COVID-19-related threats top the Allianz Risk Barometer 2021, reflecting the potential disruption and loss scenarios companies face in the wake of the coronavirus pandemic. Business interruption (No. 1 with 41% of responses) and the pandemic outbreak itself (No. 2 with 40%) are the biggest business risks this year, with cyber incidents (40% of responses) taking third place.

The annual global business risk survey conducted by Allianz Global Corporate & Specialty (AGCS) covers the views of 2,769 experts from 92 countries around the world. Every year, board members, risk managers, brokers and insurance experts take part in the survey.

- The Allianz Risk Barometer 2021 is clearly dominated by COVID-19-related threats. Business interruption, the pandemic and cyber are closely interlinked, which shows the growing vulnerability of our highly globalized and connected world. The coronavirus pandemic has reminded us all that risk and business continuity management must evolve to help companies prepare for extreme events and, ultimately, help them survive. Although the pandemic is still very much present around the world, we must also prepare for more frequent extreme scenarios, such as system failures, cyber attacks, natural disasters caused by climate change or even the outbreak of another disease pandemic - says Joachim Müller, CEO of AGCS

The biggest risks in the world

The COVID-19 health crisis continues to pose a direct threat both to individual safety and to businesses. This reflects why the pandemic outbreak jumped 15 places in the Barometer - to second place in the ranking. Until now, according to respondents, the pandemic as a threat had never ranked higher than 16th in the Allianz Risk Barometer over the past 10 years. This only shows that until now it was a risk clearly considered remote and underestimated. However, in 2021 it is the number one risk in 16 countries. It is also among the three biggest threats on every continent.

Market developments (4th place with 19%) are also climbing in the Allianz Risk Barometer 2021, reflecting the risk of rising insolvency rates after the pandemic. According to Euler Hermes, most insolvencies will occur precisely in 2021. Experts estimate that the global insolvency rate for the trade credit insurer will reach a record level for bankruptcies, reaching 35% by the end of 2021. The largest increases are expected in the US, Brazil, China and major European countries. Other threats include macroeconomic changes (#8 with 13%) and political risks and violence (#10 with 11%), which are largely also a consequence of the coronavirus pandemic. Declines in this year's survey include changes in legislation and regulation (#5 with 19%), natural disasters (#6 with 17%), fires and explosions (#7 with 16%) and climate change (#9 with 13%). All clearly displaced by pandemic-related concerns.

Responses from Polish experts

- It is no surprise that the pandemic outbreak tops the ranking in the Barometer in 2021 according to Polish experts. The pandemic has significantly changed the perception of risks facing both citizens and businesses. This can also be seen in the further responses of experts, who indicated that the second-biggest business risk this year is business interruption. And this is directly linked, among other things, to coronavirus-related restrictions – says Tomasz Kryłowicz, Allianz Poland. Changes in legislation and regulations (30%) made it onto the podium of the biggest threats. Interestingly, cyber incidents, which for years had been among the three biggest risks, this year rank only 5th (22%). Polish respondents also indicated a new risk that had not previously appeared in the rankings – political risks and violence. – The emergence of this risk in this year's ranking may be directly linked to social sentiment both in the country and around the world – adds Tomasz Kryłowicz.
COVID-19 the biggest business risk [REPORT] — illustration 1

The pandemic causes disruption - now and in the future

BI – an extreme risk

COVID-19 as the biggest business risk

COVID-19 the biggest business risk: results of the Allianz Risk Barometer

Before the outbreak of COVID-19, business interruption (BI) had already topped the global Allianz Risk Barometer seven times and returns to first place after being replaced by cyber incidents in 2020. The pandemic shows that the extreme global scale of a BI event is not just theory, but a real possibility, causing loss of revenue and disruption to production, operations and supply chains. 59% of respondents indicate the pandemic as the main cause of BI in 2021, followed by cyber incidents (46%) and natural disasters and fires and explosions (around 30% each). In addition, the pandemic is expanding the growing list of "non-physical" BI scenarios, such as cyber failures or power outages. - The consequences of the pandemic - broader digitalization, remote work and the growing dependence of companies and societies on technology - are likely to increase BI risk in the coming years - explains Philip Beblo, an expert in the global property insurance team at AGCS. - However, traditional threats will not disappear and must remain in the risk management agenda. Natural disasters, extreme weather conditions or fires remain major causes of BI in many industries and we continue to see a trend toward larger losses over time.

Cyber threats are growing

Cyber risk is gaining momentum

Cyber incidents may have fallen to 3rd place, but they remain a major threat with more respondents than in 2020. They are still in the top three threats in many countries, including Brazil, France, Germany, India, Italy, Japan, South Africa, Spain, the United Kingdom and the United States. The acceleration toward greater digitalization and remote work triggered by the pandemic further increases IT vulnerabilities to threats. At the peak of the first wave of lockdowns in April 2020, the FBI recorded a 300% increase in incidents. It is also estimated that cybercrime cost the global economy more than $1 trillion, or 50% more than two years ago. Ransomware-related incidents, which are already frequent, are becoming increasingly harmful and increasingly targeted at large companies.

- Covid-19 showed how quickly cybercriminals are able to adapt, and the rapid increase in digitalization caused by the pandemic created opportunities for intrusions with new cyber loss scenarios - says Catharina Richter, global head of the Allianz Cyber Center of Competence at AGCS. - Attackers are innovating, using automated scanning to identify vulnerabilities, attacking poorly secured routers or even using "deepfake" - realistic multimedia content modified or falsified by artificial intelligence. At the same time, data protection and privacy regulations and penalties for data breaches continue to trend upward.

Summary

The Allianz report indicates that the COVID-19 pandemic dominated this year's risk ranking. Business interruption (41% of responses), the pandemic outbreak (40%) and cyber incidents (40%) are the biggest threats to companies worldwide. In Poland, experts placed the pandemic, business interruption and changes in legislation on the podium, while cyber risk fell to 5th place.

The Allianz Risk Barometer shows that the pandemic increased vulnerability to cyber attacks – the FBI recorded a 300% increase in incidents in April 2020. Global losses from cybercrime exceeded $1 trillion, and experts warn of new scenarios such as ransomware attacks and deepfake.