Nat cats, business interruption top risk list for Canadian businesses: Allianz

Natural catastrophes are a major risk affecting Canadian companies, but there is a broader range of risks in 2014 than in the past that demand attention, suggests Kevin Leong, CEO of Allianz Global Corporate & Specialty SE (AGCS) Canada.

Natural catastrophes, business interruption(BI)/supply chain, pollution, legislative and regulatory changes, and loss of reputation/brand value represent the top risks for Canadian companies in 2014, notes the third annual Allianz Risk Barometer, issued Tuesday.

“We are seeing an increased interconnectivity and dependency of different risks. Thus, client’s business continuity plans must prepare for different risk scenarios that reflect hidden incidental effects,” Leong notes in a statement from AGCS, Allianz Group’s carrier for corporate and specialty insurance business.

“For example, a natural catastrophe such as the floods we experienced last year in Alberta and Toronto or the recent ice storm can result in BI, IT-systems failure and power blackouts, among other perils,” he points out.

The barometer is based on feedback from an AGCS survey of more than 400 corporate insurance experts from 33 countries.

Specifically, 50% of Canadian respondents identified natural catastrophes as the number one risk for 2014. Swiss Re recently reported that, globally, insured losses from natural catastrophes totalled about $41 billion in 2013.

AGCS reports that BI/supply chain losses – accounting for 50% to 70% of all insured property losses, or as much as $28 billion annually in Canada (based on 2013 data) – followed nat cats.

BI/supply chain was cited by 42% of Canadian respondents, but topped the global list. In the United States, for example, more than 60% of survey participants identified the risk as their number one, notes the AGCS statement.

Pollution, changes in legislation and regulation, and loss of reputation/brand value tied for third place at 25% in Canada.

“Any disruption – be it due to natural catastrophes, IT/telecommunication outages, transportation issues, a supplier’s bankruptcy or civil unrest – may lead to a snowball effect that can be devastating to their bottom line,” suggests Tom Varney, regional manager for Allianz Risk Consulting in the Americas.

“Business continuity planning is critical and should be part of any risk manager’s supplier selection process. However, it is no longer enough to have transparency of your most important suppliers; you also need to know how they manage their own supply chains,” Varney continues.

AGCS recommends that companies can respond to the increasing complexity of the combination of new technological-, economic- and regulatory-related risks through stronger internal controls, combined with a holistic approach to risk management.