Insurance carrier Allianz recently published its ninth annual Risk Barometer, surveying more than 2,700 risk management experts to identify the top 10 business risks in 2020. Included on the list are new additions such as cyber and climate change, and more traditional liabilities such as business interruption, and loss of brand reputation.
For the first time, cyber ranked as the top global risk. Increased reliance on data and IT systems, and high-profile cases have made businesses aware of potential cyber threats, including data breaches, business email compromise incidents, and the prospect of litigation.
Data breaches are the primary cause of cyber threats, respondents said. Data privacy protections and privacy regulations have increased the cost of resolving issues. A breach involving more than one million records averages $42 million; those involving records of 50 million or more cost on average $388 million, according to Compliance Week.
Ransomware and spoofing attacks--emails duping employees into revealing login information and fraudulent transactions--have increased in frequency and sophistication. Employee preparation and training to prevent human error, often the cause of cyber issues, are the most effective methods of prevention.
Business interruption ranked as the second most-pressing issue, followed by changes in legislation and regulation. Advances in environmental laws and protections are encouraging businesses to incorporate sustainability into their risk management procedures, and companies staying ahead of future legislation are focusing on data gathering, target-setting, and measurement implementation.
The Risk Barometer cited natural disasters, market developments, and fires/explosions as other global risk areas. Respondents ranked climate change for the first time. Growing regulatory and governmental pressure on carbon pricing; energy and efficiency mandates; mobility regulations; industry-specific taxes; and fines means businesses must address risks and implement de-carbonizing measures to mitigate physical losses, operational impact, and market changes.
Loss of brand reputation made the list. More than a quarter of reputational crises spread within an hour of the incident; more than two-thirds within 24 hours. The impact of reputation on stock price has doubled since the introduction of social media. Planning and crisis management are necessary capabilities to prepare for such occurrences.
The list ends with new technologies and macroeconomic developments complicated by decision transfer, lack of transparency, and human oversight resulting from AI.