Cyber Incidents Top Concern for 2024, According to Allianz

Cyber incidents such as ransomware attacks, data breaches, and information technology (IT) disruptions are the biggest worry for companies globally in 2024, followed by business interruption and natural catastrophes, according to the latest survey from Allianz.

The January 15, 2024, report, titled Allianz Risk Barometer: Identifying the Major Business Risks for 2024, is based on insights from more than 3,000 risk management professionals.

While all sizes of businesses have concerns about cyber, business interruption, and natural catastrophes, the resilience gap between large and smaller companies is widening, as risk awareness among larger organizations has grown since the pandemic with a notable drive to upgrade resilience, the report found. Conversely, smaller businesses often lack the time and resources to identify and effectively prepare for a wider range of risk scenarios and, as a result, take longer to get the business back up and running after an unexpected incident.

Trends Driving Cyber Activity in 2024

Cyber incidents rank as the most important risk globally for the third year in a row. A data breach is seen as the most concerning cyber threat, according to respondents, followed by attacks on critical infrastructure and physical assets. The recent increase in ransomware attacks—2023 saw a worrying resurgence in activity, with insurance claims activity up by more than 50 percent compared with 2022—ranks third, according to the findings.

"Cyber criminals are exploring ways to use new technologies such as generative artificial intelligence (AI) to automate and accelerate attacks, creating more effective malware and phishing. The growing number of incidents caused by poor cyber security, in mobile devices in particular, a shortage of millions of cyber security professionals, and the threat facing smaller companies because of their reliance on IT outsourcing are also expected to drive cyber activity in 2024," explains Scott Sayce, global head of cyber, Allianz Commercial.

Business Interruption and Natural Catastrophes

Despite an easing of post-pandemic supply chain disruption in 2023, business interruption retains its position as the second biggest threat in the 2024 survey. This result reflects the interconnectedness in an increasingly volatile global business environment, as well as a strong reliance on supply chains for critical products or services. Improving business continuity management, identifying supply chain bottlenecks, and developing alternative suppliers continue to be key risk management priorities for companies in 2024, Allianz said.

Natural catastrophes, up three positions from 2022, are the third biggest threat, according to the findings. The year 2023 was a record-breaking year on several fronts. It was the hottest year since records began, while insured losses exceeded $100 billion for the fourth consecutive year, driven by the highest-ever damage bill of $60 billion from severe thunderstorms, Allianz said.

Around the world, natural catastrophes are the top risk in Croatia, Greece, Hong Kong, Hungary, Malaysia, Mexico, Morocco, Slovenia, and Thailand, many of which sustained some of the most significant events of 2023, per Allianz. In Greece, a wildfire near the city of Alexandroupolis in August was the largest ever recorded in the European Union. Meanwhile, severe flooding in Slovenia resulted in one of the biggest supply chain events, causing production delays and parts shortages for European car manufacturers, according to the financial services provider.

Regional Differences and Risk Risers and Fallers

Coming in seventh position in the survey is climate change, which remains among the top three business risks in countries such as Brazil, Greece, Italy, Turkey, and Mexico, Allianz said. Physical damage to corporate assets from more frequent and severe extreme weather events is a key threat. The utility, energy, and industrial sectors are among the most exposed. In addition, net zero transition risks and liability risks are expected to increase in the future as companies invest in new, largely untested low-carbon technologies to transform their business models, Allianz indicated.

Given ongoing conflicts in the Middle East and Ukraine, and tensions between China and the United States, political risks and violence fall in the eighth position, per the survey results. The year 2024 is also a super-election year, where as much as 50 percent of the world's population could go to the polls, including in India, Russia, the United States, and the United Kingdom. Dissatisfaction with the potential outcomes, coupled with general economic uncertainty, the high cost of living, and growing disinformation fueled by social media, means societal polarization is expected to increase, triggering more social unrest in many countries, Allianz advised.

However, survey respondents hope that 2024 could see the wild economic ups and downs experienced since the COVID-19 shock settle down, resulting in macroeconomic developments, falling to third to fifth place. Yet economic growth outlooks remain subdued—just over 2 percent globally in 2024, according to Allianz Research.

"But this lackluster growth is a necessary evil: high inflation rates will finally be a thing of the past," says Ludovic Subran, chief economist at Allianz. "This will give central banks some room to maneuver—lower interest rates are likely in the second half of the year. Not a second too late, as stimulus cannot be expected from fiscal policy. A caveat is the considerable number of elections in 2024 and the risk of further upheavals depending on certain outcomes."

While the shortage of skilled workforce ended in tenth place, businesses in Central and Eastern Europe, the United Kingdom, and Australia identify it as a top five business risk. Given there is still record low unemployment in many countries around the globe, companies are looking to fill more jobs than there are people available to fill them. IT or data experts are seen as the most challenging to find, making this issue a critical aspect in the fight against cyber crime, according to Allianz.