"Big three" risks trouble companies
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20 Februarie 2012 |
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ALLIANZ-TIRIAC ASIGURARI S.A. |
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Allianz experts see economic risks, business interruption and natural catastrophes as greatest risks for 2012.
An Allianz study has found that economic risks, business interruption and natural catastrophes are the most feared risks for businesses. These are the big three, all of which have been highly active in combination this year and will continue to do so in 2012. They are followed by legal and reputational risks. Currently the most underestimated risks are IT and cyber risks.
Allianz Global Corporate & Specialty (AGCS), the center of competence for corporate and industrial insurance at Allianz, has conducted a worldwide survey among its risk management professionals to identify the risks they see as most prevalent today and in the future.
By far the most frequently mentioned type of risk in the AGCS Risk Barometer is economic risk. 21 percent of all AGCS risk experts see it as the most pressing concern for their clients. Economic risk refers to a broad range of risks related to the economic climate. It includes commodity price increases, loss of key markets and, generally, economic recession, sovereign debt concerns and foreign currency fluctuations.
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“As an insurer we are constantly looking at new, emerging risks that might become important for our clients,” says Axel Theis, CEO of Allianz Global Corporate & Specialty.
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Source: Allianz / AGCS
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“In the current climate we have all become acutely aware of the pervasiveness of economic risk,” says Allianz Group Chief Economist, Dr. Michael Heise.
“Nervousness and volatility in the financial markets eventually undermine confidence and business activities in the real economy, which in turn further unsettles investors and the markets. Risk assessment is a crucial element in all our personal and business decisions.”
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Vulnerable supply chains
The second most frequently mentioned issue is business interruption. 14 percent of AGCS experts see this as a major risk and mention it as their clients’ highest priority, especially those AGCS risk engineers who go out to their clients’ plants and see the production on site. This view is shared by their counterparts at the operational risk management level, who are responsible for seamless production. Business interruption refers to supply chain interruptions and the vulnerability of production processes through a concentration of suppliers. AGCS risk experts also point out the exposures created by “just-in-time” logistics, with pronounced knock-on effects when the supplier is not able to deliver within the tight tolerances of such processes.
“The past 20 to 30 years have seen the development of business strategies that promote the ideas of ‘lean manufacturing’ and ‘just-in-time’ supply. In reality this means rationalizing supply, centralizing distribution and, even holding virtual inventories,” explains Paul Carter, Head of Property Risk Consulting at AGCS. “In addition to these strategies there has been an increasing trend to source globally in order to reduce costs yet further, all along the chain. This has become the dominanteconomic model, but its success has been achieved at the expense of a significantly increased risk of disruption within companies’ overall supply chains. The very flexibility that provides the supply chain with its cost advantages has also caused its inherent vulnerability.”
