The top risks in the business world

Cyber incidents such as ransomware attacks, data breaches and IT failures are the biggest risk for companies worldwide this year. The closely related general business interruptions follow in second place, while natural disasters jump from 6th to 3rd place year-on-year. Fire and explosions (from 9 to 6) and political risks and violence (from 10 to 8) also climb up this year's ranking. Allianz Risk Barometeras Allianz Commercial writes. For the current edition, more than 3,000 risk experts from 92 countries were asked about their top corporate risks.

3rd place in Switzerland different

Among the participants in the study from Switzerland, cyber attacks and business interruptions also ranked first (2023: 1) and second (2023: 3). Unlike globally, however, changes to laws and regulations - such as customs duties, sanctions or protectionist efforts - ranked third (2023: fifth), according to the data. It is striking that the shortage of skilled workers is perceived as a major risk in Switzerland: In this country, it is in 4th place and has risen three positions compared to the previous year. Globally, the shortage of skilled workers is only ranked 10th as a risk.

Petros Papanikolaou, CEO of Allianz Commercial, comments on the results: "The top risks and biggest risers in this year's Risk Barometer reflect the major challenges - digitalization, climate change and an uncertain geopolitical environment - that companies around the world are facing. Many of these risks have already arrived in the respective domestic markets. Extreme weather events, ransomware attacks and regional conflicts will continue to strain the resilience of supply chains and business models this year. Brokers and insurance customers should therefore be vigilant and adjust their cover accordingly."

Companies of all sizes share the same concerns worldwide: cyberattacks, business interruptions and natural disasters are at the top of the list of top risks, according to the survey. Despite identical risk perceptions, the gap between large and small companies is widening in terms of their resilience. The coronavirus pandemic has made large companies in particular more aware of risks and the associated measures to increase resilience. Smaller companies often have neither the time nor the resources to develop a large number of risk scenarios and prepare for them effectively. As a result, it takes longer for them to get their business back on track after an unexpected incident, according to Allianz.

Cyber security remains the undisputed top risk in 2024

According to the Risk Barometer, cyber incidents (36%) are the main risk for companies for the third time in a row and for the first time by a clear margin of five percentage points. In 17 countries, including Australia, Germany, France, India, Japan, the UK and the USA, experts would classify threats from cyber attacks as the greatest risk. 59% of respondents would name data breaches as the most worrying threat, ahead of attacks on critical infrastructure or assets at 53%. Ransomware attacks would also concern more than half of companies, as these have increased significantly in the past year. In 2023, claims had increased by more than 50 percent compared to 2022.

Business interruptions and natural disasters are causing anxiety for companies. Although disruptions to supply chains have become less frequent since the coronavirus pandemic, business interruptions remain the second biggest risk for companies at 31%. This result illustrates the numerous interdependencies in an increasingly volatile world and the high dependency on supply chains for critical products or services. According to the insurance group, companies' risk management priorities in 2024 should therefore be to ensure business continuity, identify bottlenecks in the supply chain and develop alternative suppliers.

Natural disasters rise from 6th to 3rd place in this year's Risk Barometer with 26%, making them one of the biggest climbers (not so in Switzerland: from 5th to 8th place). 2023 is a record year: for example, it will be the hottest year since records began. In addition, insurance claims would exceed the 100 billion US dollar mark for the fourth time in a row. Severe storms alone accounted for 60 billion US dollars. Natural catastrophes are the top risk in countries heavily affected by various extreme weather conditions, such as Greece, Hong Kong, Croatia, Malaysia, Morocco, Mexico, Slovenia, Thailand and Hungary. A forest fire near Alexandroupolis in Greece last year was the largest natural disaster ever recorded in the EU. Floods in Slovenia caused major disruptions to supply chains. As a result, European car manufacturers and suppliers in particular had to contend with production delays and shortages of components, according to the press release.

Regional differences in risk perception

Although climate change remains in 7th place in the ranking at 18% (Switzerland: from 10th to 9th place), it is among the top 3 risks in Brazil, Greece, Mexico and Turkey. Physical damage to company assets due to extreme weather events is the main threat here. Utilities as well as energy and industrial companies are particularly affected. It is expected that corporate risks on the path to climate neutrality and liability risks will increase, as companies will have to invest a lot of money in new, often barely proven technologies with low CO2 emissions in order to transform their business model.

Due to the ongoing conflicts in the Middle East and Ukraine as well as tensions between the USA and China, political risks and violence would climb from 8th to 10th place (Switzerland: from 4th to 6th place) with 14%. The upcoming super election year, in which more than 50 percent of the world's population will go to the polls, also offers a high risk potential. Particular attention will be paid to the elections in the USA, India, Russia and the UK. Dissatisfaction with the outcome of the elections, combined with general economic uncertainty, the high cost of living and the proliferation of fake news via social media, could in the worst-case scenario lead to further social polarization and increased potential for conflict worldwide.

However, there was also reason for hope among those surveyed. Macroeconomic developments would fall from 3rd to 5th place (Switzerland: from 8th to 7th place) after the sometimes violent economic swings of the Covid years with 19%. Nevertheless, there are still many economic challenges ahead. Data from Allianz Research shows that the global growth outlook for 2024 is unlikely to exceed two percent growth.

"Weak growth is a necessary evil, as high inflation rates will finally be a thing of the past," explains Ludovic Subran, Chief Economist at Allianz. "Central banks will have more room for maneuver, so lower interest rates are likely in the second half of the year. This comes at the right time, as there is likely to be no stimulus from fiscal policy. The numerous elections this year and the associated risks could act as a brake, depending on the outcome."

Skills shortage: lower risk

From a global perspective, the shortage of skilled workers is considered to be a lower risk compared to 2023, at twelve percent and 10th place (previously 8th). The regional picture is different: Companies in Switzerland (4th place), Central and Eastern Europe, the UK, Germany and Australia cite the shortage of skilled workers as a top 5 risk. In many countries, the unemployment rate is still at an all-time low and companies are offering far more jobs than there are applicants to fill them. IT and data experts are particularly hard to find, which is a major problem in the fight against cybercrime.