Cyber, business interruption (BI) and natural disasters are this year’s top business risks globally, according to the Allianz Risk Barometer 2022 survey.
The annual study is carried out by Allianz Global Corporate & Speciality (AGCS), a global corporate insurance carrier and business unit of the Allianz Group providing risk consultancy, property and casualty insurance solutions, and alternative risk transfer.
It surveys 2,650 risk professionals in 89 countries and territories, including CEOs, risk managers, brokers and insurance experts.
Cyber
This marks the second time that cyber incidents — including the threat of ransomware attacks, data breaches, software vulnerabilities in physical infrastructure, and major IT outages — has led the global survey.
As the number one (44 per cent) business risk globally, cyber perils outrank COVID-19 (which placed fourth at 22 per cent) as many companies feel adequately prepared for future pandemic outbreaks.
Scott Sayce, global head of cyber at AGCS, explains: “Ransomware has become a big business for cyber criminals, who are refining their tactics and lowering the barriers to entry. The commercialisation of cybercrime makes it easier to exploit vulnerabilities on a massive scale. We will see more attacks against technology supply chains and critical infrastructure.”
AGCS notes that cyber security also features as a major ESG concern, with many respondents recognising the need to strengthen resilience and have contingency plans for future outages to appease regulators, investors and other stakeholders.
Business interruption
BI follows as a close second (42 per cent) and 2021 demonstrated the scope of vulnerabilities in modern supply chains and production networks. The most important triggers for BI, as identified by respondents, are cyber incidents, natural catastrophes and pandemic, respectively.
As an example of global BI, ACGS points to factory closures in Asia, which caused record congestion levels in container shipping ports. It also highlights the Suez Canal blockage and the global shortage of semiconductors following plant closures in Taiwan, Japan and Texas from weather events.
The survey cites the recent Euler Hermes Global Trade Report, which found that the COVID-19 pandemic is likely to continue to prompt high levels of supply chain disruption into the second half of 2022.
It is therefore essential, AGCS emphasises, for companies to be increasingly aware of BI as a strategic issue by bringing transparency to supply chains and investing in data tools.
Philip Beblo, property industry lead for technology, media and telecoms at AGCS, summarises: “The COVID-19 pandemic has exposed the extent of interconnectivity in modern supply chains and how multiple unrelated events can come together to create widespread disruption. For the first time, the resilience of supply chains has been tested to breaking point on a global scale.”
Natural catastrophes
Completing the top three list, natural catastrophes saw a jump from sixth in the 2021 survey to third (25 per cent), reflecting the increase in extreme weather events and growing concern over transition risks.
Global insured catastrophe losses reached more than US$100 billion in 2021, according to AGCS, which marks the fourth highest year on record as global warming increases the frequency and severity of weather events.
Survey respondents expressed concern over the potential of climate change-related weather events to cause damage to corporate property, as well as lead to BI and supply chain disruption.
There was also notable concern around the transition to a low-carbon economy, regulation and reporting requirements, and potential litigation risks for not adequately taking action to address climate change.
Line Hestvik, chief sustainability officer at Allianz SE, explains: “The pressure on businesses to act on climate change has increased noticeably over the past year, with a growing focus on net-zero contributions.
“In the coming years, many corporate decision-makers will be looking even more closely at the impact of climate risks in their value chain and taking appropriate precautions. Many companies are building up dedicated competencies around climate risk mitigation, bringing together both risk management and sustainability experts.”
Other notable business risks in the Allianz Risk Barometer survey include the acquisition and retention of a skilled workforce, changes in legislation and regulation, and macroeconomic developments.
Summarising the results of the survey, AGCS CEO Joachim Mueller says: “BI will likely remain the key underlying risk theme in 2022. For most companies, the biggest fear is not being able to produce their products or deliver their services.
“2021 saw unprecedented levels of disruption, caused by various triggers. Crippling cyber-attacks, the supply chain impact from many climate change-related weather events, as well as pandemic-related manufacturing problems and transport bottlenecks wreaked havoc.
“This year only promises a gradual easing of the situation, although further COVID-related problems cannot be ruled out. Building resilience against the many causes of BI is increasingly becoming a competitive advantage for companies.”
