Allianz Risk Barometer: Energy crises as an emerging risk

The Allianz Risk Barometer is an annual ranking published by the eponymous corporate insurer with a view to the biggest corporate risks. The survey was addressed to 2712 risk experts from 94 countries. For the second year in a row, the Allianz Risk Barometer shows that companies currently see themselves most at risk from cyber incidents and business interruption. At the same time, they see inflation, an impending recession and the energy crisis as immediate threats to their business. Companies from Europe and the USA are particularly concerned about the ongoing "perma-crisis" now resulting from the consequences of the pandemic, but also from the economic and political consequences of the war in Ukraine.

Nevertheless, Allianz writes that it is pleased that many of its customers are seeing continuous improvements in resilience and risk management. Many companies have made their supply chains more robust and are now better equipped to withstand disruptions to their business operations. There has also been increased investment in IT security. It seems that this has been the central task of many companies in recent years.

In 2023, however, the Allianz Risk Barometer's top four risks will remain across all company sizes. Furthermore IT failures, cyber incidents, ransomware attacks and data breaches ranked as the greatest risk, globally. According to the Allianz Cyber Center of Competence, the frequency of ransomware attacks remains elevated in 2023, while the average cost of a data breach is at an all-time high of $4.35 million and could cross the $5 million threshold this year. The conflict in Ukraine and other geopolitical tensions increase the risk of a large-scale cyberattack by state-sponsored actors. In addition, there is a growing shortage of cybersecurity professionals, which presents additional challenges to improving security.

For companies in many countries, 2023 is likely to be another year of increased risk for Business interruptions (BU), as many business models are vulnerable to sudden changes, which in turn affect revenues and profits. In countries such as Brazil, Germany, Mexico, the Netherlands, Singapore, South Korea, Sweden and the USA, business interruption is the second top risk worldwide.

The range of disruption sources is wide. Cyberattacks are the cause of BU most feared by companies (45 % of responses), followed by the energy crisis (35 %) and natural disasters (31 %). Skyrocketing energy costs have forced energy-intensive industries in particular to use energy more efficiently, move production to alternative locations, or even consider temporary shutdowns. The resulting shortages threaten to cause supply disruptions in a number of critical industries in Europe, such as food, agriculture, chemicals, pharmaceuticals, construction and manufacturing.

Risk ascenders and descenders

The energy crisis is the most worrisome risk, appearing in the Allianz Risk Barometer in new or 4th place (22 %). Some industries, such as chemicals, fertilizers, glass and aluminum production, can be dependent on a single source of energy - Russian gas in the case of many European countries - and are therefore vulnerable to disruptions to the Energy supply or price increases. When such basic industries experience problems, the impact can be felt in other sectors further down the value chain, according to Allianz. According to Allianz Trade, the energy crisis represents the biggest profitability shock for European companies. At current levels, the Energy prices wipe out profits for most industrial companies as pricing power dwindles in the face of weakening demand.

Economic crises

Macroeconomic developments such as inflation or volatility in economic and financial markets rank as the third biggest risk for companies worldwide in 2023 (25 % of responses), up from 10th place in 2022. It is the first time in a decade that this risk has "made it" into the top3. All three major economies - the United States (US), China and Europe - are in economic crisis at the same time, albeit for different reasons.

Source: AGCS