- 10thAllianz survey: Business interruption,Pandemic outbreak and Cyberincidents are the top three global business risks for 2021 -- all stronglyinterlinked.
- Globally,Pandemic outbreak rockets to #2 from#17 and is seen as main cause of business interruption in 2021, followed by Cyberincidents. Companies look to de-risk supply chains and boost businesscontinuity management for extreme events.
- InAsia Pacific, the top three risks are mirrored although Business interruption swaps places with Cyber incidents, which ranks #1 for the second consecutive year.
- Market developments (#4), Macroeconomicdevelopments (#8) and Politicalviolence (#10) are all rising global risks. Socioeconomic consequences of the pandemicwill bring more insolvencies and likely fuel further civil unrest in 2021. Climate change falls to #9 globally butwill be back on the board agenda as a priority in 2021.
JOHANNESBURG/LONDON/MUNICH/NEW YORK/PARIS/SAOPAULO/SINGAPORE - Media OutReach - 19 January 2021 - A trio of Covid-19 related risks heads upthe 10thAllianz Risk Barometer 2021, reflecting potential disruption and lossscenarios companies are facing in the wake of the coronavirus pandemic. Businessinterruption (#1with 41% responses) and Pandemic outbreak (#2 with 40%) are this year's top global business risks withCyber incidents (#3 with 40%) ranking a close third. Theannual survey on globalbusiness risks from Allianz Global Corporate & Specialty (AGCS)incorporates the views of 2,769 experts in 92 countries and territories, includingCEOs, risk managers, brokers and insurance experts.
"The Allianz Risk Barometer 2021 isclearly dominated by the Covid-19 trio of risks. Business interruption,pandemic and cyber are strongly interlinked, demonstrating the growing vulnerabilitiesof our highly globalized and connected world," says Joachim Müller, CEO ofAGCS. "The coronavirus pandemic is a reminder that risk management and businesscontinuity management need to further evolve in order to help businessesprepare for, and survive, extreme events. While the pandemic continues to havea firm grip on countries around the world, we also have to ready ourselves formore frequent extreme scenarios, such as a global-scale cloud outage orcyber-attack, natural disasters driven by climate change or even anotherdisease outbreak."
The Covid-19 crisis continues to representan immediate threat to both individual safety and businesses, reflecting why pandemicoutbreak has rocketed 15 positions up to #2 in the global rankings at theexpense of other risks. Prior to 2021, it had never finished higher than #16 in10 years of the Allianz Risk Barometer, a clearly underestimated risk. However,in 2021, it's the number one risk in 16 countries and among the three biggestrisks across all continents and in 35 out of the 38 countries which qualify fora top 10 risks analysis. Japan, South Korea and Ghana are the only exceptions.
Market developments (#4 with 19%) also climbs up the global rankings of the Allianz Risk Barometer2021, reflecting the risk of rising insolvency rates following the pandemic. According to Euler Hermes, the bulkof insolvencies will come in 2021. The trade credit insurer's global insolvencyindex is expected to hit a record high for bankruptcies, up 35% by the end of2021, with top increases expected in the US, Brazil, China and core Europeancountries. Further, Covid-19will likely spark a period of innovation and market disruption, acceleratingthe adoption of technology, hastening the demise of incumbents and traditionalsectors and giving rise to new competitors. Other risers include Macroeconomic developments (#8with 13%) and Political risks andviolence (#10 with 11%) which are, in large part, a consequence ofthe coronavirus outbreak, too. Fallers inthis year's global rankings include Changes in legislation and regulation(#5 with 19%), Natural catastrophes (#6 with 17%), Fire/explosion(#7 with 16%), and Climate change (#9 with 13%), all clearly supersededby pandemic concerns.
Top Asia Pacific Risks
Similar to the global results, Cyber incidents (#1 with41% responses), Pandemic outbreak(#2 with 39%) and Businessinterruption (#3 with 38%) skyrocketed to the top three business risks inAsia Pacific followed by Natural catastrophes (#4 with 27% ) rounding out the key issues in the region.
Asexpected, Changes in legislation and regulation (#5 with 22%) also keptits place amongst the top five Asia Pacific risks in 2021 for the thirdconsecutive year. This was largely due to the several elections and change inleaderships that took place across the region in Singapore, Taiwan, Indonesia, SouthKorea and Malaysia, as well as the broader implications on supply chains as aresult of China's trade wars and greater uncertainty brought on by governmentsintroducing tough lock down measures.
Commentingon the Asia Pacific results Mark Mitchell, AGCS APAC Managing Director, said:"Companies and even entire sectors, have suffered large business interruptionevents as a result of the pandemic of 2020 and it's the largest catastrophicevent to hit a modern, globalised and interconnected economy. The Pandemic hasdemonstrated just how vulnerable the world and businesses have become tounpredictable multi-country events and this has forever changed the risklandscape for clients and society more generally.
TheCOVID-19 pandemic has not only changed our society, but has also fundamentallychanged the way businesses operate, especially the acceleration towards greaterdigitalisation driven by more companies working remotely. Our hope is thatbusinesses and clients can learn from their experiences in 2020 and make surethey have in place measures which will reduce the impact of similar events inthe future."
Pandemic drives disruption -- now and infuture
Prior to the Covid-19 outbreak, Business interruption (BI) hadalready finished at the top of the global rankings of the Allianz RiskBarometer seven times and it returns to the top spot after being replaced bycyber incidents in 2020. The pandemic shows that extreme global-scale BI eventsare not just theoretical, but a real possibility, causing loss of revenues anddisruption to production, operations and supply chains. 59% of respondentshighlight the pandemic as the main cause of BI in 2021, followed by Cyber incidents (46%) and Natural catastrophes and Fire and explosion (around 30% each).
