Allianz Risk Barometer: Cyber, BI & Catastrophes

We thought you might like a few edited highlights from the Allianz Risk Barometer 2022;

Cyber perils are the biggest concern for companies globally in 2022, according to the Allianz Risk Barometer. The threat of ransomware attacks, data breaches or major IT outages worries companies even more than business and supply chain disruption, natural disasters or the Covid-19 pandemic, all of which have heavily affected firms in the past year.

Cyber incidents tops the Allianz Risk Barometer for only the second time in the survey’s history (44% of responses), Business interruption drops to a close second (42%) and Natural catastrophes ranks third (25%), up from sixth in 2021. Climate change climbs to its highest-ever ranking of sixth (17%, up from ninth), while Pandemic outbreak drops to fourth (22%). The annual survey from Allianz Global Corporate & Specialty (AGCS) incorporates the views of 2,650 experts in 89 countries and territories, including CEOs, risk managers, brokers and insurance experts. View the full global and country risk rankings.

“’Business interrupted’ will likely remain the key underlying risk theme in 2022,” AGCS CEO Joachim Mueller summarizes. “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-19-related problems cannot be ruled out. Building resilience against the many causes of business interruption is increasingly becoming a competitive advantage for companies.”

In the UK cyber ranked number one, mirroring the global result, with a growing percentage of respondents identifying this as the primary peril for the year (50% up from 42% in 2021).  Business Interruption once again ranked in the top three for the UK, this year taking second place (34%) up from third last year. In the wake of COP26, climate change was the biggest increase for the UK, moving to third in the rankings from sixth last year (31% up from just 17% in 2021).

Ransomware drives cyber concerns while awareness of BI vulnerabilities grows
Cyber incidents ranks as a top three peril in most countries surveyed. The main driver is the recent surge in ransomware attacks, which are confirmed as the top cyber threat for the year ahead by survey respondents (57%). Recent attacks have shown worrying trends such as ‘double extortion’ tactics combining the encryption of systems with data breaches; exploiting software vulnerabilities which potentially affect thousands of companies (for example, Log4J, Kaseya) or targeting physical critical infrastructure (the Colonial pipeline in the US).

Cyber security also ranks as companies’ major environmental social governance (ESG) concern with respondents acknowledging the need to build resilience and plan for future outages or face the growing consequences from regulators, investors and other stakeholders.

The rise of Natural catastrophes and Climate change to third and sixth position respectively is telling, with both upwards trends closely related. Recent years have shown the frequency and severity of weather events are increasing due to global warming.

For 2021, global insured catastrophe losses were well in excess of $100bn – the fourth highest year on record. Hurricane Ida in the US may have been the costliest event, but more than half of the losses came from so-called secondary perils such as floods, heavy rain, thunderstorms, tornados and even winter freezes, which can often be local but increasingly costly events. Examples included Winter Storm Uri in Texas, the low-pressure weather system Bernd, which triggered catastrophic flooding in Germany and Benelux countries, the heavy flooding in Zhengzhou, China, and heatwaves and bushfires in Canada and California.

Other risers and fallers in this year’s Allianz Risk Barometer:

• Shortage of skilled workforce (13%) is a new entry in the top 10 risks at number nine.  Attracting and retaining workers has rarely been more challenging. Respondents rank this as a top five risk in the engineering, construction, real estate, public service and healthcare sectors, and as the top risk for transportation.
• Changes in legislation and regulation remains fifth (19%). Prominent regulatory initiatives on companies’ radars in 2022 include anti-competitive practices targeting big tech, as well as sustainability initiatives with the EU taxonomy scheme.
• Fire and explosion (17%) is a perennial risk for companies, ranking seventh as in last year’s survey, while Market developments (15%) falls from fourth to eighth year-on-year and Macroeconomic developments (11%) falls from eighth to 10th.