Transportation executives in Asia believe that their companies’ primary business threats are emerging from cyberspace, according to the 2016 Willis Towers Watson Transportation Risk Index.
The Index’s consolidated findings – taken from land, sea and air transportation companies – showed the potential for cyber and data privacy breaches to disrupt business as the top concern among the region’s senior executives, matching the global consensus.
Digital threats certainly have had the highest profile across most technologically advanced industries for the past decade. The transportation industry, with its strategic relationship to international commerce, is no exception and makes an attractive target for cyber-criminals.
The annual cost of data breaches alone across all industry is expected to quadruple – to US$2.1 trillion — between 2015 and 2019, according to a recent report from UK-based Juniper Research.
It’s a significant figure. But it may represent only part of the story as the direct cost of cyberattacks is not restricted to data-privacy breaches such as those traditionally aimed at acquiring confidential information from the public or private sectors.
For one, there are indirect costs. As losses mount and the capital markets look to offset some of their growing risks in this area, companies in Asia and elsewhere can expect the cost of capital to be more closely aligned with their ability to prove cyber resilience. In short, good cyber resilience will equal good business.
Strategic efforts to become more connected are now central to most corporate agendas. Hence the transportation industry is seeing an unprecedented rise in the use of networks, common platforms and alliances to deliver critical operations. These networks feature direct and indirect partners, so users often underestimate their reliance on the community to carry out core business activities.
Asian maritime execs rate all risks higher
Of the three main modes of transport in Asia, senior managers from the sea-transport sector are the most concerned about the cyber threat, according to the Index.
In fact, shipping’s decade-long recession has increased its overall sensitivity to risk in Asia, where more than half the merchant fleet is now owned. The sector’s top seven individual risks all rated higher than anything perceived by their air or land-transport colleagues.
However, while maritime executives rate cyber threats higher than their peers do, it is third-party vulnerability in the physical world that has them most concerned, according to the Index.
Multinational transportation companies rely on connectivity – both digital and physical – to help them to manage the vast distances they serve. Common platforms and networks do everything from managing ticketing to coordinating container and fleet movements. But each additional link in the supply chain, new member in the alliance, new user of a common platform and new partner adds another layer of risk, and sometimes several.
Partners often remain hidden until an event such as the recent demise of Hanjin Shipping fully draws back the curtain on the extent of commercial dependence. With supply chains offering a multitude of hidden risks, maritime executives in Asia rated ‘dependence on third-party suppliers’ as their top individual risk. In fact, it was the highest rated individual risk from any mode of transport in the region.
Another third-party vulnerability – this time in the maritime sector’s digital supply chain — ran a very close second. Clearly, Asia-based companies in future will be judged by the company they keep.
When seen through the wider lens of the overall transportation sector, three of the top five individual risks emerge from the ‘Technology’ ‘megatrend’, or category of risk. In fact, regional executives were substantially more concerned about risks in the technology and geopolitical categories than were their counterparts in other regions.
Asian aviation execs most concerned about social unrest
For example, ‘social unrest’ was the greatest fear among executives in Asia’s air-transport sector, whether caused by involuntary migration, terrorism or other events.
Aviation companies tend to ask a premium for their services – for moving passengers and cargo – relative to other modes of transport, so a continuation in discretionary spending is comparatively important to the sector’s economic health. In many parts of the region, multinationals rely on a rapid emergence of Asia’s middle class to drive global growth and profits.
Local economies, too, rely on its success. The latest report from the Air Transport Action Group suggests that the air-transport sector generates almost 29 million jobs and US$626 billion of the Asia-Pacific region’s GDP; a third of the world’s 3.6bn passengers were carried by its airlines this year.
The high level of concern about social unrest was clear in the Index’s findings but was unique to the Asian air-transport sector. Globally, the hi-tech sector’s predominant fear was a failure of critical IT systems.