Business interruption has topped the executive worry list for 2021, according to Allianz’s annual Risk barometer. But three key risks are almost level pegging in first place in the survey: business interruption (41 per cent), pandemic outbreak (40 percent), and cyber incidents (40%).
“All three risks – and many of the others in this year’s top 10 – are interlinked, demonstrating the growing vulnerabilities and uncertainty of our highly globalized and connected world, where actions in one place can spread rapidly to have global effects,” the report said. “Building greater resilience in supply chains and business models will be critical for managing future exposures.”
Apart from the pandemic, the top two risks have featured in prime positions over the past ten years. But the virus has highlighted how interconnected such risks are. The report says other potential triggers for large-scale business interruption events in future could include environmental or natural disasters, further disease outbreaks, a large-scale cyber- attack or blackout, or even a solar storm.
Many businesses are increasing their focus on digitalisation in response, the report said. But the low ranking given to other risks are a cause for concern, it added.
“Disruption associated with political, economic and social trends, like strikes, protests and civil unrest, is often underestimated,” Philip Beblo, global practice group leader in utilities and services, IT Communication at Allianz Global Corporate and Specialty. “The economic consequences of the pandemic could fuel further political and social unrest in 2021 and beyond, with potential implications for supply chains and business interruption.”
While it was understandable that businesses would increasingly turn to greater digitalisation, the trend could create additional risks.
“The digitalisation of supply chains could potentially reduce the frequency of business interruption events, but it may also lead to more severe disruption when the underlying technology goes wrong,” the report said. “Digitalisation increases transparency in the supply chain, which means organizations can react faster and better. However, a cyber-attack or a technical failure causing a major outage could lead to a severe business interruption event.”
In addition, traditional business interruption threats have not disappeared. Natural catastrophes, extreme weather and fire remain the main causes of business interruption for many industries. They are the biggest threat for manufacturing and industrial plant and equipment.
“Just because emerging risks like cyber are coming onto the stage, it does not mean that traditional business interruption triggers are any less dangerous,” Beblo said. “They will be just as relevant going forward, and in the case of climate change will become even more of a threat to businesses in the future.”