- The 9th edition of the Allianz Risk Barometer survey involved a record turnout – over 2,700 experts from more than 100 countries
- Cyber incidents generate increasingly large and expensive losses for companies most of times leading to lawsuits and litigations
- Business interruption became the second most threatening risk for companies, still it continues to be a challenge, in the context of digitalization and civil unrest determining loss of income and generating new disrupting factors
- Risks generated by climate changes occupy the most advanced position so far – companies mainly fear property damage arising from extreme weather conditions, as well as consumers’ poor reviews and regulatory tightening.
For the first time cyber incidents ranks first among risks most feared by companies globally, about 39% of participants in the annual Allianz Risk Barometer 2020 survey classifying the risk of a cyber-attack as the main threat to the business. Business interruption ranks second among risks threatening companies globally.
Awareness of cyber-attacks has grown rapidly in recent years, driven by companies’ increasing reliance upon IT and data systems, as well as by a number of high-profile incidents. Comparatively, seven years ago, cyber incidents ranked 15th in the top risks, with only 6% of responses.
Legal and regulatory changes (3rd place with 27% of responses) and climate changes (7th place with 17% of responses) are the risks that advanced most in the ranking, highlighting the growing concerns of companies and nations for the commercial war between USA and China, Brexit and global warming.
The annual survey regarding global risks faced by companies conducted by Allianz Global Corporate & Speciality (AGCS) includes opinions of a record number of 2,718 experts from more than 100 countries, including CEOs, risk managers, brokers and insurance specialists.
„Allianz Risk Barometer 2020 highlights that cyber risk and climate change are two significant challenges that companies need to watch closely in the new decade. Of course, there are many other damage and disruption scenarios to contend with but if corporate boards and risk managers fail to address cyber and climate change risks this will likely have a critical impact on their companies’ operational performance, financial results and reputation with key stakeholders. Preparing and planning for cyber and climate change risks represent both a matter of competitive advantage and business resilience in the era of digitalization and global warming”, says Joachim Müller, CEO of AGCS.
Cyber risks continue to evolve
In addition to being the most feared risk globally, cyber incidents rank among the top three risks in many of the countries surveyed. In Austria, Belgium, France, India, South Africa, South Korea, Spain, Sweden, Switzerland, the UK and the US it also ranks as the top business risk.
Companies face the challenge of a more complex and expensive data breaches, an increase of ransomware attacks, as well as the prospect of privacy-driven fines or litigation after a cyber event.
A significant data breach – involving over a million compromised records – generates costs averaging USD 42 million[1], up by 8% over the previous year.
„[Cyber] Incidents are becoming more damaging, increasingly targeting large companies with sophisticated attacks and hefty extortion demands. Five years ago, a typical ransomware demand would have been in the tens of thousands of dollars. Now they can be in the millions”, says Marek Stanislawski, Deputy Global Head of Cyber at AGCS.
Extortion demands are only part of the picture: companies can suffer major losses due to unavailability of critical data, systems or technologies either due to a technical glitch or a cyber-attack.
„Many incidents are the result of human error and can be mitigated by staff awareness trainings, which are not yet a routine practice across companies”, says Marek Stanislawski.
Business interruption – a continuing threat with new causes
After seven years at the top of the ranking, the risk of business interruption drops to the second position in Allianz risk barometer.
Nevertheless, the risk of larger and more complex losses due to business interruption continues to be high.
Causes become more and more diverse and range from fire, explosion or natural catastrophes to disruptions in digital supply chains or even political violence.
„ Digital supply chains and platforms today allow for full transparency and traceability of goods but a fire at a data center, a technical glitch or a hack could bring large BI losses for multiple companies that all rely and share the same system and which cannot switch back to manual processes, ", says Raymond Hogendoorn, Global Head of Property and Engineers Claims at AGCS.
Companies are also increasingly exposed to the direct or indirect impact of riots, civil unrest or terrorist attacks. Last year has seen civil unrest escalate in Hong Kong, Chile, Bolivia, Columbia and France, resulting in property damage, business interruption and loss of income both for local and multinational companies, as shops closed for months, customers and tourists could not benefit from services or employees could not access their workplace due to safety concerns.
Legal and regulatory changes rank third in the risk barometer, climbing one position since 2019. Customs tariffs, sanctions, Brexit and protectionism were cited as key concerns. About 1,300 new trade barriers were implemented in 2019 alone. The USA-China trade dispute has brought the US average customs tariffs close to levels last recorded in the '70s.
„Trade policy is becoming just another political tool for many different policy ends, such as economic diplomacy, geopolitical influence or environmental policy. This activism is not restricted to the US: it has spread to Japan and South Korea, India and the EU”, explains Ludovic Subran, Chief Economist of Allianz.”
New regulatory challenges in the next decade will focus on environmental impact, pollution decrease and climate change.
„EU sustainability regulation is nothing less than a game changer. The impact on corporates will be as wide-ranging as that of the new rules on accounting and data protection were in the past”, says Ludovic Subran
Climate change brings added risk complexity
Climate change ranks seventh in this year edition of Allianz risk barometer – highest-ever position – and is already in the top three risks for companies in the Asia-Pacific region, Australia, Hong Kong, India and Indonesia.
An increase in property damage is the highest threat cited by companies (49% of responses), as rising sea level, severe droughts, fierce storms and massive flooding pose threats to factories and other corporate assets, as well as transport and energy links upon which supply chains rely.
Further, companies are concerned about the operational impact (37% of responses), which could mean relocation of facilities and potential market and regulatory impact (35% and 33% of responses). Companies may have to prepare for more litigation in the future. Climate change litigations targeting major polluters have already been brought in 30 countries, most of which in the US.
„ There is a growing awareness among companies that the negative effects of global warming above two degrees Celsius will have a dramatic impact. Failure to take action will trigger regulatory action and influence decisions from customers, shareholders and business partners. Ignoring climate risk is more costly than grappling with it. Therefore, every company has to define its role, stance and pace for its climate change transition – and risk managers need to play a key role in this process", says Chris Bonnet, Head of ESG Business Services at AGCS.
Further details regarding the results of Allianz Risk Barometer 2020 survey are available here:
About Allianz Global Corporate & Speciality (AGCS)
Allianz Global Corporate & Speciality (AGCS) is a business unit of Allianz Group specialized in corporate insurance solutions and risk consultancy. Our clients range from Fortune 500 Global companies to small and medium-sized businesses and private individuals.
AGSC provides insurance solutions in more than 200 countries through over 4,400 employees. In 2018 AGSC underwrote a total of EUR 8.2 billion gross premiums.
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