In the recently released Allianz Risk Barometer report, Cyber tops the list of business risks, as the greatest concern for companies in the year ahead.
Given the last few years with increased incidences of ransomware attacks, data breaches and other major IT outages, it’s perhaps not surprising Cyber is such a huge business risk.
Business interruption as a key risk comes in at a close second (42%), while Natural catastrophes rank third (25%), up from sixth in 2021. Climate change continues to climb to its highest-ever ranking of sixth (17%), while Pandemic outbreak has dropped to fourth (22%), no doubt thanks to the increasing popularity of vaccinations the world over.
While the annual global Business risk’s report suggests that Cyber takes the lead as a key business risk this year, the report also suggests that Business interruption will also be a key theme throughout 2022.
Here is a brief summary of the Allianz Risk Barometer’s top ten global business risks below and we outline some ways you can minimise some of your risks.
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Cyber Incidents
The main driver of Cyber reaching the number one position in the Allianz Risk Barometer report is due to the surge in ransomware attacks in 2021, which have included worrying trends such as ‘double extortion’ tactics, exploiting software vulnerabilities in supply chains, and the targeting of physical critical infrastructure.
With so many people working remotely, this in itself has also created opportunities for Cyber criminals to attack and create disruption.
Businesses need to take the threat of Cyber incidents seriously and put in place measures to minimise their cyber risk and consider other ways, including Cyber insurance, to minimise the impact of a potential Cyber incident.
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Business Interruption
While the research suggests the ongoing effects of Covid-19 and resulting disruptions are a great cause of concern for many businesses, the ‘most feared’ cause of business interruption are Cyber incidents. 2021 was a year that saw a rapid rise in ransomware attacks, as more companies shifted to working remotely, in turn creating gaps in IT security.
The ensuing business interruption for some businesses ill prepared or lacking in insurance coverage, resulted in a number having to close their doors due to the income lost and lack of finance to re-build.
Business insurances are one way to counter potential business risks and provide peace of mind that your business will still be able to operate if there is a disruption.
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Natural Catastrophes
Extreme weather events are becoming more frequent and severe the world over, so it is unsurprising that in 2021 insured catastrophe losses globally were well in excess of $100 billion – the fourth highest year on record.
In Australia, we had one natural disaster after another (bushfires and floods) while in the US, Hurricane Ida was one of the most costliest events of the year, such that ‘Natural Catastrophes’ jumped up three places in the 2022 Allianz report.
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Pandemic Outbreak
While the Covid-19 pandemic continues to be a concern for many people and businesses, pandemic risk has actually dropped two positions in this year’s risk report compared with last year.
Many businesses have learned from 2020 and 2021 and put in place contingency plans and future preparations to mitigate the risks associated with the Pandemic (i.e. cloud-based technology to enable staff to work from home seamlessly).
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Changes in Legislation and Regulation
Legislation ‘never sleeps’ and despite many promises to reduce red tape, new rules and regulations continue to proliferate across all industries.
This year will be no exception, particularly in the areas of big tech and sustainability. Add to this the increased attention placed on environmental social and governance issues and this has resulted in new regulations leading to tougher disclosure and reporting rules for businesses.
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Climate Change
The risks of global warming and the pressure for businesses to act have all increased over the last 12 months. The Allianz Risk Barometer suggests that regulatory and legal risks associated with climate change are likely to increase in 2022, particularly for those businesses who haven’t yet begun looking for climate friendly and sustainable ways of doing business.
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Fire, Explosion
Allianz’s research reveals that between July 2013 and July 2018, the largest single cause of loss for businesses was fire/explosion (excluding wildfires), causing in excess of $15billion worth of damages during this period.
Interestingly, it’s not just the material damage of a Fire/Explosion that equates to the biggest losses – it’s more that a major fire or explosions can halt companies from operating and that such incidents are the most frequent drivers of Business Interruption claims.
Businesses should always have contingency plans in place should a Fire or explosion take place along with insurances to protect and safeguard them from additional business risks that come after the fire.
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Market Developments
Those surveyed for the Allianz Risk Barometer suggest that share market volatility is set to increase considerably in 2022 and that repercussions of the monetary turnaround are likely to be felt all around the world, with weaker emerging markets coming under strain.
While global growth is expected to remain relatively strong, with global output expected to increase by +4.1% in 2022, continued supply-demand imbalances could push inflation rates higher this year.
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Labour Shortages
Shortage of skilled labour is a new entry in the top 10 risks outlined by Allianz’s Global Risk report. ‘The great resignation’ is a phenomenon that has struck all around the world with managers trying to navigate and retain employees re-evaluating their careers and leaving their jobs in record numbers.
As a result, attracting and retaining skilled workers is becoming increasingly challenging with 69% of companies globally reporting talent shortages – that is the highest it has ever been in 15 years, according to a ManpowerGroup survey.
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Macroeconomic Development
Macroeconomic developments dropped down in the rankings for 2022. Allianz’s research confirms that 2021 was an extreme year on many fronts and that after the lockdowns, demand for goods and services exploded, overwhelming supply capacities and resulting in clogged supply chains, material and labour shortages, as well as rising prices.
What this means is that 2022 is unlikely to be much more stable, as Covid-19 is still not over and the constant changing between tightening and loosening restrictions may continue indefinitely. Supply chain tensions are likely to ease gradually, but a return to ‘normal’ trade flows will take time.
How we can help
Business risks can make or break a business. Understanding how to prepare for and mitigate risk is something we do every day for our clients. Contact us today for peace of mind that your business is adequately prepared for the future.
The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact us directly for personalised insurance advice.
References
[1] Allianz, Allianz Global Risk Barometer, 2022
[2] Resilium Insurance Broking, The top global business risks of 2022. Could they affect you?
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