A new report from the World Economic Forum has underlined the key risks facing companies in the Asia-Pacific region over the next decade, with familiar themes such as cyber, energy prices and unemployment the major concerns.
The 2018 Regional Risks for Doing Business Report, released by the WEF with the help of insurance and risk firms Zurich and Marsh, asked 12,000 executives in 140 global economies their views on the most pressing risks for the next ten years.
Managers in the East Asia and Pacific region picked cyber-attacks as their top risk for the second consecutive year. The region also cited unemployment or underemployment, asset bubbles, energy price shocks, and data fraud/theft as their key concerns.
Australian risk managers picked energy price shock as their top risk, followed by cyber attacks, asset bubbles, failure of regional and global governance, and fiscal crises.
Karina Rodriguez Diaz, Crisis Management & Cyber Underwriting Manager, Australasia at HDI Global, said there was “no surprise” to see cyber as a top risk. She added: “Technological advancements continue to accelerate and constantly change the way business, both big and small, is conducted globally. While global connectivity and technological advancements create opportunities, they also create risks.”
Rodriguez Diaz added many organisations do not consider the true financial impact of cyber attacks: “Understanding and managing cyber risk remains a challenge for many organisations. A vast number of organisations do not appreciate the financial consequences a cyber-attack or incident may have on them,” she said.
Scott Ryrie, CEO of The Risk Management Institute of Australasia, was surprised trade tariffs were not a top 5 risk. Ryrie noted bank lending as another key risk off the list: “The other one [risk] locally is the drastic tightening of lending by the banks which has suddenly put the brakes on the property market.”
Josh Roach, Managing Director, Specialities Leader, Pacific Region at Marsh, said the threat of energy price increases was particularly relevant for Australian executives: “For immediate macro influence it can’t be ignored. There’s a double whammy with increasing oil prices and the strengthening US dollar, with gas prices also increasing.”
Roach said energy risk in Australia was a concern due to doubts over the country’s renewable energy strategy, and reliance on traditional forms of energy production: “There’s certainly concern about the ability to replace ageing infrastructure,” he added.
In Singapore, cyber attacks also ranked top, following a year of significant events including the attack on Singapore’s health system in July. Singapore executives also picked terrorist attacks, data theft, asset bubbles, the spread of infectious diseases, and water crises as leading risks.
Gordon Song, a PARIMA board member, said he agreed with the Singapore list. He believes one key threat did not make the top five.
Song said: “I would have added “Loss of competitiveness” as another. By that, I mean Singapore losing its competitiveness and relevance as a regional economic hub.”
Across the Asia-Pacific region, data theft and fraud (of personal data) was seen as a bigger risk this year. Data theft/fraud did not make the top five risks in 2017 but ranked fourth this year.
Roach said the digitisation of local Asian economies made data theft a growing concern for business leaders and consumers alike: “Data fraud and theft is a concern in Malaysia and Singapore, with the digitisation of those economies, and a greater prevalence of e-commerce and digital payment methods.”
Concerns about data theft in Malaysia are likely to have been influenced by 2017’s massive mobile data breach which saw personal details linked to 46.2 million numbers stolen.
Roach said there was also a greater focus on cyber attacks causing interruption to business operations: “There is growing awareness of the business interruption impact. Hackers can infiltrate IT systems and bring an entire company to a halt.
“Three or four years ago we were mostly talking about privacy, and now it is about how data can be stolen and cause business interruptions,” he added.
“We are advising clients that they should review their risk register on a regular basis,” Roach said. “Take into consideration whether contingency planning is required as an additional form of protection to insurance. Some [cyber] risk may be so unpredictable that no amount of upfront insurance will help solve the problem,” he added.
The wider World Economic Forum’s Global Risk Report is set to be unveiled in January 2019.