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Pandemic-Related Business Interruption, Cyber Top Business Risks for 2021: Allianz

2021-01-27 06:00:27

According to world leaders in business, risk management and insurance, the coronavirus was inevitable by 2020 and the pandemic will once again dominate the risk landscape in 2021.

A trio of Covid-19-related risks – business interruption, the pandemic outbreak and cyber incidents – leads the 10th Allianz Risk Barometer 2021, which reflects possible disruption and loss scenarios facing businesses in the aftermath of the coronavirus pandemic.

Business interruption (No. 1 with 41% responses) and pandemic outbreak (No. 2 with 40%) are the main business risks of this year, with cyber incidents (No. 3 with 40%) coming in third place.

Allianz Global Corporate & Specialty's (AGCS) annual survey on global business risk includes the views of 2,769 experts in 92 countries and territories, including CEOs, risk managers, brokers and insurance experts. The barometer identifies the main business risks for the next 12 months and beyond.

“Business interruption, pandemic and cyber are closely linked, demonstrating the growing vulnerabilities of our highly globalized and connected world,” said Joachim Müller, CEO of AGCS. "The coronavirus pandemic is a reminder that risk management and business continuity management must continue to evolve to help companies prepare for and survive extreme events."

He said that while the pandemic has a tight grip on countries around the world, companies should also prepare for 'more common extreme scenarios, such as a global cloud outage or cyber-attack, natural disasters due to climate change or even a new disease outbreak. "

The Covid-19 crisis continues to pose an immediate threat to individual security as well as businesses, which explains why a pandemic outbreak shot 15 positions to # 2 in the rankings at the expense of other risks. Before 2021, it had never finished higher than # 16 in 10 years of the Allianz Risk Barometer. However, in 2021 it will be the highest risk in 16 countries and one of the top three risks on all continents and in 35 of the 38 countries eligible for a top 10 risk analysis. Japan, South Korea and Ghana are the only exceptions.

The risk of rising insolvency rates is reflected in market developments (# 4 at 19%) climbing the 2021 barometer. According to Euler Hermes, the majority of insolvencies will come in 2021. The credit insurer's global insolvency index is expected to hit an all-time high for bankruptcies, up 35% by the end of 2021, with top gains expected in the US, Brazil, China and core Europe countries.

Furthermore, Covid-19 is likely to initiate a period of innovation and market disruption, accelerate technology adoption, accelerate the demise of incumbents and traditional industries, and create new competitors.

Other risers include macroeconomic developments (# 8 at 13%) and political risks and violence (# 10 at 11%), which are also largely the result of the coronavirus outbreak.

Fallers in this year's survey include changes in laws and regulations (# 5 with 19%), natural disasters (# 6 with 17%), fire / explosion (# 7 with 16%) and climate change (# 9 with 13 %), all clearly outdated by pandemic concerns.

Pandemic leads to disruption – now and in the future

Prior to the Covid-19 outbreak, Business Interruption (BI) has already topped the Allianz Risk Barometer seven times and returns to number one after being replaced by cyber incidents in 2020. Pandemic Shows That Extreme Global Scale BI Events Are Not only theoretical, but a real possibility, losing revenues and disrupting production, operations and supply chains. 59% of respondents cite the pandemic as the main cause of BI in 2021, followed by cyber incidents (46%) and natural disasters and fires and explosions (approximately 30% each).

The pandemic complements the growing list of BI scenarios for non-physical damage, such as cyber or power outages. "The impact of the pandemic – broader digitalization, more remote working and the growing reliance on technology from companies and societies – are likely to increase BI risks in the coming years," said Philip Beblo, AGCS expert. 39; global Property Underwriting team. “Traditional physical risks, however, will not disappear and must remain on the risk management agenda. Natural disasters, extreme weather or fires remain the leading causes of BI for many industries and we continue to see a trend of greater losses over time. "

In response to heightened BI vulnerabilities, many companies are striving to build more resilient operations and shrink their supply chains. According to Allianz Risk Barometer respondents, improving business continuity management is the top action companies take (62%), followed by developing alternative or multiple suppliers (45%), investing in digital supply chains (32%), and improving supplier selection and auditing (31%). According to AGCS, many companies felt their plans were soon overwhelmed by the pace of the pandemic.

Cyber ​​dangers

Cyber ​​incidents may have declined to # 3, but it remains a major threat with more respondents than in 2020 and is still ranked as a top three risk in many countries including Brazil, France, Germany, India, Italy, Japan, South Africa , Spain, UK and USA. The acceleration towards more digitization and remote working as a result of the pandemic also further increases IT vulnerabilities. At the height of the first wave of lockdowns in April 2020, the FBI alone reported a 300% increase in incidents, as cybercrime is now estimated to cost the global economy. more than $ 1 trillion, an increase of 50% from two years ago. Ransomware incidents are already common and increasingly harmful.

Covid-19 has shown how cyber criminals can adapt and how the pandemic has created opportunities for intruders. "Attackers innovate with automated scanning to identify vulnerabilities, attack poorly secured routers or even use 'deepfakes' – realistic media content modified or faked by artificial intelligence," said Catharina Richter, global head of the Allianz Cyber ​​Center of Competence at AGCS. "At the same time, data protection and privacy regulations and fines for data breaches continue to rise."

Risers and Fallers

Macroeconomic developments

Macroeconomic developments have risen to # 8 and political risks and violence (# 10) are returning to the top 10 for the first time since 2018, reflecting the fact that civil unrest, protests and riots are now challenging terrorism as the most important exposure for companies. The number, magnitude and duration of recent events, including Black Lives Matter protests, anti-lockdown rallies and unrest surrounding the US presidential election have been exceptional. As the socio-economic impact of Covid-19 intensifies, further political and social unrest is likely, and according to AGCS analysts, many countries are expected to experience increases in activity in 2021 and beyond, particularly in Europe and America.

Legislation and regulations

Changes in laws and regulations drop from # 3 to # 5 year-over-year. “The pandemic may have caused some delays to the regulatory train, but it didn't stop or derail it. On the contrary, 2021 promises to be a very busy year in terms of new laws and regulations, especially in the field of data and sustainability, ”predicts Ludovic Subran, chief economist at Allianz. Natural disasters drop from # 4 to # 6, reflecting the fact that while aggregate losses from multiple smaller events such as wildfires or tornadoes still led to widespread devastation and significant insured losses in 2020, it is also the third consecutive year was without a single major event, such as Hurricane Harvey in 2017.

Climate change

Climate change also falls back to # 9. However, the need to combat climate change remains unabated, as 2020 was the joint hottest year on record. "With the vaccination campaign coming into effect, climate change will once again be a priority on the board's agenda by 2021," said Michael Bruch, global head of ESG at AGCS. "Many companies need to adapt their businesses to a low-carbon world – and risk managers need to be at the forefront of this transition."

Source: AGCS


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