Cyber incidents have been ranked as the top business risk in the Allianz Global Risk Barometer 2020, knocking business interruption from a top spot it had held for seven consecutive years.
According to the Allianz study, which focuses on large and small- to mid-sized enterprises in 22 industry sectors and 102 countries, cyber incidents (including cybercrime, IT failure/outage, data breaches, fines and penalties) were the top concern, followed by business interruption, changes in legislation and regulation, natural catastrophes, and market developments.
Other business risks to make the top 10 globally include: fire and explosion, climate change and the increasing volatility of weather, and macroeconomic developments. The complete list of top business risks around the world in 2020, according to the Allianz Global Risk Barometer, is below:
- Cyber incidents
- Business interruption
- Changes in legislation and regulation
- Natural catastrophes
- Market developments
- Fire, explosion
- Climate change
- Loss of reputation or brand value
- New Technologies
- Macroeconomic developments
The threat landscape varies around the world. While cyber and business interruption featured as top business risks in almost all countries, the final ‘top three’ spot was more hotly contested. For many countries, concerns revolved around changes to legislation and regulation, but there was also a lot of worry worldwide about fire and explosion, and natural catastrophes.
Cyber incidents have been ranked as the top business risk in the USA for 2020. Cyber replaces business interruption, which has moved down into second spot, and natural catastrophes remain in third place. Bill Scaldaferri, CEO of AGCS North America said “its no surprise” cyber incidents have emerged as the top risk for US businesses in 2020. It follows a year filled with significant cyber events, including the Capital One breach, which saw 106 million records exposed on March 22 and 23, 2019, making it one of the biggest breaches in history.
Scaldaferri commented: “Increasing connectivity and sophistication of attacks have been driving up the frequency and severity of incidents for some time. Given that most cyber insurance is written in the US this risk will continue to influence the direction of our industry and encourage close portfolio reviews of silent exposures.”
UK businesses have also selected cyber as the top business risk for 2020, followed by changes in legislation/regulation and business interruption respectively. The start of the new decade brings about a period of huge uncertainty for the UK, with its impending exit from the European Union and the potential economic fallout from such a move.
Canadian companies have ranked business interruption as their top threat in 2020, with cyber incidents coming in second place, and changes in legislation/regulation following in third. Linda Regner-Dykeman, chief agent, AGCS Canada, said it’s no surprise that BI and cyber continue to be major exposures for Canadian businesses.
She commented: “Changes in legislation and regulation has moved up significantly to 3rd, chosen as a top risk by almost a third of respondents. Trade wars, tariffs, economic sanctions and protectionism have companies concerned about the instability of future markets. We must ensure underwriters ask the right questions in order to understand today’s risks and exposures and find solutions accordingly to help manage this uncertainty.”
As unprecedented bushfires continue to reap havoc across multiple Australian states, it’s hardly surprising that climate change has made it into Australia’s top three business risks (in third spot). James Stack, CEO of AGCS Australia, said: “Fuelled by rising temperatures and extreme dry weather attributed in part to climate change, these fires not only cause physical property damage, but also potential business interruption as the smoke causes hazardous air quality levels. With increased awareness, and first-hand experience of the negative impact, it is no surprise to see climate change in the top three Australian risks for the first time.” The top business risk voted by Australia companies was changes in legislation/regulation, followed by cyber incidents.
“With the country locked in a trade war with the US that does not look to be fully resolved any time soon, risk managers in China have chosen business interruption as their top risk, again, as the unpredictable nature of tariff announcements has made it difficult to plan accurately for the future,” said Patrick Zeng, CEO of AGCS Hong King and Greater China. A new risk in the top three for China this year is cyber incidents. This reflects greater global understanding of cyber risk and its potential impact upon businesses.