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Business interruption resurfaces as top business risk in Singapore
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.
Worries over business interruption - the top concern of 43 per cent of respondents - overtook marginally concerns about cyber security risk (41 per cent), according to the eighth annual Allianz Risk Barometer published by Allianz Global Corporate & Specialty (AGCS).
For Singapore, natural catastrophes (29 per cent) rounded up the experts' top three risk concerns.
While the risk of cyber incidents has fallen in rankings this year, it is still a major concern for Singaporean businesses, with 60 per cent of local respondents stating cyber incidents are the cause of business interruption they fear most.
Singapore also sees two new entrants into its top 10 ranking, with climate change (20 per cent) and environmental risks (12 per cent) coming in fifth and ninth respectively, reflecting an increased concern over the huge economic, political, and social impacts that climate change can have if left unchecked.
Climate change will also have big implications for regulation and liability, with emission regulations and targets already shaping industries like aviation and shipping.
"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," said Mark Mitchell, regional chief executive, AGCS Asia Pacific, who noted that the risk is heightened by today's increasingly interconnected and global business environment.
He added that almost all large property insurance claims include a major business interruption element and the average business interruption claim of over US$3 million was almost 40 per cent higher than an average direct property loss.
"As manufacturing shifts east, Asia is increasingly exposed to these losses, reflecting the importance for companies to adopt a holistic approach to risk management."
Meanwhile, business interruption remains the top threat for businesses worldwide for the seventh consecutive year.
It is the top risk reported in the US, Canada, Japan, Germany, Spain, Italy and China.
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.
Both cyber and business interruption risks are increasingly interlinked as ransomware attacks and accidental IT outages often result in a disruption of operations and services costing hundreds of millions of dollars.
Increasingly, cyber incidents also bring their own business interruption losses. Respondents rank cyber as the business interruption trigger they fear most, given many companies' primary assets can often be data, service platforms or groups of customers or suppliers.
For example, business interruption loss was a hallmark of the WannaCry and NotPetya malware attacks in 2017 which disrupted shipping, logistics and manufacturing companies.
Increasing concern over cyber incidents follows a watershed year of activity in 2018.
"Cyber risk has been a major risk for a number of years but as with any new risk it has struggled with awareness," said Marek Stanislawski, deputy global head of cyber, AGCS. "We have now reached a point where cyber is as equally concerning for companies as their major traditional exposures."
Cyber crime now costs an estimated US$600 billion a year - up from US$445 billion in 2014.
This compares with a 10-year average economic loss from natural catastrophes of US$208 billion, AGCS noted.
Even as criminals use more innovative methods to steal data, commit fraud or extort money, there is also a growing cyber threat from nation states and affiliated hacker groups targeting critical infrastructure providers or stealing valuable data or trade secrets from companies.
Singapore experienced in 2018 its worst ever cyber attack, in which sophisticated hackers - believed to be state-sponsored - infiltrated the computers of SingHealth and stole the personal particulars of 1.5 million patients, including those of Prime Minister Lee Hsien Loong.
Cyber incidents are increasingly likely to spark litigation, including securities and consumer class actions, AGCS flagged.
Data breaches or IT outages can also generate large third-party liabilities as affected customers or shareholders seek to recoup losses from companies, it noted.
As with Singapore, natural catastrophes (28 per cent) again ranked third in this year's top 10 ranking of global business risks, with 2018 being a more benign version of 2017's peak catastrophe losses, although economic losses still totalled close to US$150 billion last year.
The Allianz Risk Barometer is based on the insights of 2,415 risk experts across 86 countries, including Singapore.