Cyberattacks, business interruption, talent shortage among top business risks in 2023 – Allianz
The annual report accounts for the views of 2,712 risk management experts from 94 countries and territories, who ranked the most significant perils that their organizations face.
It found that despite positive efforts to diversify business models and supply chains in 2022, many businesses continue to be impacted by disruption, shortages, and higher costs. The war in Ukraine, which triggered an energy crisis in Europe, has also aggravated inflation globally.
At the same time, rapid digitization has made cyber incidents the top concern in the Allianz ranking for a second year. Businesses must guard against the evolving threats from ransomware and social engineering, as well as the geopolitical conflicts being played out in cyber space.
What are the most important business risks for 2023?
The most important global business risks for 2023 according to the Allianz Risk Barometer are:
Macroeconomic developments such as inflation and monetary policies
The energy crisis
Changes in legislation and regulation
The shortage of skilled workers
Fire and explosion
Political risks and violence
In the US, the top three risks (in order of concern) are business interruption, cyber, and macroeconomic developments. In Canada, the top three risks are cyber, the shortage of skilled workers, and climate change.
Thomas Varney (pictured), North American regional manager for Allianz, said this year’s results were unsurprising.
“In 2022, we were coming up out of the pandemic and things were starting to move forward. From a North America standpoint, inflation, market volatility, recession and those other macroeconomic aspects weren’t as felt as they are now because we were still in the beginning of that whole situation,” he told Insurance Business.
The talent crisis, which entered the global top-10 list this year, is notable for the US and Canada. Many industries, particularly aviation and aerospace, engineering, and professional services sectors, are struggling to plug the skilled labor gap. According to data from the World Economic Forum, there were almost two unfilled positions for every jobseeker in the US at the end of 2022.
“Organizations are still in a situation where they can’t find skilled workers. How can we replace workers that have decided to retire or not return to the workplace after the pandemic?” Varney said. “It’s interesting because your workforce is the engine that makes things go.”
Natural catastrophes, which dropped three positions in the 2023 ranking, appeared to be overshadowed by other developments in the risk landscape. But businesses in the US and Canada can’t afford to be complacent, especially after single events such as Hurricanes Ian and Fiona continue to cause billions of dollars in losses.
Similarly, US and Canadian business leaders should also keep a close eye on the global energy crisis, according to Varney. “The energy crisis was felt a bit less in North America than it was globally. But it’s something we need to keep track of and see how things work out as we go forward in 2023,” he said.
How are small- to medium-sized enterprises impacted by the biggest business risks in 2023?
Small- (less than US$250 million revenue) and mid-sized (between US$250 million and US$500 million revenue) businesses made up about half of the Allianz Risk Barometer respondents. While the top perils for these businesses mirrored those impacting larger enterprises, the potential consequences are significantly more severe.
“The number of resources [to address risks] may not always be there for small- to medium-sized businesses,” Varney said. “At a smaller company, they may not have a specific cyber person, for instance, or the person in charge wears many hats. Whereas at a larger company, you could have an entire team involved in mitigating cyber risks.”
Cyber incidents and business interruption (including supply chain disruption) ranked as a top-three risk in both small- and mid-sized firms. Additionally, inflation and soaring costs threaten these companies’ cash flows and, in many cases, cause insolvency.
How can brokers help organizations manage business risks in 2023?
Organizations need to step up their efforts to strengthen their businesses and supply chains against a vast array of exposures. According to the Allianz report, the most common action taken by business leaders is to make supply chains more resilient by diversifying suppliers and developing alternative of multiple sources.
“Being flexible, adaptable and more agile will be important because there’s going to be an ever-changing landscape,” Varney said.
Building resiliency and a robust continuity plan will also be key risk management strategies for organizations big and small, according to the executive. When it comes to managing cyber risk, for example, brokers should encourage their clients to take thorough stock of their cybersecurity measures and cyber insurance policies.
“Companies should look at the use of technology within their operation and make sure they are insured or take action to reduce or eliminate risks,” Varney said.
What is your take on the most significant business risks for 2023? Leave your thoughts in the comments below.