From Cyber Attacks to Weather Disasters: What Risks Threaten Businesses in 2024

Cyber incidents such as ransomware attacks, data breaches, and IT disruptions are the biggest concern for companies worldwide in 2024, according to Allianz’s Risk Barometer. The closely related danger of business interruption ranks second. Natural disasters (moving from sixth to third place compared to the previous year), fire, explosion (from ninth to sixth place), and political risks and violence (from tenth to eighth place) show the largest increase in the latest compilation of the biggest global business risks, based on the opinions of over 3,000 risk management experts.

Data for Croatia shows that natural disasters such as storms, floods, earthquakes, fires and extreme weather events pose the greatest threat to Croatian companies (from 2nd place to 1st place compared to the previous year), while macroeconomic developments such as inflation, monetary policy, and austerity measures occupy the second place on the Risk Barometer ranking (from 1st place to 2nd place). The lack of qualified workforce ranks third, which is a significant rise on the ranking compared to the previous year when this risk was in sixth place.

– Last year, we witnessed catastrophic weather events resulting from climate change, which pose a significant risk to the operations of numerous companies across Croatia. The role of insurance companies in such situations is crucial as they provide financial resources to citizens and companies through damage payouts based on the coverage of contracted policies, helping them to better cope with the significant damages they have suffered. Croatian companies still recognize inflation as a risk they may face despite inflation rates beginning to ease in the rest of the world, while the shortage of labor and qualified workers is becoming an increasingly significant and dangerous risk faced by companies across almost all industries in Croatia – stated Marijana Jakovac, CEO of Allianz Croatia.

– The biggest risks and main increases in this year’s Allianz Risk Barometer reflect the major issues currently facing companies worldwide – digitalization, climate change, and an uncertain geopolitical environment. Many of these risks are already present, and extreme weather conditions, ransomware attacks, and regional conflicts are expected to further test the resilience of supply chains and business models in 2024. Brokers and clients of insurance companies should be aware and adjust their insurance accordingly – comments Petros Papanikolaou, Director of Allianz Commercial.

Large corporations, medium, and smaller enterprises share the same concern regarding risks – they are all primarily worried about cybersecurity, business interruptions, and natural disasters. However, the gap in resilience between large and smaller companies is increasing as awareness of risk among larger organizations has grown since the pandemic, with noticeable efforts to enhance resilience, the report states. In contrast, smaller companies often lack the time and resources to recognize and effectively prepare for a broader range of risk scenarios, thus requiring more time to restart operations after an unexpected incident.

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photo Allianz

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Expected Increase in Cyber Incidents

Cyber incidents have been ranked as the most important risk globally for the third consecutive year. They represent the greatest danger in 17 countries, including Australia, France, Germany, India, Japan, the UK, and the USA. Respondents of Allianz’s Risk Barometer consider data breaches to be the most concerning cyber threat, followed by attacks on critical infrastructure and physical assets. The recent increase in ransomware attacks ranks third – in 2023, there was a concerning resurgence of activity, with claims activity rising by more than 50 percent compared to 2022.

– Cybercriminals are exploring ways to use new technologies such as generative artificial intelligence to automate and accelerate attacks, create more effective malware, and commit identity theft (phishing). The growing number of incidents caused by poor cybersecurity, particularly on mobile devices, the shortage of millions of cybersecurity experts, and the threats faced by smaller companies due to their reliance on IT outsourcing are also expected to drive cyber activity in 2024 – explains Scott Sayce, Global Head of Cybersecurity at Allianz Commercial.

Business Interruption and Natural Disasters

Despite the easing of supply chain disruptions following the pandemic, business interruption will maintain its position as the second greatest threat in 2024. This result reflects the interconnectivity in an increasingly unstable global business environment, as well as a strong reliance on supply chains for key products or services. Improving business continuity management, identifying bottlenecks in the supply chain, and developing alternative suppliers for businesses remain key risk management priorities in 2024.

Natural disasters in third place show one of the largest shifts, moving up three places. The past year was record-breaking in several areas. It was the hottest year on record, while insured losses exceeded $100 billion for the fourth consecutive year, driven by the largest amount of damage of $60 billion caused by severe thunderstorms. Worldwide, natural disasters are the biggest risk, including in Croatia, Greece, Hong Kong, Hungary, Malaysia, Mexico, Morocco, Slovenia, and Thailand, so it is no surprise that many of these countries experienced some of the most significant events in 2023. In Greece, a forest fire near the city of Alexandroupolis in August was the largest recorded in the EU to date. Meanwhile, severe floods in Slovenia reflected one of the largest supply chain events, causing production delays and shortages of parts for European car manufacturers.

Regional Differences and Rising and Falling Risk Trends

Climate change in seventh place may not change its position on the ranking from year to year, but it is among the top three business risks in countries such as Brazil, Greece, Italy, Turkey, and Mexico. Physical damage to corporate property caused by increasingly frequent and severe extreme weather conditions is a key threat. Among the most exposed are the utilities, energy, and industrial sectors. Additionally, risks associated with the transition to net-zero emissions energy and liability risks are expected to increase in the future as companies invest in new, largely unproven low-carbon technologies to transform their business models.

Given the current conflicts in the Middle East and Ukraine and tensions between China and the USA, it is not surprising that political risks and violence have jumped from tenth to eighth place. The year 2024 is an election year, in which as much as 50 percent of the world’s population could head to the polls, including India, Russia, the USA, and the UK. Discontent with possible outcomes, along with general economic uncertainty, high living costs, and rising amounts of misinformation fueled by social media, means that an increase in social polarization is expected, which will provoke more social unrest in many countries.

However, there is some hope among respondents of Allianz’s Risk Barometer that 2024 could see a calming of the wild economic ups and downs that followed the shock of the COVID-19 pandemic, leading to a drop in macroeconomic developments from third to fifth place. Economic growth prospects remain weak – just over two percent in 2024, according to Allianz’s research.

– But this weak growth is a necessary evil: high inflation rates will finally be a thing of the past. This will give central banks some room to maneuver – lower interest rates are likely in the second half of the year. Not a moment too late as fiscal policy cannot be expected to provide stimulus. A warning is the significant number of elections in 2024 and the risk of further reversals depending on certain outcomes – says Ludovic Subran, Allianz’s Chief Economist.

In a global context, the lack of qualified workforce is considered a lower risk than in 2023, leading to its drop from eighth to tenth place. However, companies in Central and Eastern Europe, the UK, and Australia rank it among the top five business risks. As unemployment remains record low in many countries around the world, companies want to fill more jobs than there are people available to fill them. IT specialists or data experts are considered the hardest to find, making this issue a key aspect in the fight against cybercrime.

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photo Allianz

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