Allianz Risk Barometer 2020: Business Interruption top peril for companies in Tanzania  

Press release | February 11, 2020 | Johannesburg
  • 9th annual survey on top business risk attracts record participation of 2,700+ experts from over 100 countries
  • Business interruption ranks as the top risk in Tanzania and is a key challenge with digitalization and civil unrest creating new causes of disruption and loss of income
  • Changes in legislation and regulation, Climate change are increasing concerns for companies in Tanzania and the region
  • Cyber incidents have become more damaging and expensive for companies – and often result in lawsuits and litigation after the event

Business Interruption (67% of responses) ranks as the most important business risk in Tanzania as larger and more complex BI losses continues unabated. Causes are becoming ever more diverse, ranging from critical infrastructure blackouts, fire, explosion or natural catastrophes to digital supply chains or even political violence. Changes in legislation and regulation (#2 with 61% of responses) and Climate change (#6 with 17%) underline the US-China trade war, Brexit and global warming as increasing concerns for companies and nations including Tanzania. Cyber incidents is second in this year’s Allianz Risk Barometer (39% of responses). Awareness of the cyber threat has grown rapidly in recent years, driven by companies’ increasing reliance on data and IT systems and a number of high-profile incidents.

The annual survey on global business risks from Allianz Global Corporate & Specialty (AGCS) incorporates the views of a record 2,718 experts in over 100 countries including CEOs, risk managers, brokers and insurance experts. Each year Allianz asks CEOs, risk managers, brokers and insurance experts around the world to name their top three risk concerns for the year ahead. This is the inaugural Allianz Risk Barometer  report for Tanzania.

“Businesses in Tanzania are concerned about business interruption as it is the country’s top risk in 2020. It also ranks in the top three risks in Africa and the Middle East (#1), Nigeria (#3), South Africa (#2) and Cameroon (#2). Companies are worried about Changes in legislation and regulation, which is second in the country. Cyber incidents is third in Tanzania, the top risk in South Africa and second in Africa and the Middle East – while companies are also more worried about it. The top risks in Tanzania are in line with the top three global risks, which show that businesses in that country have similar concerns as other companies around the world,” says AGCS Africa CEO Thusang Mahlangu.
BI’s top ranking in Tanzania is a strong indication of the trend for larger and more complex BI. Causes are becoming ever more diverse, ranging from fire, explosion or natural catastrophes to digital supply chains or even political violence. “Digital supply chains and platforms today allow for full transparency and traceability of goods but a fire at a data center, a technical glitch or a hack could bring large BI losses for multiple companies that all rely and share the same system, which cannot switch back to manual processes,” says Raymond Hogendoorn, Global Head of Property and Engineering Claims at AGCS.

Changes in legislation and regulation and Climate change are big risks to companies underlining the US-China trade war, Brexit, the African Continental Free Trade Area (AfCFTA) and global warming as increasing concerns for companies in Tanzania and the region. Around 1,300 new trade barriers were implemented in 2019 alone. The US-China trade dispute has brought the US average tariff close to levels last seen in the 1970s. “Trade policy is becoming just another political tool for many different policy ends, such as economic diplomacy, geopolitical influence or environmental policy,” explains Ludovic Subran, Chief Economist of Allianz. “This activism is not restricted to the US: it has spread to Japan and South Korea, India and the EU.”

New regulatory challenges in the next decade will focus on environmental impact, de-carbonization and climate change. “EU sustainability regulation is nothing less than a game changer. The impact on corporates will be as wide-ranging as that of the new rules on accounting and data protection were in the past,” says Subran.

Cyber’s third ranking in Tanzania is in line with its move to the top risk globally. It is a dominant risk in South Africa and has been a top risk since 2016 except only in 2019 where it ranked second to BI.  It ranks fourth in Ghana, eighth in Nigeria and ninth in Cameroon this year. Businesses face the challenge of larger and more expensive data breaches, an increase in ransomware and spoofing incidents, as well as the prospect of privacy-driven fines or litigation after an event. A mega data breach - involving more than one million compromised records - now costs on average $42mn [1], up 8% year-on-year. “Incidents are becoming more damaging, increasingly targeting large companies with sophisticated attacks and hefty extortion demands. Five years ago, a typical ransomware demand would have been in the tens of thousands of dollars. Now they can be in the millions,” says Marek Stanislawski, Deputy Global Head of Cyber, AGCS.

Extortion demands are just one part of the picture: Companies can suffer major BI losses due to the unavailability of critical data, systems or technology, either through a technical glitch or cyber-attack. “Many incidents are the results of human error and can be mitigated by staff awareness trainings which are not yet a routine practice across companies,” says Stanislawski.

Climate change’s ranking in the top 10 risks in Tanzania and the region is driven by risk management experts’ concerns about global warming. An increase in physical losses is the exposure businesses fear most (49% of responses) as rising seas, drier droughts, fiercer storms and massive flooding pose threats to factories and other corporate assets, as well as transport and energy links that tie supply chains together. Further, businesses are concerned about operational impacts (37%), such as relocation of facilities, and potential market and regulatory impacts (35% and 33%). Companies may have to prepare for more litigation in future – climate change cases targeting ‘carbon majors’ have already been brought in 30 countries around the world, with most cases filed in the US.

“There is a growing awareness among companies that the negative effects of global warming above two degrees Celsius will have a dramatic impact,” says Chris Bonnet, Head of ESG Business Services at AGCS. “Failure to take action will trigger regulatory action and influence decisions from customers, shareholders and business partners. Ignoring climate risk is more costly than grappling with it. Therefore, every company has to define its role, stance and pace for its climate change transition – and risk managers need to play a key role in this process alongside other functions.”

[1] IBM Security, Ponemon, Cost Of A Data Breach Report 2019

 

The Allianz Risk Barometer is our annual report identifying the top corporate risks for the next 12 months and beyond, based on the insight of more than 2,700 risk management experts from over 102 countries and territories.

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Allianz Global Corporate & Specialty (AGCS) is a leading global corporate insurance carrier and a key business unit of Allianz Group. We provide risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 12 dedicated lines of business.

Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are not only the world’s largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film productions. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience.

Worldwide, AGCS operates with its own teams in 33 countries and through the Allianz Group network and partners in over 200 countries and territories, employing over 4,400 people. As one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial ratings. In 2018, AGCS generated a total of €8.2 billion gross premium globally.

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