of cyber (33% of
responses). Rounding up the top three is new
technologies (28% of responses), which rises up from #5 last year.

 

BI threats continue to evolve

South Korean businesses are deeply
concerned about the impact of BI as
potential 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 or political rioting or environmental pollution. Asia
and South Korea, is potentially exposed to business interruption losses because
of economic growth and concentration of suppliers. As manufacturing and
outsourced services are migrated to countries in the region, so too are large
claims.

 

Similarly, BI remains the top threat for
businesses globally and regionally for the seventh year running, ranking top in
countries such as the US,
Canada, Germany, Singapore. In addition, both cyber and BI risks are
increasingly interlinked as ransomware attacks or accidental IT outages often
result in disruption of operations and services costing hundreds of millions of
dollars.

“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. The risk of BI is heightened by today’s
increasingly interconnected and global business environment,” said Chang Tae
Noh CEO AGCS South Korea.

“Almost all
large property insurance claims include a major BI element and the average BI
claim of over $3m is almost 40% higher than an average direct property loss. As
manufacturing shifts east and with growing frequency of natural catastrophe
activity in the region, Asia Pacific ins increasingly exposed to these losses
reflecting the importance for companies to adopt a holistic approach to risk
management.”

Cyber — growing awareness, growing losses

Cyber incidents continue to be an area of concern for South Korean
businesses. Countries with regional tensions have been found to be more likely
affected by targeted cyber-attacks, and South Korea suffered the 6^th
most number of targeted attacks in the world in 2017[1].
This is unlikely to improve in the future, as the number of cyber-attacks
worldwide doubled in 2017 to 160,000, according to the Online Trust Alliance[2].
According to AGCS analysis of insurance industry claims over the past five
years, the average insured loss from a cyber incident is now in excess of €2m,
compared with almost €1.5m from the average claim for a fire / explosion
incident.

 

Similarly, concern over cyber incidents is increasingly
globally, following a watershed year of activity in 2018. Cyber-crime now costs
an estimated $600bn a year — up from $445bn in 2014[3].This
compares with a 10-year average economic loss from natural catastrophes of $208bn[4]
— three times as much.  

 

“Companies
need to plan for a wide range of disruptive scenarios and triggers, as this is
where their big exposure lies in today’s networked society,” says Chris Fischer
Hirs, CEO of AGCS. “Disruptive risks can be physical, such as fire or storms,
or virtual, such as an IT outage, which can occur through malicious and
accidental means. They can stem from their own operations but also from a
company’s suppliers, customers or IT service providers. Whatever the trigger,
the financial loss for companies following a standstill can be enormous. New
risk management solutions, analytical tools and innovative partnerships can
help to better understand and mitigate the modern myriad of BI risks and
prevent losses before they occur.”

Environmental risks (#7 with 17% of responses) and loss of reputation or brand value (#9
with 11% of responses) are new entrants into the top 10 risks for South Korean
businesses.

 

More information on the findings of the Allianz Risk
Barometer 2019, including global results, is available here:

• Top
  10 global business risks
• Executive
  summary
• Full
  report
• Video
• Appendix
  Results for 34 countries
• Selected
  infographics