The two significant challenges that the Allianz Risk Barometer 2020 highlight are climate change and cyber risk. Climate change has risen to its highest ever position on the barometer (ranking at seventh place, with 27 per cent of the votes), while cyber incidents have taken the top spot in 2020, as voted for by 39 per cent of respondents.
Elsewhere, BI ranks second; changes in legislation and regulation, third; natural catastrophes, fourth; and market developments, fifth. These are all the prime concerns and challenges facing the industry according to 2,718 risk management experts from 102 countries and 22 industry sectors.
With companies’ increasing reliance on data and IT systems, awareness of cyber threat has grown exponentially in the last few years; seven years ago, it ranked as low down as 15th, with only six per cent of respondents’ votes. And, in addition to being the top risk globally, cyber incidents are among the top three risks in many of the countries surveyed (Austria, Belgium, France, India, South Africa, South Korea, Spain, Sweden, Switzerland, the UK and the US). Indeed, a mega data breach – involving more than one million compromised records – now costs on average US$42 million, up eight per cent year on year.
“Incidents are becoming more damaging, increasingly targeting large companies with sophisticated attacks and hefty extortion demands. Five years ago, a typical ransomware demand would have been in the tens of thousands of dollars. Now they can be in the millions,” says Marek Stanislawski, Deputy Global Head of Cyber, AGCS.
On the other hand, risks concerning climate change and changes in legislation and regulation – categories which have both have made a considerable jump up the barometer since 2019 – are likely driven by the US-China trade war, Brexit and the ever-prevailing perils of global warming. In fact, climate change is already in the top three business risks for the Asia-Pacific region overall, and businesses most fear an increase in physical losses, the study reveals.
“There is a growing awareness among companies that the negative effects of global warming above two degrees Celsius will have a dramatic impact,” said Chris Bonnet, Head of ESG Business Services at AGCS. “Failure to take action will trigger regulatory action and influence decisions from customers, shareholders and business partners. Ignoring climate risk is more costly than grappling with it. Therefore, every company has to define its role, stance and pace for its climate change transition – and risk managers need to play a key role in this process alongside other functions.”
Ultimately, as Joachim Müller, CEO of AGCS, suggests, corporate boards and risk managers should act to address cyber and climate change risks, or else risk a critical impact on their companies’ operational performance, financial results and reputation with key stakeholders. “Preparing and planning for cyber and climate change risks is both a matter of competitive advantage and business resilience in the era of digitalisation and global warming,” he said.