Business interruption, the COVID-19 pandemic outbreak and cyber incidents are this year’s top business risks, according to the Allianz Risk Barometer 2021 survey.
The annual survey on global business risks from Allianz Global Corporate & Specialty (AGCS) incorporates the views of 2,769 experts in 92 countries and territories, including CEOs, risk managers, brokers and insurance experts.
Business interruption was named the top risk, with the pandemic outbreak in close second, followed by cyber incidents ranking as a close third.
“The Allianz Risk Barometer 2021 is clearly dominated by the COVID-19 trio of risks. Business interruption, pandemic and cyber are strongly interlinked, demonstrating the growing vulnerabilities of our highly globalised and connected world,” says Joachim Müller, CEO of AGCS.
COVID-19 continues to represent a threat to both individual safety and businesses, reflecting why pandemic outbreak has spiked 15 positions up to second in the rankings at the expense of other risks, the report shows.
Prior to this year, pandemic risk had never finished higher than 16th over the last 10 years. In 2021, the report reveals that it’s the now the number one risk in 16 countries and among the three biggest risks across all continents and in 35 out of the 38 countries which qualify for a top 10 risks analysis — with Japan, South Korea and Ghana being the only exceptions.
Prior to the pandemic, business interruption had already finished at the top of the Allianz Risk Barometer seven times and it returns to the top spot after being replaced by cyber incidents in 2020.
AGCS explains that the pandemic shows that extreme global-scale business interruption events are not just theoretical, but a real possibility, causing loss of revenues and disruption to production, operations and supply chains.
Although cyber incidents slipped to third, it remains a key peril with more respondents than in 2020 and still ranking as a top three risk in many countries, including Brazil, France, Germany, India, Italy, Japan, South Africa, Spain, UK and the US.
The survey notes the acceleration towards greater digitalisation and remote working driven by the pandemic is also further intensifying IT vulnerabilities.
At the peak of the first wave of lockdowns in April 2020, the FBI reported a 300 per cent increase in incidents alone, while cyber crime is now estimated to cost the global economy over $1 trillion, up 50 per cent from two years ago.
A cyber report by AGCS cyber report in November 2020 revealed that there has been a 67 percent increase in the average number of security breaches in five years.
Catharina Richter, global head of the Allianz cyber centre of competence at AGCS, comments: “COVID-19 has shown how quickly cybercriminals are able to adapt and the digitalisation surge driven by the pandemic has created opportunities for intrusions with new cyber loss scenarios constantly emerging.”
“Attackers are innovating using automated scanning to identify security gaps, attacking poorly secured routers or even using ‘deepfakes’ – realistic media content modified or falsified by artificial intelligence. At the same time, data protection and privacy regulation and fines for data breaches continue their upward trend,” Ritcher adds.
Elsewhere, market developments also climbed up the Allianz Risk Barometer, which AGCS says reflects the risk of rising insolvency rates following the pandemic.
The survey highlights that COVID-19 will “likely spark a period of innovation and market disruption, accelerating the adoption of technology, hastening the demise of incumbents and traditional sectors and giving rise to new competitors”.
Other risers include macroeconomic developments and political risks and violence which are also partly a consequence of the coronavirus outbreak.
Changes in legislation and regulation dropped from third to fifth. Ludovic Subran, chief economist at Allianz, predicts: “The pandemic may have caused some delays of the regulatory train, but it did not stop or even derail it. Quite the opposite, 2021 promises to become a very busy year in terms of new legislation and regulation, particularly in the areas of data and sustainability.”
Natural catastrophes and climate change also fell down the risk barometer.
Commenting on climate change, Michael Bruch, global head of environmental, social and governance at AGCS, says: “With the vaccination campaign coming into effect, climate change will be back on the board agenda as a priority in 2021. Many companies need to adjust their business for a low-carbon world — and risk managers need to be at the forefront of this transition.”
Joachim Müller, CEO of AGCS, says: “The COVID-19 pandemic is a reminder that risk management and business continuity management need to further evolve in order to help businesses prepare for, and survive, extreme events.”
“While the pandemic continues to have a firm grip on countries around the world, we also have to ready ourselves for more frequent extreme scenarios, such as a global-scale cloud outage or cyber-attack, natural disasters driven by climate change or even another disease outbreak,” he adds.
