By Erin Ayers, Advisen
In an increasingly risky world, cyber incidents have risen to the top as the chief worry of businesses around the globe for the first time, edging out business interruption, according to Allianz Global Corporate & Specialty’s (AGCS) annual Risk Barometer.
Just seven years ago, cyber risk ranked 15th in Allianz’s tally. In this year’s survey, 39 percent of the record 2,700 risk management experts in 102 countries Allianz surveyed cited cyber events like IT/cloud outage, data breaches, business email compromise, and ransomware as the top peril facing their businesses. The threat of litigation and regulatory actions following cyber events add to the risk and survey respondents also cited the geopolitical climate and threats from nation-states as increasing their worry.
“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,” said Marek Stanislawski, deputy global head of cyber for AGCS.
Cyber risk replaced business interruption, which fell to second place in the rankings but still presents significant concern for respondents. After cyber risks and business interruption, the top global risks included legislative and regulatory changes; natural catastrophes, market developments; fire/explosion; climate change; reputational harm; new technologies; and (new for 2020) macroeconomic developments such inflation and monetary policies.
The survey revealed that business interruption and contingent BI can arise from many causes but most frequently fires, storms, and water damage. Cyber incidents, however, remained the BI cause most feared by respondents, due to greater reliance on digital supply chains.
“It may no longer be the standalone number one peril in the eyes of risk management experts but the business interruption (BI) threat is undiminished. The trend for larger more complex BI losses – from both traditional causes, such as fires and natural catastrophes, and newer ones, such as digital supply chains or civil unrest – continues unabated,” Allianz said in the report.
Allianz found that organizations may be underestimating business interruption risks due to political violence, with civil unrest in Hong Kong, Chile, France, Bolivia, and Columbia causing property damage, BI, loss of revenue, and diminished tourism.
“It’s not only that customers or hotel guests stay away,” said Bjoern Reusswig, AGCS head of global political violence and hostile environmental solutions. “Another consequence of these types of events is that employees might not be able to access their workplace because of security reasons. This can reduce productivity or bring production to a standstill in other industries.”
Political differences also contributed to the third most significant peril for businesses – changes in legislation and regulation. Trade wars, Brexit, economic sanctions, and protectionist attitudes present significant obstacles for businesses worldwide.
Allianz cited cyber risks and climate change as the issues with the biggest potential impact on organizations for the future. Climate change rose to its highest level in the Allianz survey and brings a “full spectrum of risks” with it, including operational, financial, reputational, and regulatory impacts.
“The 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,” says Joachim Müller, CEO of AGCS. “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 is both a matter of competitive advantage and business resilience in the era of digitalization and global warming.”
Editor Erin Ayers can be reached at firstname.lastname@example.org.