Cybersecurity, supply chain disruptions and resilience, and environmental issues dominate two key reports released last week.
The World Economic Forum’s Global Risks Report and Allianz Global Corporate & Specialty SE’s 2022 Risk Barometer also note the interconnectedness of risks and the continued influence on other risks of the COVID-19 pandemic, which itself is still among the main exhibits.
The Risk Barometer, based on a survey of 2,650 risk management professionals, including Allianz customers and staff, from 89 countries, ranked cyber incidents, business interruptions and natural disasters as the most important global business risks for 2022. Climate change ranked sixth, its highest rank ever, gaining three positions from the 2021 barometer.
Cyber reclaimed the top spot after slipping to second place last year, noted Rani Christie, regional distribution manager, North America, in Alpharetta, Georgia, for AGCS.
“Ransomware attacks, data breaches and information technology outages are reaching unprecedented levels. We’ve seen a trend over the past few years almost as a commercialization of cybercriminal activity,” said Christie.
Risk managers are building resilience to deal with cybercriminals who face a much lower barrier to entry in terms of technical skills and funding, and who have global reach, he said.
The WEF’s Global Risks Report identified rising supply chain and cyber risks among the key challenges in the near term, as climate and environmental issues dominated in the long term. The report is based on the organization’s Global Risk Perceptions Survey, using 959 responses from professionals across eight regions in technology, economics and other fields.
Risk factors often influence each other, as events such as the pandemic have led to changes, such as working from home, which in turn have increased cyber exposures, said Colleen Zitt, director of risks at Zurich North America in Schaumburg, Illinois.
“Digital transformation and working from home have certainly attracted bad cyber actors and ultimately increased the risk for companies and businesses,” she said. “Last year’s report talked about COVID eclipsing much of the risk landscape. This year it hasn’t gone away, evidenced by the way COVID-19 pushes and causes things like a ripple effect.
“The remote work environment we’ve been in for the past few years has obviously created a vulnerability,” Mr. Christie said.
The pandemic has acted almost as a stress test for business systems such as supply chains, exposing weaknesses.
“We started to see where the limits of our supply chain and resiliency were,” said Reid Sawyer, group leader of emerging risks and US cyber advisory practice in Chicago for Marsh LLC.
The interconnectedness of risk factors complicates managing exposures, Sawyer said. “How do you stress test for the pandemic, even the environment, because all of these things intersect with supply chains at some point.”
Business interruption, the second biggest threat according to Allianz’s Risk Barometer, can directly affect supply chains, Mr Christie said, again showing how perils influence each other. “The ripple effect of business interruption is enormous,” he said.
Environmental concerns dominated the long-term view of the WEF’s Global Risks Report, with ‘failure of climate action’, ‘extreme weather events’ and ‘biodiversity loss’ ranking among the three risks most serious over a 10-year horizon. “Clearly a transition is needed from fossil fuels,” Ms Zitt said.
Mr. Sawyer said climate change poses some of the same risks and exposure challenges as COVID-19. “How do we think about systemic risk? It’s the same system dynamics that are now being tested in a way that they haven’t been in the last 10 to 15 years,” he said.