As we approach the final months of the year, which issues are expected to pose the greatest threat to risk managers in 2019? Leading managers pick the top emerging risks for the year ahead.
A recent roundtable hosted by StrategicRisk and global insurer Allianz in Singapore outlined some of the leading concerns risk managers should look out for in 2019. According to the insurer, cyber risk, data protection, director & officer litigation related to M&A, climate change-related claims against directors, and litigation relating to modern slavery are the top emerging risks for the coming year.
Different forms of cyber attack have emerged over the past year, causing notable breaches in Asia, including the major attack on Singapore’s health system in July. Ryan Tan, vice president, mergers & acquisitions and corporate planning at Singaporean telecommunications company Starhub, said cyber risk was a “key risk going forward” for the country.
Tan added: “There have been some high profile incidents recently in Singapore which have underscored the need for risk managers to understand the challenges and perspectives of the Chief Information Security Officer. It’s another critical area and skill-set for the risk manager to master.”
Independent risk consultant Eamonn Cunningham agrees cyber is a leading challenge in the year ahead. He also cites climate change as a key source of concern for the risk industry. He believes companies will face louder calls to tackle the topic: “There is a growing demand for businesses to be more involved. This is driven by the ever-heightening level of public consciousness and increasing demand for action. As this continues, I can see an evolution of the way in which this impacts the risk landscape.”
Fellow risk consultant Gavin Byatt agrees. Byatt said climate and cyber were the two standout risks for the next 12 months. In a recent blog, Byatt described climate change as the “new big risk for business”, stating the topic was “closer to home” than ever for boardroom executives.
Byatt said investors’ increased focus on climate change should prompt companies to address climate risk: “There is a compelling argument for businesses to seek new innovation and ways of thinking to improve their business model by addressing climate-related risk.”
The geopolitical environment is also expected to raise red flags for the Asia-Pacific risk industry. Risk managers believe the region faces a series of unique challenges due to escalating trade tensions. The trade war between the US and China is likely to have a damaging impact across the region, experts say. Multinational businesses operating in China are likely to face the greatest challenges over the next 12 months.
Martin Baghdadi, director, Control Risks said: “The trade wars aren’t just about numbers, it is also a strategic concern for the US. That is not going to go away anytime soon.”
Baghdadi said Australian companies operating in or exporting to China were most at risk: “For businesses, specifically in Australia, we are caught in the middle of this. If you isolate one situation, the Chinese are the biggest importers of soybeans. They are saying they won’t get any more soybeans. What that means down the track is that access to meat is going to be more expensive. The Chinese will have less disposable income and won’t be buying as many Australian luxury goods. Australian exports will suffer. In simplistic terms, that is how we are going to suffer from a trade perspective.”
Cunningham said the impact of trade wars on the global economy was a key emerging risk: “Despite the current robust US economy there are factors out there that could realistically impact it. Trade wars and rising interest rates for example. The high level of economic interdependency between nation states will mean that what impacts the big players will spread to others probably sooner than later.”
Political tensions between Australia and China could also impact the risk landscape in the year to come. Baghdadi said allegations of Chinese interference in Australian politics had damaged relations between the countries. He warned this could have a knock-on effect and make China “weaponise regulation to make it more difficult to do business”. He added: “We’ve already seen that over the past few years, with political detentions, or making it more difficult to get into China. Western companies operating in China have to start thinking about this.”
Baghdadi added: “The days of the red carpet treatment for multinationals is over. They have to be a lot more careful because the business landscape has changed. They don’t want to be on the wrong side of the government and regulations that are changing.”
Baghdadi said multinationals should avoid over-exposure to Chinese companies in their supply chain: “If your supply chain is dependent on one country, and that is China, I’d encourage organisations to spread that supply chain risk.”