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 rank 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.
In the U.S., BI (50%) retains its top spot followed by cyber incidents (37%) and natural catastrophes (35%).
Ransomware drives cyber concerns while awareness of BI vulnerabilities grows
Cyber incidents rank 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 that potentially affect thousands of companies (for example, Log4J, Kaseya) or targeting physical critical infrastructure (the Colonial pipeline in the U.S.).
Cyber security also ranks as companies’ major environmental, social and 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.
Business interruption (BI) ranks as the second-most-concerning risk. In a year marked by widespread disruption, the extent of vulnerabilities in modern supply chains and production networks is more obvious than ever. According to the survey, the most feared cause of BI is cyber incidents, reflecting the rise in ransomware attacks but also the impact of companies’ growing reliance on digitalization and the shift to remote working. Natural catastrophes and pandemic are the two other important triggers for BI in the view of respondents.
In the past year, post-lockdown surges in demand have combined with disruption to production and logistics, as COVID-19 outbreaks in Asia closed factories and caused record congestion in container shipping ports. Pandemic-related delays compounded other supply chain issues, such as the Suez Canal blockage or the global shortage of semiconductors after plant closures in Taiwan, Japan and Texas from weather events and fires.
According to the recent Euler Hermes Global Trade Report, the COVID-19 pandemic will likely drive supply chain disruption into the second half of 2022, although mismatches in global demand and supply and container shipping capacity are eventually predicted to ease, assuming no further unexpected developments.
See also: Cyber Risk Impact of Working From Home
Pandemic outbreak remains a major concern for companies but drops from second to fourth position (although the survey predated the emergence of the Omicron variant). While the COVID-19 crisis continues to overshadow the economic outlook in many industries, businesses do feel they have adapted well. The majority of respondents (80%) think they are adequately or well-prepared for a future incident. Improving business continuity management is the main action companies are taking to make them more resilient.
The rise of natural catastrophes and climate change to third and sixth position respectively is telling, with the upward 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 $100 billion – the fourth-highest year on record. Hurricane Ida in the U.S. 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.
Allianz Risk Barometer respondents are most concerned about climate-change-related weather events causing damage to corporate property (57%), followed by BI and supply chain impact (41%). However, respondents are also worried about managing the transition of their businesses to a low-carbon economy (36%), fulfilling complex regulation and reporting requirements and avoiding potential litigation risks for not adequately addressing climate change (34%).
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 remain fifth (19%). Prominent regulatory initiatives on companies’ radars in 2022 include anti-competitive practices targeting big tech, as well as sustainability initiatives with the E.U. taxonomy scheme.
- Fire and explosion (17%) is a perennial risk for companies, ranking seventh as in last year’s survey, while market developments (15%) fall from fourth to eighth year-on-year and macroeconomic developments (11%) fall from eighth to 10th.
More information on the report is available here: Allianz Risk Barometer 2022.