Allianz Risk Barometer 24: what risks threaten your business?

As we venture into 2024, the global business landscape is becoming increasingly complex and unpredictable. To ensure sustainable growth and success, companies must be aware of, and proactively address the potential risks that could impact their operations. In this article, we will delve into the top risks identified by the Allianz Risk Barometer for 2024, covering a range of factors including; cyber incidents, business interruption, natural catastrophes, changes in legislation, macroeconomic developments, fires, climate change, political risks, market developments, and concerns about a shortage in skilled workers.

The risks identified in the report are ranked by a panel of 3,069 risk management experts from 92 different countries across 24 industry sectors. The report looks at how these risks are developing on a global scale, impacting businesses not just in the UK, but worldwide. By conducting this research, insurers like Allianz can ensure they are able to provide the best protection possible to their business customers.

Click here to access the full report.

According to the Allianz report:

“The top risks in this year’s Allianz Risk Barometer reflect the big issues facing companies right now – digitalisation, climate change and an uncertain geopolitical environment. Many of these risks are already hitting home, with extreme weather, ransomware attacks and regional conflicts testing the resilience of supply chains and business models. The fast pace of change, and the growing interconnected nature of risk, likely necessitates a shift up in gear for many companies when it comes to risk management.”

If you are a business owner who has questions about the risks posed to your business and wish to speak to an advisor about the insurance covers that can help protect you, contact our experts to find out more. Our trained advisors are on hand to review your current business insurance to ensure you have the right cover in place.

The biggest risk identified in this year’s report is cyber risk. By the start of the next decade, it is predicted that ransomware risk alone will cost victims $265bn annually. Cyber threats have become increasingly sophisticated, posing a significant risk to businesses of all sizes. The rise in remote work and reliance on digital systems has further exposed organisations to potential data breaches, ransomware attacks, and other cyber incidents. To mitigate these risks, companies should prioritise investment in robust cybersecurity measures such as firewall protection, encryption, multi-factor authentication, and regular security audits. Additionally, employee training on recognising and responding to cyber threats is crucial to enhance overall resilience, alongside having adequate cyber insurance in place.

Disruptions to business operations can arise from various sources, including supply chain disruptions, equipment failure, natural disasters, or even the insolvency of key suppliers. The COVID-19 pandemic served as a poignant demonstration of this and is something many businesses are still dealing with even today. Business interruptions can result in revenue loss, reputational damage, and increased costs. To minimise the impact, businesses should conduct comprehensive risk assessments, mapping out critical dependencies and vulnerabilities in their supply chains. Implementing contingency plans, diversifying suppliers, and maintaining business interruption insurance coverage can help mitigate the financial and operational risks associated with business interruptions.

Globally, the total economic losses from natural catastrophes are estimated to be at $260bn during 2023 alone. The frequency and severity of natural disasters, such as hurricanes, earthquakes, floods, and wildfires, are on the rise due to climate change. These events can lead to physical damage, disruption in operations, and even temporary or permanent closure of businesses. To prepare for natural catastrophes, companies should conduct thorough risk assessments to identify potential vulnerabilities, invest in resilient infrastructure, and develop comprehensive disaster recovery plans. Collaborating with local authorities and insurance providers can also help businesses mitigate the financial impact of such events.

It goes without saying that the decisions made by policy makers globally can have a trickle-down effect on businesses. Changes in legislation and regulatory frameworks can significantly impact companies big and small, particularly those with operations across different jurisdictions. Businesses must stay informed about emerging laws and regulations, assess their potential impact, and proactively adapt their operations to remain compliant. Establishing ongoing relationships with industry associations and policymakers can provide businesses with valuable insights and opportunities to influence regulatory developments that may impact their operations.

In the UK alone, we have recently experienced interest rates skyrocket, as well as huge hikes in the general cost of living which has had an impact, not just on businesses, but on their customers too. Global economic uncertainties, currency fluctuations, trade tensions, and political instability can significantly impact businesses' financial performance. To navigate these risks, organisations should closely monitor macroeconomic indicators, conduct scenario planning exercises, and assess the potential impact on their operations. Diversifying customer bases and supply chains across multiple regions can help mitigate risks associated with economic uncertainties in specific markets.

Fire will always pose a risk to businesses because of its devastating nature. Fires can cause severe damage to businesses, endangering employees' safety, damaging assets, and disrupting operations. To mitigate this risk, companies should implement robust fire prevention measures, including fire detection systems, regular safety audits, and employee training on fire safety protocols. Adequate insurance coverage tailored to the specific needs of the business is crucial to ensure financial protection in the event of a fire-related incident.

The impacts of climate change, such as extreme weather events, rising sea levels, and changing weather patterns, can pose substantial risks to businesses. Climate change also has a direct impact on the occurrence of natural catastrophe events. So as global temperatures continue to rise, the chance of a natural disaster impacting your business rises also. Organisations should conduct comprehensive risk assessments to identify climate-related vulnerabilities specific to their operations and supply chains. Developing climate adaptation strategies, such as implementing sustainable practices, investing in renewable energy sources, and fortifying infrastructure against climate-related risks, is essential for long-term business sustainability and resilience.

Macroeconomic risks can occur as a result of political risks as we have seen over the past few years in response to global conflicts and other political uncertainties. Although these are on a global scale, the impact is still felt by even the smallest businesses across the world. Political instability, social unrest, terrorism, and trade disputes can disrupt business operations, particularly for companies operating globally. Organisations should stay informed about geopolitical developments, monitor political risks in their operating regions, and conduct thorough risk assessments to identify potential vulnerabilities. Establishing crisis management protocols, including communication plans and alternative supply chain options, can help businesses respond effectively to political risks and minimise potential disruptions.

Rapid technological advancements, changing consumer behaviours, and competitive market dynamics require businesses to remain agile and adapt to evolving market conditions. Companies should invest in research and development, continuously monitor market trends, and embrace innovation to stay ahead of the competition. Building strong customer relationships, ensuring excellent customer service, and leveraging data-driven insights can help businesses identify new opportunities and mitigate risks associated with market developments.

Over the next six years, the global population of people of a ‘working age’ is expected to decline from 265m to 258m, contributing to a potential worldwide talent shortage. The global workforce is undergoing significant changes, including demographic shifts, technological advancements, and changing skill requirements. To address the shortage of skilled workers, companies should invest in talent management strategies, including attracting and retaining top talent through competitive compensation packages and opportunities for professional growth. Providing comprehensive training and development programs, fostering a culture of inclusivity, and leveraging technology to streamline operations can help address the talent gap and ensure long-term business success.

Through consultation with businesses across the globe, the Allianz Risk Barometer highlights what business owners are most worried about in the coming 12-months. The risk posed by some of the things discussed in this report are dynamic and business owners should take time to regularly assess these risks to ensure they are doing what they need to do to protect their business, their employees and their customers.

If you’re a business owner who is concerned about some of the risks highlighted in this article, don’t forget that our team of advisors are on hand to discuss your business insurance needs with you. Contact us today to discuss your business insurance needs.