The pandemicis adding to the growing list of non-physical damage BI scenarios such as cyberor power blackouts. "The consequences of the pandemic -- wider digitalization, moreremote working and the growing reliance on technology of businesses andsocieties -- will likely heighten BI risks in coming years," explains PhilipBeblo, expert in AGCS's global Property underwriting team. "However,traditional physical risks will not disappear and must remain on the riskmanagement agenda. Natural catastrophes, extreme weather or fire remain themain causes of BI for many industries and we continue to see a trend for largerlosses over time."
In response toheightened BI vulnerabilities, many companies are aiming to build moreresilient operations and to de-risk their supply chains. According to AllianzRisk Barometer respondents, improving business continuity management is themain action companies are taking (62%), followed by developing alternative ormultiple suppliers (45%), investing in digital supply chains (32%) and improvedsupplier selection and auditing (31%). According to AGCS experts, many companiesfound their plans where quickly overwhelmed by the pace of the pandemic. Businesscontinuity planning needs to become more holistic, cross-functional, anddynamic, monitor and measure emerging or extreme loss scenarios, be constantlyupdated and tested and embedded into an organization's strategy.
Cyber perils intensify
Cyber incidents may have slipped to#3 globally, in Asia Pacific it ranks #1 for the second consecutive year.Elsewhere in the world, it still ranks as a top three risk in many countries,including Brazil, France, Germany, India, Italy, Japan, South Africa, Spain, UKand the US. The acceleration towards greater digitalization and remoteworking driven by the pandemic is also further intensifying IT vulnerabilities.At the peak of the first wave oflockdowns in April 2020, the FBI reported a 300% increase in incidents alone,while cyber crime is now estimated to cost the global economy over $1trn, up 50% from two years ago. Already high in frequency, ransomwareincidents are becoming more damaging, increasingly targeting large companieswith sophisticated attacks and hefty extortion demands, as highlighted in therecent AGCS cyber risk trends report.
"Covid-19 has shown how quicklycybercriminals are able to adapt and the digitalization surge driven by thepandemic has created opportunities for intrusions with new cyber loss scenariosconstantly emerging," says Catharina Richter, Global Head of the Allianz CyberCenter of Competence at AGCS. "Attackers are innovating using automatedscanning to identify security gaps, attacking poorly secured routers or evenusing 'deepfakes' -- realistic media content modified or falsified by artificialintelligence. At the same time, data protection and privacy regulation andfines for data breaches continue their upward trend."
Risers and fallers
Macroeconomic developments is up to #8 globally and Political risks and violence(#10) returns to the global top10 for the first time since 2018, reflecting the fact that civil unrest, protestsand riots now challenge terrorism as the main exposure for companies. Thenumber, scale and duration of many recent events, including Black Lives Matterprotests, anti-lockdown demonstrations, Hong Kong riots and unrest around theUS presidential election, have been exceptional.As the socioeconomic falloutfrom Covid-19 mounts, furtherpolitical and social unrest is likely, with many countries expected to experience anincrease in activity in 2021 and beyond, particularly in Europe and theAmericas.
Changes inlegislation and regulation drops from the Global ranking from #3 to #5year-on-year. "The pandemic may have caused some delays of the regulatory train,but it did not stop or even derail it. Quite the opposite, 2021 promises tobecome a very busy year in terms of new legislation and regulation,particularly in the areas of data and sustainability," predicts Ludovic Subran,Chief Economist at Allianz. Natural catastrophes falls to #6 from #4 inthe global rankings, reflecting the fact that although aggregated losses frommultiple smaller events such as wildfires or tornadoes still led to widespreaddevastation and considerable insured losses in 2020, it was also the thirdconsecutive year without a single large event, such as Hurricane Harvey in2017.
Climate change also falls to #9 globally. However, the need to combat climate changeremains as high as ever, given 2020 was the joint hottest year ever recorded. "Withthe vaccination campaign coming into effect, climate change will be back on theboard agenda as a priority in 2021," says Michael Bruch, Global Head of ESG atAGCS. "Many companies need to adjust their business for a low-carbon world --and risk managers need to be at the forefront of this transition."
More information on the findings of the Allianz RiskBarometer 2021 is available here:
- Top10 global business risks
- Individualcountry and industry sector results
- Watch a short filmabout the top 10 risks for 2021
About Allianz Global Corporate & Specialty SE
AllianzGlobal Corporate & Specialty (AGCS) SE is a leading global corporateinsurance carrier and a key business unit of Allianz Group. We provide risk consultancy, Property-Casualty insurance solutions and alternative risktransferfor a wide spectrum of commercial, corporate and specialty risks across 10dedicated lines of business.
Our customersare as diverse as business can be, ranging from Fortune Global 500 companies tosmall businesses, and private individuals. Among them are not only the world'slargest consumer brands, tech companies and the global aviation and shippingindustry, but also wineries, satellite operators or Hollywood film productions.They all look to AGCS for smart answers to their largest and most complex risksin a dynamic, multinational business environment and trust us to deliver anoutstanding claims experience.
Worldwide,AGCS operates with its own teams in 31 countries and through theAllianz Group network and partners in over 200 countries and territories,employing over 4,450 people. As one of the largest Property-Casualty units ofAllianz Group, we are backed by strong and stable financial ratings. In 2019, AGCSgenerated a total of €9.1 billion gross premium globally.
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