Allianz Global Corporate & Specialty (AGCS) published the results of their 10th annual survey identifying global business risks. According to the survey, the biggest risk faced by the businesses is business interruption, followed by the pandemic outbreak and cyber incidents.
Prior to 2021, pandemic outbreak had never finished higher than number 16 in 10 years of the Allianz Risk Barometer; however, in 2021, it’s the number one risk in 16 countries. Underlining that business interruption, pandemic and cyber are strongly interlinked, Allianz Risk Barometer 2021demonstrates the growing vulnerabilities of our highly globalized and connected world.
Allianz Global Corporate & Specialty (AGCS) published the results of their 10th annual survey identifying global business risks. This annual survey on global business risks incorporates the views of 2,769 experts in 92 countries and territories, including CEOs, risk managers, brokers and insurance experts. The survey shows business interruption, pandemic outbreak and cyber incidents are the top three business risks for 2021 – all strongly interlinked. Business interruption ranks number one with 41% of responses, and pandemic outbreak ranks number 2 with 40% of responses, being this year’s top business risks, followed by cyber incidents which ranks a close third with 40% of responses.
Pandemic outbreak rockets to number 2 from number 17 and is seen as main cause of business interruption in 2021, followed by cyber. Companies look to de-risk supply chains and boost business continuity management for extreme events.
According to the 10th Allianz Risk Barometer, market developments (#4), macroeconomic developments (#8) and political violence (#10) are all rising risks. Natural catastrophes (with 17%) falls to number 6 from number 4, reflecting the fact that although aggregated losses from multiple smaller events such as wildfires or tornadoes still led to widespread devastation and considerable insured losses in 2020, it was also the third consecutive year without a single large event, such as Hurricane Harvey in 2017. Climate change also falls to number 9. However, the report states that the need to combat climate change remains as high as ever, given 2020 was the joint hottest year ever recorded; and that it will be back on the agenda as a priority in 2021.
Risk management and business continuity management need to further evolve
“The coronavirus pandemic is a reminder that risk management and business continuity management need to further evolve in order to help businesses prepare for, and survive, extreme events,” reminds Joachim Müller, CEO of AGCS. “The Allianz Risk Barometer 2021 is clearly dominated by the Covid-19 trio of risks. Business interruption, pandemic and cyber are strongly interlinked, demonstrating the growing vulnerabilities of our highly globalized and connected world. While the pandemic continues to have a firm grip on countries around the world, we also have to ready ourselves for more frequent extreme scenarios, such as a global-scale cloud outage or cyber-attack, natural disasters driven by climate change or even another disease outbreak,” he says.
Climate change related risks are priority like pandemic outbreak
Tolga Gürkan, Chief Executive Officer of Allianz Turkey, commented on Allianz Group’s annual Risk Barometer Survey, underlining that pandemic outbreak had never finished higher than number 16 prior to 2021 but is reported as the number one risk in 16 countries as of 2021. “Pandemic outbreak is among the three biggest risks across all continents and in 35 out of the 38 countries which qualify for a top 10 risks analysis. Climate change and natural catastrophes are among the top 10 risks. The report indicates that climate change will be back on the board agenda as a priority in 2021. Today, the risk perception, related measures and actions are constantly changing. We are entering an era which will be dominated by companies that can handle their business processes in environmental and social aspects rather than just focusing on economics. Those that fall behind have begun to feel the consequences with each passing day. As pandemic has once again proved to us, every company will have to reconsider all business processes by taking into account every ESG aspect,” he says.
Market developments (which ranks number 4 with 19%) also climbs up the Allianz Risk Barometer 2021, reflecting the risk of rising insolvency rates following the pandemic. According to Euler Hermes, the rebound in insolvencies will start in the second half of 2021 along with the gradual phasing out of support measures for companies. In 2022, insolvencies are estimated to increase by 12% worldwide and 17% in the Eurozone. Prior to the Covid-19 outbreak, business interruption had already finished at the top of the Allianz Risk Barometer seven times and it returns to the top spot after being replaced by cyber incidents in 2020. The pandemic shows that extreme global-scale BI events are not just theoretical, but a real possibility, causing loss of revenues and disruption to production, operations and supply chains. 59% of respondents highlight the pandemic as the main cause of business interruption in 2021, followed by Cyber incidents and natural catastrophes and fire and explosion.
In response to heightened business interruption vulnerabilities, many companies are aiming to build more resilient operations and to de-risk their supply chains. According to Allianz Risk Barometer respondents, improving business continuity management is the main action companies are taking, followed by developing alternative or multiple suppliers, investing in digital supply chains and improved supplier selection and auditing. According to AGCS experts, many companies found their plans were quickly overwhelmed by the pace of the pandemic. The survey underlines that business continuity planning needs to become more holistic, cross-functional, and dynamic, monitor and measure emerging or extreme loss scenarios, be constantly updated and tested and embedded into an organization’s strategy.
Cyber perils intensify
The 10th Allianz Risk Barometer indicates that cyber incidents have slipped to number 3, but it remains a key peril with more respondents than in 2020 and still ranking as a top three risk in many countries, including Brazil, France, Germany, India, Italy, Japan, South Africa, Spain, UK and the US. According to the survey results, macroeconomic developments is up to number 8, and political risks and violence which ranks number 10 returns to the top 10 for the first time since 2018 with 11% of responses.
GLOBAL TOP 10 RISKS
1/ Business interruption 41%
2/ Pandemic outbreak 40%
3/ Cyber incidents 40%
4/ Market developments 19%
5/ Changes in legislation and regulation 19%
6/ Natural catastrophes 17%
7/ Fire/explosion 16%
8/ Macroeconomic developments 13%
9/ Climate change 13%
10/ Political risks and violence 11%