The 10th annual Allianz Risk Barometer reveals that exposures related to the ongoing COVID-19 pandemic are considered the top business risks in 2021, with business interruption (BI) taking the top spot for the eighth time.
A significant 41% of responses see BI as the top risk to business in 2021, followed by a pandemic outbreak (40%) and cyber incidents (40%) in third place.
The Allianz Risk Barometer is an annual report designed to identify the top corporate risks for the year ahead; based on the insights of over 2,700 risk management experts from 92 countries and territories.
Unsurprisingly, pandemic-related risks lead the way this year as the world continues to grapple with rising infection rates amid new variants of the virus and government enforced restrictions, despite the promising rollout of vaccines.
Pandemic outbreak was the biggest mover this year, jumping from 17th in 2020 all the way up to second place. The report highlights how the top three risks are interlinked, with a pandemic outbreak viewed as the main cause of BI in 2021, followed by cyber.
Previously, pandemic outbreak had never finished higher than 16th in a decade of Allianz Risk Barometer reports, which shows how underestimated the risk was. This year, however, it’s viewed as the top risk in 16 countries and among the three largest risks across all continents and in 35 out of the 38 countries which qualify for a top 10 risk analysis, explains Allianz.
Joachim Müller, Chief Executive Officer (CEO) of Allianz Global Corporate & Specialty (AGCS), a division of Allianz which runs the report, commented: “The Allianz Risk Barometer 2021 is clearly dominated by the Covid-19 trio of risks. Business interruption, pandemic and cyber are strongly interlinked, demonstrating the growing vulnerabilities of our highly globalized and connected world.
“The coronavirus pandemic is a reminder that risk management and business continuity management need to further evolve in order to help businesses prepare for, and survive, extreme events. While the pandemic continues to have a firm grip on countries around the world, we also have to ready ourselves for more frequent extreme scenarios, such as a global-scale cloud outage or cyber-attack, natural disasters driven by climate change or even another disease outbreak.”
BI had previously taken the number one spot seven times, and returns to the top of the list for 2021 after coming in behind cyber last year.
BI-related COVID-19 exposure has been a constant topic of debate throughout the pandemic, and especially over the past week after the UK Supreme Court ruled largely in favour of policyholders on the Financial Conduct Authority’s (FCA) BI insurance test case.
While responses to our recent poll shows that the industry is split over the Court’s judgment, 59% of responses to the Allianz Risk Barometer highlight pandemic as the main cause of BI in 2021, followed by cyber incidents at 46%, and natural catastrophes and fire and explosion both at around 30% each.
Philip Beblo, an expert in AGCS’s global Property underwriting team, said: “The consequences of the pandemic – wider digitalization, more remote working and the growing reliance on technology of businesses and societies – will likely heighten BI risks in coming years.
“However, traditional physical risks will not disappear and must remain on the risk management agenda. Natural catastrophes, extreme weather or fire remain the main causes of BI for many industries and we continue to see a trend for larger losses over time.”
Turning to cyber, and although it fell to third place for 2021, the exposure still ranks as a top three risk in numerous countries as digitisation accelerates and interconnectedness continues to intensify; trends exacerbated by heightened remote working in response to the pandemic.
Catharina Richter, Global Head of the Allianz Cyber Center of Competence at AGCS, commented: “Covid-19 has shown how quickly cybercriminals are able to adapt and the digitalization surge driven by the pandemic has created opportunities for intrusions with new cyber loss scenarios constantly emerging.
“Attackers are innovating using automated scanning to identify security gaps, attacking poorly secured routers or even using ‘deepfakes’ – realistic media content modified or falsified by artificial intelligence. At the same time, data protection and privacy regulation and fines for data breaches continue their upward trend.”
Outside of the top three, and market developments such as M&A; intensified competition/new market entrants; and market stagnation/fluctuation sits in fourth (19% of responses) place this year. While changes in legislation and regulation (19%) completes the top five.
Natural catastrophes fell from fourth to sixth on the list year-on-year with 17% of responses, followed closely by fire/explosion in seventh position, with 16% of responses.
Completing the top ten risks for businesses in 2021 are macroeconomic developments in eighth place with 13% of responses, climate change/increasing volatility of weather in ninth place (13%), and finally, political risks and violence in tenth, with 11% of responses.