Allianz Risk Barometer: top global cyber business risk for 2024

Data breaches, attacks on critical infrastructure or physical assets, and increased ransomware attacks raise concerns about IT systems. Globally, business interruption remains in second place, with 31% of responses. Natural disasters represent the risk for companies that increases the most compared to 2023, reaching third place, with 26%

According to the Allianz Risk Barometer, cyber risks, such as ransomware attacks, data breaches and IT system disruptions, are the top concern for businesses globally in 2024. In second place is a closely related threat: l interruption of activity. Natural disasters (which rose from 6th to 3rd place compared to the previous year), fires, explosions (from 9th to 6th place) and political risks and violence (from 10th to 8th place) recorded the biggest increases in the latest ranking of the top global business risks, based on the opinions of more than 3,000 risk management professionals.

The risks for companies

Large, medium and small businesses share the same risk concerns: concerns about IT systems, business interruptions and natural disasters. However, the resilience gap between large and small businesses is widening, as risk awareness among larger organizations has grown since the pandemic, with a significant push to improve resilience, the report attests. In contrast, smaller companies often lack the time and resources to effectively identify and prepare for a broader range of risk scenarios and, as a result, take longer to get their business back up and running after an unexpected incident.

“The most important and fastest-growing risks in this year’s Allianz Risk Barometer reflect the big issues facing businesses around the world at this moment in time: digitalisation, climate change and global uncertainty. geopolitical,” commented Petros Papanikolaou, CEO of Allianz Commercial. “Many of these risks already have significant consequences: in 2024, extreme weather, ransomware attacks and regional conflicts will further test the resilience of supply chains and business models. Brokers and clients of insurance companies should be aware of this and adjust their insurance coverage accordingly,” added Papanikolaou.

The Top 10 risks in Italy

In Italy the three main risks are: business interruption (which goes from 2nd to 1st place compared to the previous year) on a par with IT risks (which maintain 1st place) and climate change which jumps from 5th to 3rd place, collecting around a third of the responses. In 4th place we find natural disasters (increasing from 7th in 2023), followed by political risks and violence (from 8th to 5th place) and changes in the macroeconomic scenario (from 4th to 6th place).

Following in the Top 10 ranking in Italy, we find three categories tied for 7th place: loss of reputation or brand value, changes in the markets (from 8th place) and the risk of recalling the product from the market for quality management problems or serial defects. The energy crisis closes the ranking in 10th place, down 7 positions (from 3rd).

“The natural events that hit the country in 2023 were certainly reflected in the responses of those interviewed. In continuity with previous editions, business interruption and cyber risks maintained the first two positions, but climate change and natural disasters climb the rankings. We must be ready and support the concerns of our customers and intermediaries in this area,” said Marco Vincenzi, Regional Managing Director Southern Europe of Allianz Commercial.

Trends driving cyber businesses in 2024

Cyber ​​risks (36% of overall responses) are the most important risk globally for the third consecutive year and for the first time by a clear margin (5 percentage points). They represent the main danger in 17 countries, including Australia, France, Germany, India, Japan, the United Kingdom and the United States. Data breaches are considered the most alarming cyber threat to Allianz Risk Barometer respondents (59%), followed by attacks on critical infrastructure and physical assets (53%). The recent increase in ransomware attacks (2023 saw a worrying resurgence in activity, with an increase in insurance claims of more than 50% compared to 2022) puts them in third place (53%).

“Cybercriminals are exploring ways to use new technologies like generative artificial intelligence (AI) to automate and accelerate attacks, creating more effective malware and phishing. It is also expected that the growing number of incidents caused by inadequate cybersecurity, particularly in mobile devices, the shortage of millions of cybersecurity professionals, and the threat looming over smaller companies due to their reliance on outsourcing of IT will be the factors that will drive cyber activities in 2024,” explained Scott Sayce, Global Head of Cyber ​​at Allianz Commercial.

Business interruption and natural disasters

Despite post-pandemic supply chain disruptions scaling back in 2023, business disruption (31%) maintains its No. 2 position in the global ranking in the 2024 Allianz Risk Barometer. This result reflects the level of interconnectedness in an increasingly volatile global economic environment, as well as the heavy reliance on supply chains for critical products or services. Improving business continuity management, identifying bottlenecks in the supply chain and sourcing alternative suppliers continue to be key risk management priorities for businesses in 2024.

Natural disasters (26%) saw one of the largest increases, with an increase of three places placing them in third place. 2023 was a record year on several fronts. It was the hottest year since records began, while insured losses exceeded $100 billion for the fourth consecutive year due to the highest losses ever recorded, amounting to $60 billion, caused by violent storms . Globally, natural disasters are the number one risk in Croatia, Greece, Hong Kong, Hungary, Malaysia, Mexico, Morocco, Slovenia and Thailand, and many of these countries have experienced some of the most notable events of 2023. In Greece, In August, a fire occurred near the city of Alexandroupolis which was the largest ever recorded in the EU. At the same time, heavy flooding in Slovenia triggered one of the most severe supply chain events, causing production delays and component shortages for European automakers.

Regional differences. Risks increasing and decreasing

Globally, climate change (18%) does not assume greater importance than the previous year, ranking in 7th place, but it is among the top three business risks in Italy – hit by the flood in Emilia-Romagna and record hailstorms in the Northern regions – in Greece, Turkey, Brazil and Mexico. Physical damage to business assets caused by more frequent and severe extreme weather events is a key threat. The utilities, energy and industrial sectors are among the most exposed. Furthermore, transition risks to a zero-emission economy and liability risks are expected to increase in the future as companies invest in new low-carbon technologies to transform their business models, largely not tested.

In light of the ongoing conflicts in the Middle East, Ukraine and tensions between China and the United States, it is not surprising that political risks and violence (14%) rose from 10th to 8th position. 2024 will be a year characterized by very important elections: as many as 50% of the world’s population will be called to vote in countries such as India, Russia, the United States and the United Kingdom. Dissatisfaction with potential outcomes, combined with general economic uncertainty, the high cost of living and growing misinformation fueled by social media, means that the polarization of society is set to increase, sparking further social conflict in many countries.

The prospects for 2024

However, among the interviewees of the Allianz Risk Barometer there is hope that in 2024 we may witness a progressive settlement of the strong economic instability that occurred following the shock of the pandemic, with the result that Macroeconomic developments (19%) fell from 3rd to 5th place. However, according to Allianz Research, economic growth prospects in 2024 remain weak: just over 2% globally. “This lackluster growth must be considered a necessary evil: high inflation rates will finally be a thing of the past and this will give central banks some room for maneuver; interest rates are likely to fall in the second half of the year and no later, because stimulus cannot be expected from budgetary policies. The considerable number of elections in 2024 will need to be closely monitored, the results of which could generate further upheavals,” said Ludovic Subran, Chief Economist at Allianz.

In a global context, skilled workforce shortage (12%) is seen as a lower risk than in 2023 dropping from 8th to 10th position. However, businesses in Central and Eastern Europe, the UK and Australia rate it as one of their top five business risks. Given that unemployment is still at historic lows in many countries around the world, companies are looking for more job positions than there are people available on the job market. The most difficult profiles to find are IT or data experts, a particularly relevant problem in the fight against cybercrime.