Elevated levels of disruption look set to continue in 2024 as dangers from digitalization, the war in Ukraine, high energy prices and inflation, geopolitical and economic uncertainty, and climate change test already strained business models and supply chains, according to Beinsure Media Top 10 Major Business Risks. The survey focused on companies of varying sizes. Respondents selected the industry they knew well and identified up to three key risks.
Given the ongoing ‘permacrisis,’ business interruption and supply chain disruption emerged as the second top risk, just behind cyber incidents. This ranking highlights the significance of the digital economy, evolving ransomware threats, and geopolitical cyber conflicts.
Despite efforts to diversify business models and supply chains post-Covid-19, businesses still face global disruptions. “The pandemic shocked business models, causing shortages, delays, and higher prices, while the Ukraine war triggered an energy crisis, especially in Europe, driving inflation,” says Oleg Parashchak, CEO of Finance Media Holding.
The Allianz Risk Barometer for this year places business interruption and supply chain disruption second, with 34% of respondents identifying it as a major risk. Cyber incidents, also at 34%, hold the top spot. This reflects the critical role of the digital economy and the increasing threat from ransomware and geopolitical cyber conflicts.
The survey indicates several business interruption-related risks have climbed the rankings due to new economic and political consequences post-Covid-19 and the Ukraine war. The energy crisis, new to the 2023 survey, ranks #4, while macroeconomic developments, such as inflation and potential recession, peak at #3, the highest since the Allianz Risk Barometer began in 2012.
“A cross-sectoral comparison of insurance systemic risk scores with the banking sector shows that systemic risk stemming from insurers remains significantly below that of banks”, says Oleg Parashchak.
The International Association of Insurance Supervisors published its Global Insurance Market Report, sharing the outcomes of this year’s Global Monitoring Exercise (GME), the IAIS’ risk assessment framework to monitor key risks and trends and detect the potential build-up of systemic risk in the global insurance sector. Beinsure Media selected the key points.
The aggregate systemic risk footprint of the insurance sector decreased. Key drivers for the decline in system risk scores of the insurance sector are lower exposures to short-term funding, liability liquidity, intra-financial assets and minimum guarantees on variable products.
Political risks and violence enter the top 10 global risks at #10, while a shortage of skilled workforce rises to #8. Critical infrastructure blackouts or failures, at #12, are also of greater concern than a year ago. Pandemic outbreak concerns have dropped from #4 in 2022 to #13 in 2023, as vaccines have ended lockdowns and restrictions in most major markets. China, however, sees pandemic risk rise from #9 to #3, following the easing of long-standing restrictions.
Cyber incidents, such as IT outages, ransomware attacks, or data breaches, rank as the top global risk for the second consecutive year. Data breaches are the most concerning, with the average cost reaching $4.35mn in 2022, expected to exceed $5mn in 2023. Ransomware attacks and failures of digital supply chains or cloud services follow.
Severe business interruption can result from various cyber-related triggers, including malicious attacks, human error, or technical glitches. Allianz claims analysis shows business interruption is the largest loss driver for cyber insurance claims. Hackers increasingly target both digital and physical supply chains, aiming to attack multiple companies simultaneously and gain leverage for extortion. As large corporations invest more in cybersecurity, small- and mid-size businesses become more frequent targets.
2024 has been shaped so far by geopolitical turbulence and climate-related events, but also economic resilience in the face of persistent inflation.
“Humanitarian concerns are at the forefront of global priorities for society at large, but lingering concerns about financial solvency following failures in the banking sector continue for many business leaders”, says Oleg Parashchak.
Severe business interruption can result from a wide range of cyber-related triggers, including malicious attacks by criminals or nation state-backed hackers, human error or technical glitches.
Allianz claims analysis shows BI is the single biggest loss driver for cyber insurance claims. Hackers are increasingly targeting both digital and physical supply chains, which provide opportunities to simultaneously attack multiple companies and gain additional leverage for extortion, while one consequence of more large corporations investing in cyber security is that small- and mid-size businesses are increasingly targeted.
High inflation, and efforts by central banks to tame it, together with the energy crisis, have resulted in the cost-of-living soaring and the threat of recession.
All three major economic areas – the US, China and Europe – are in crisis at the same time, albeit for different reasons.
Such macroeconomic developments rank as the third top risk for companies in 2024 (25%), up from #10 in 2023. Inflation is a particular concern as higher costs can make certain business models uneconomic while it also has a direct relationship to the cost of BI. Recession is another likely source of disruption in 2023, bringing the potential for supplier failure and insolvency (a new entry in the top global risks at #17). Global business insolvencies are likely to rise by 10% in 2022 and 19% in 2023 as the cost of energy, rising interest rates and wages weigh heavily on profitability and cash flows.
