Cyber incidents and the risk of business interruption were the top concerns for companies for the second year in a row, according to a new report from Allianz.
While cyber incidents and business interruption were ranked as a top concern by 34% of respondents to the Allianz survey, macroeconomic issues such as inflation, financial market volatility and an impending recession (moving from 10th to 3rd year-over-year) and the impact of the energy crisis rose the most on this year’s list of business risks.
All of these concerns required immediate action by companies, while long-term concerns such as natural catastrophes (#3 to #6), climate change (#6 to #6) 7) and pandemic outbreak (from No. 4 to No. 13) fell in the rankings. Political risks and violence were a new entry in the top 10 global risks at No. 10, while shortages of skilled labor moved up to #8. Changes in laws and regulations remained a top concern at #5, while fire/explosion risk dropped two places to #9.
He Allianz Risk Barometer is compiled by Allianz Global Corporate & Specialty (AGCS) together with other Allianz entities. The survey polled 2,712 risk management experts in 94 countries and territories.
“For the second year in a row, the Allianz Risk Barometer shows that companies are more concerned about rising cyber risks and business interruption,” said Joachim Mueller, CEO of AGCS. “At the same time, they see inflation, a looming recession and the energy crisis as immediate threats to their business. Businesses, particularly in Europe and the US, worry about the current “permanent crisis” resulting from the consequences of the pandemic and the economic and political impact of the ongoing war in Ukraine. It is a stress test for the resilience of each company.
“The positive news is that, as an insurer, we see continued improvement in this area among many of our clients, particularly around making supply chains more fail-safe, improving business continuity planning and strengthening cyber controls,” Mueller said. “Taking steps to build resilience and reduce risk is now the focus of business, given the events of recent years.”
cyber incidents
Cyber incidents, including IT outages, ransomware attacks and data breaches, ranked as the top risk globally for the second year in a row. It was also ranked as the top hazard in 19 different countries, including Canada, the United Kingdom, France, Japan, and India. It is also the risk that most concerns small businesses (those with less than $250 million in annual revenue).
“For many companies, the threat in cyberspace remains higher than ever, and cyber claims remain at a high level,” said Shanil Williams, AGCS board member and corporate director of underwriting, responsible for underwriting. cybernetics. “Large companies have grown accustomed to being attacked, and those with adequate cybersecurity can repel most attacks more effectively. More and more small and medium-sized companies are also affected. They tend to underestimate their exposure and need to continually invest in strengthening their cyber control framework.”
According to the Allianz Cyber Competence Center, the frequency of ransomware attacks remains high this year. The average cost of a data breach reached an all-time high of $4.35 million and is expected to exceed $5 million this year.
The war in Ukraine and broader geopolitical tensions have increased the risk of a large-scale cyberattack by state-sponsored actors, Allianz said. There is also a growing shortage of cybersecurity professionals, increasing the risk.
business interruption
2023 is likely to be another year with higher risks of business interruption because many business models are vulnerable to sudden changes and changes, Allianz said. Business interruption was ranked #2 globally on the enterprise risk list and was the #1 risk in countries including the US, Brazil, Germany, Mexico, the Netherlands, Singapore, South Korea and Sweden.
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There are many sources of business interruption, and cyber is the cause most feared by companies, according to Allianz. Rising energy costs have forced some energy-intensive industries to relocate production or even consider temporary shutdowns, and the resulting shortages threaten to disrupt supplies to several critical industries in Europe, including food, agriculture, construction and more. A potential global recession is another likely cause of business disruption in 2023.
macroeconomic problems
Macroeconomic developments such as inflation and economic volatility were the third leading risk for companies in 2023, up from 10th in 2022. This is the first time this risk has appeared in the top three in a decade, Allianz said.
Inflation is a particular concern as it is eating into many companies’ profit margins, Allianz said.
“2023 will be a challenging year. In purely economic terms, it is likely to be a year to forget for many households and businesses,” said Ludovic Subran, chief economist at Allianz. “However, there is no reason to despair. On the one hand, the change in interest rates is helping, especially for millions of savers.
“The medium-term outlook is also much brighter, despite, or rather because of, the energy crisis. The consequences, beyond the recession expected in 2023, are already becoming clear: a forced transformation of the economy in the direction of decarbonization, as well as increased risk awareness in all parts of society, strengthening social resilience and economic”.
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