Supply chain risks top dangers for Canadian enterprises

by MM&D Online staff

Toronto, ON—Natural catastrophes, business interruption/supply chain and pollution top the list of risks for Canadian companies in 2014, according to the third annual Allianz Risk Barometer, which surveyed over 400 corporate insurance experts from 33 countries.

The survey, conducted by Allianz Global Corporate & Specialty SE (AGCS), highlights the increasing complexity of business risks, including a combination of new technological-, economic- and regulatory-related risks, potentially creating a systemic threat for businesses. Allianz suggests that companies can respond to these growing challenges through stronger internal controls, combined with a holistic approach to risk management.

It’s very clear that natural catastrophes are one of the major risks affecting Canadian companies, explains Kevin Leong, CEO of AGCS Canada: “But there is a broader range of risks in 2014 than in the past. We are seeing an increased interconnectivity and dependency of different risks. Business continuity plans must prepare for different risk scenarios that reflect hidden incidental effects. 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.”

Natural catastrophes topped the list of Canadian business risks, with 50 percent of respondents identifying it as the number one risk. Globally, insured losses from natural catastrophes totalled about CAN$ 41bn in 2013 (source: Swiss Re).

In second place at 42 percent are business interruptions and supply chain losses, which account for around 50-70 percent of all insured property losses, as much as $28bn a year, based on 2013 data. These risks are ranked number one in the global results, including in the US, where over 60 percent of participants identified them as the top business risk in 2014.

“Businesses in the Canada are discovering that supply chains are becoming increasingly complex in a globalized world. Any disruption–be it due to natural catastrophes, IT/telecommunication communication outages, transportation issues, a supplier’s bankruptcy or civil unrest–may lead to a snowball effect that can be devastating to their bottom line,” advises 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.”

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