Allianz Risk Barometer 2022: Business Interruption, Cyber and Climate Change are the top Australian business risks

19 January 2022

Business interruption and Cyber incidents (joint #1 with 41% responses each) are the top Australian business risk for 2022, according to a global survey by leading corporate insurer, Allianz.

The 2022 Allianz Risk Barometer also found Climate Change (#3 with 34%) is a growing risk in Australia, up three spots from 2021; while Natural Catastrophes (#4 with 29%) continues to pose as a growing threat to business following two years significant wild weather events. Changes in legislation and regulation (#5 with 27%) has been ranked within the top 5 risks for Australian businesses for the last five years.

The annual survey from Allianz Global Corporate & Specialty (AGCS) incorporates the views of 2,650 experts in 89 countries and territories, including CEOs, risk managers, brokers and insurance experts.

According to the survey, cyber perils are the biggest concern for companies globally in 2022, with Cyber incidents being named the number 1 global threat for 2022 for only the second time in the survey’s history (44% of responses). The threat of ransomware attacks, data breaches or major IT outages worries companies even more than business and supply chain disruption, natural disasters or the COVID-19 pandemic, all of which have heavily affected firms in the past year.

Business interruption drops to a close second (42%) and Natural catastrophes ranks third (25%), up from sixth in 2021. Climate change climbs to its highest-ever ranking of sixth (17%, up from ninth), while Pandemic outbreak drops to fourth (22%).

“‘Business interrupted’ will likely remain the key underlying risk theme in 2022,” AGCS CEO Joachim Mueller summarises. “For most companies the biggest fear is not being able to produce their products or deliver their services. 2021 saw unprecedented levels of disruption, caused by various triggers. Crippling cyber-attacks, the supply chain impact from many climate change-related weather events, as well as pandemic-related manufacturing problems and transport bottlenecks wreaked havoc. This year only promises a gradual easing of the situation, although further COVID-19-related problems cannot be ruled out. Building resilience against the many causes of business interruption is increasingly becoming a competitive advantage for companies.”

Top Asia Pacific Risks

Cyber incidents (#1 with 40% responses), is the top Asia Pacific risk for the third consecutive year while Business interruption (#2 with 37%) and Pandemic outbreak (#3 with 27%) make up the top three business risks followed by Natural catastrophes (#4 with 25%) rounding out the key issues in the region.

As expected, Changes in legislation and regulation (#5 with 22%) also kept its place amongst the top five Asia Pacific risks in 2022 for the fourth consecutive year. In China, there is continuing crackdown on big internet companies and the US-China geopolitical rivalry has had widespread pressure on economic activity, ranging from trade to technology and investment. 2022 may likely see further political challenges, as the US heads into mid-term elections and China gathers for an all-important Communist Party Congress.

Top Australian Risks

Risk Barometer 2022

In Australia, Business interruption topped the list and marked the fifth consecutive year it was among the top 5 rankings. In a year marked by widespread disruption and extended COVID-lockdown measures, the extent of vulnerabilities in modern supply chains and production networks is more obvious than ever. According to the survey, the most feared cause of business interruption is cyber incidents, which came in second place in the Australian rankings; reflecting the rise in ransomware attacks but also the impact of companies’ growing reliance on digitalisation and the shift to remote working.

According to a recent Euler Hermes Global Trade Report, the COVID-19 pandemic will likely drive high levels of supply chain disruption into the second half of 2022, although mismatches in global demand and supply and container shipping capacity are eventually predicted to ease, assuming no further unexpected developments.

Awareness of business interruption risks is becoming an important strategic issue across entire companies. Maarten van der Zwaag, AGCS Global Head of Property Risk Consulting said: “There is a growing willingness among top management to bring more transparency to supply chains with organisations investing in tools and working with data to better understand the risks and create inventories, redundancies and contingency plans for business continuity.”

Pandemic preparations improve. Next up – making businesses more weatherproof

Globally, the Pandemic outbreak remains a major concern for companies but drops from second to fourth position (although the survey predated the emergence of the Omicron variant). In Australia it dropped from pole position to sixth. While the COVID-19 crisis continues to overshadow the economic outlook in many industries, encouragingly, businesses do feel they have adapted well. The majority of respondents (80%) think they are adequately or well-prepared for a future incident. Improving business continuity management is the main action companies are taking to make them more resilient.

In Australia, the rise of Climate change and Natural catastrophes to third and fourth position respectively is telling, with both upwards trends closely related. Australia has pledged to achieve net zero carbon emissions by 2050. Recent years have shown the frequency and severity of weather events are increasing due to global warming. For 2021, global insured catastrophe losses were well in excess of $100bn – the fourth highest year on record. Hurricane Ida in the US may have been the costliest event, but more than half of the losses came from so-called secondary perils such as floods, heavy rain, thunderstorms, tornados and even winter freezes, which can often be local but increasingly costly events. Examples included the Eastern Australia floods last year, Winter Storm Uri in Texas, the low-pressure weather system Bernd, which triggered catastrophic flooding in Germany and Benelux countries, the heavy flooding in Zhengzhou, China, and heatwaves and bushfires in Canada and California.

Commenting on the Asia Pacific and Australia results Mark Mitchell, AGCS APAC Managing Director, said: “It is no surprise that Cyber is the top Asia Pacific risk for the third consecutive year and second in Australia in light of the high-profile ransomware attacks, combined with problems caused by accelerating digitalisation and remote working.

“Following a year of unprecedented global supply chain disruption, business interruption is a consequence of many of the other risks in the rankings, such as cyber and natural catastrophes and will be a perennial concern for companies the world over and in Asia Pacific. Meanwhile, the pandemic has exposed the extent of vulnerabilities in modern supply chains, and how multiple events can come together to create disruption. There will be a greater need for companies to build resilience to cope with the interconnectivity of risks in future,” he concluded.

View the full global and country risk rankings.

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