Cyber, business interruption and natural disasters ranked among top 3 business risks: Allianz
A year of unprecedented cyberattacks, business interruptions and supply chain disruptions, as well as natural disaster activity, has propelled these three perils to the top of the list of global business risks in the Risk Barometer. ‘Allianz this year.
Cyber incidents topped the Allianz 2022 Risk Barometer for only the second time in the survey’s history (44% of respondents), business interruptions moved to second place (42%) and natural disasters rank third (25%), up from sixth place in 2021 .
The report says awareness of climate change risks is rising among businesses, reaching its highest ever position of sixth (17%), up from ninth in 2021, according to Allianz Global Corporate’s annual survey. & Specialty (AGCS), which incorporates the views of 2,650 respondents from 89 countries and territories, including CEOs, risk managers, brokers and insurance experts. (See the table below for the full list of global risks identified in the report).
Diving into the survey results, the report explained that a series of high-profile ransomware attacks, combined with problems caused by the acceleration of digitization and remote working, have propelled cyber risk to the ranked first, falling from third place in 2021, when it ended behind the close related to business interruption (BI) risks and the COVID-19 pandemic.
The report notes that the most feared cause of BI risk in this year’s survey is cyber.
“Ransomware has become big business for cybercriminals, who hone their tactics, lower barriers to entry for as little as a $40 subscription and little tech savvy. The commercialization of cybercrime facilitates the exploitation of vulnerabilities on a large scale. We will see more attacks against technology supply chains and critical infrastructure,” Scott Sayce, global cybersecurity manager at AGCS, said in a statement.
The rise of natural disasters and climate change to the third and sixth highest risks, respectively, is telling, according to the report. “Recent years have shown that the frequency and severity of weather events are increasing. In 2021, insured catastrophic losses worldwide exceeded $100 billion – the fourth highest year on record. »
While Hurricane Ida in the United States was the costliest event, “more than half of the losses are due to so-called secondary perils such as floods, thunderstorms, tornadoes and even winter frosts, which can often be local events, but increasingly expensive”. Continuation of the Allianz report.
“The risks to businesses from global warming are felt with increasing force and immediacy – as direct damages after extreme weather events, but also by leading to tighter regulations, and as threats to the brand. and reputation,” said Line Hestvik, director of sustainability at Allianz. , in the report. “In addition to acute issues such as pandemic management and the volatile economic environment that dominate day-to-day risk management activities, the pressure on businesses to act on climate change has increased significantly over the past the past year, with an increasing focus on net zero contribution.
Supply chain fragility
“The past 18 months have been a wake-up call for BI and risks are expected to remain elevated for the foreseeable future,” Allianz’s report said. “The pandemic has exposed the fragility and complexity of modern supply chains, and how multiple events can combine to cause problems, raising awareness of the need for greater resilience and transparency – 45% of respondents said the recent supply chain disruption had had a significant impact on their industry.
Supply chain disruption is expected to ease in the second half of 2022, COVID-19 permitting, according to the report. However, supply chain vulnerabilities “exposed by a host of recent events, ranging from the blockage of the Suez Canal to the global shortage of semiconductors, could take companies years to fix and result in significant costs. if, for example, they seek to reduce their dependence on critical suppliers – such as manufacturers in Asia – to build alternative supplies elsewhere in the world,” he continued.
“‘Discontinued business’ will likely remain the top underlying risk theme in 2022,” AGCS CEO Joachim Mueller said in a statement accompanying the report.
“For most companies, the biggest fear is not being able to manufacture their products or provide their services. 2021 has seen unprecedented levels of disruption, caused by various triggers. Crippling cyberattacks, the supply chain impact of numerous climate change-related weather events, as well as pandemic-related manufacturing issues and transportation bottlenecks have taken their toll,” he said. -he adds. “This year promises only a gradual easing of the situation, although other issues related to COVID-19 cannot be ruled out. Building resilience against the many causes of business interruption is increasingly becoming a competitive advantage for businesses.
BI risk awareness is becoming an important strategic issue for entire companies, said Maarten van der Zwaag, global head of real estate risk consulting at AGCS, quoted in the report. “There is now a desire and willingness among senior management to bring greater transparency to supply chains and to work with data to better understand risk. The momentum has picked up and more companies are seeing resilience as a competitive advantage. »
Other survey findings include:
- Cybersecurity ranks highest in corporate environmental and social governance (ESG) concerns (58%), with respondents acknowledging the need to build resilience and plan for future outages or deal with mounting consequences from regulators , investors and other stakeholders.
- Climate change is another major ESG presence on the list, with respondents ranking it as their second ESG concern (40%).
- More and more companies are presenting strategies to reduce greenhouse gas emissions in their operations and are also analyzing business opportunities for climate-friendly technologies and sustainable products.
- The pandemic has revealed the extent of interconnectedness in modern supply chains and how multiple events can combine to create global disruption, across multiple industries.
- The majority of respondents (80%) believe they are adequately or well prepared for a future pandemic outbreak.
- Shortage of skilled labor (13%) is a new entry in the top 10 risks ranked ninth. Attracting and retaining workers has rarely been more difficult. Respondents rank this among the top five risks in the engineering, construction, real estate, utilities and healthcare sectors, and as the top risk for transportation.
- Changes in laws and regulations remain in fifth place (19%). Prominent regulatory initiatives on corporate radars in 2022 include anti-competitive practices targeting big tech, as well as sustainability initiatives with the EU taxonomy system.
- Fires and explosions (17%) are an ongoing risk for businesses, ranking seventh this year and in last year’s survey.
Survey respondents were interviewed through October and November 2021 – a period prior to awareness of the emergence of the Omicron variant of COVID-19.
The survey focused on large and small and medium enterprises. Respondents were asked to select the industry they were particularly knowledgeable about and name up to three risks they considered most important. Responses were from large companies with more than $500 million in annual revenue (1,208 respondents, 46%); medium-sized businesses with revenue between $250 million and $500 million (518 respondents, 20%) and small businesses with revenue less than $250 million (924 respondents, 34%).
Source: Allianz Global Corporate & Specialty (AGCS)
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