Pandemic shakes up top risks facing global firms, finds AGCS Barometer

Business interruption (BI) has reclaimed its position as the top risk facing global firms, followed by a pandemic outbreak in second place and cyber incidents a close third, after taking the number one spot last year, according to Allianz Global Corporate & Specialty’s (AGCS) Risk Barometer 2021. BI held the top spot for four consecutive years in the Allianz Risk Barometer until it was unseated by cyber in 2020. It has held the number one spot seven times in the poll’s ten-year history. This year’s barometer is based on the views of more than 2,700 experts in 92 countries and territories, including risk managers, CEOs, brokers and insurance experts. AGCS said the top three risks are all Covid-19-related and a true reflection of the level of disruption and losses facing global business in the wake of the pandemic. “Business interruption, pandemic and cyber are strongly interlinked, demonstrating the growing vulnerabilities of our highly globalised and connected world,” said AGCS CEO Joachim Müller. The risk of a pandemic outbreak rose from 17th in last year’s survey, when it was identified as a top-three risk by just 3% of firms. Before 2021, pandemic risk had never ranked higher than sixth in AGCS’s annual barometer. The outbreak of Covid-19 sees pandemics rated as the number one risk in 16 countries in 2021, and a top-three risk in all continents. While Covid-19 continues to disrupt companies, Mr Müller said global businesses need to be prepared for more events on this scale. “We also have to ready ourselves for more frequent extreme scenarios, such as a global-scale cloud outage or cyberattack, natural disasters driven by climate change or even another disease outbreak,” he said. Other top risks in the barometer have also been magnified by Covid-19. The risk of market developments climbed one spot to fourth. AGCS said this reflects the risk of rising insolvencies following the pandemic, with the bulk expected in 2021. AGCS added that Covid-19 is also linked to increases in the risk ranking for macroeconomic developments, up to eighth position from tenth, and political violence, which re-entered the top ten for the first time since 2018. Risks related to Covid-19 superseded other major threats, such as natural catastrophes, which fell to number six in the poll from fourth position in 202o. Meanwhile, climate change is now in ninth position, from seventh last year. AGCS said that while Covid-19 eclipsed other risks in 2021, climate change will be back on the board agenda this year. Some 59% of respondents said the pandemic is set to be the main cause of BI in 2021, followed by cyber incidents at 46%, with nat cats and fire and explosion at about 30% each. “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,” AGCS said. It added that some of the longer term consequences of Covid-19 – from remote working to increased reliance on technology – will only serve to increase BI risks and add to non-physical damage BI scenarios. AGCS said global businesses are managing the increased BI risk by derisking supply chains to become more resilient. Some 62% of respondents said they are improving business continuity management, 45% are developing multiple suppliers and 32% are investing in digital supply chains. “Many companies found their plans where quickly overwhelmed by the pace of the pandemic. 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 be embedded into an organisation’s strategy,” AGCS said. Philip Beblo, global practice group leader utilities and services, IT communication at AGCS, added: “Businesses have seen the consequences of the pandemic – the loss of revenue and disruption to production and supply chains – which has resulted in heightened awareness of the potential for losses from both traditional physical sources of business interruption and non-physical damage triggers. The pandemic has shown that business interruption risk is not isolated to a geography or sector, and that it can be overarching and span different geographies, markets and customers.” The barometer found that cyber incidents are the number one perceived risk in several countries, including France, Italy, India, Japan, South Africa and Spain. Cyber is the top risk in Europe. “Covid-19 has shown how quickly cybercriminals are able to adapt and the digitalisation surge driven by the pandemic has created opportunities for intrusions, with new cyber loss scenarios constantly emerging,” said Catharina Richter, global head of the Allianz Cyber Center of Competence at AGCS. AGCS Risk Barometer 2021: Top ten global business risks (2020 ranking in brackets): Business interruption (2) Pandemic outbreak (17) Cyber incidents (1) Market developments (5) Changes in legislation and regulation (3) Natural catastrophes (4) Fire, explosion (6) Macroeconomic developments (10) Climate change/increasing volatility of weather (7) Political risks and violence (11)

Pandemic shakes up top risks facing global firms, finds AGCS Barometer

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