Cyber incidents, such as IT outages, ransomware attacks or data breaches, ranks as the most important risk globally for the second year in succession – the first time this has occurred. It also ranks as the top peril in 19 different countries, among them Canada, France, Japan, India and the UK. It is the risk that small companies (<$250mn annual revenue) are most worried about.

“For many companies the threat in cyber space is still higher than ever and cyber insurance claims remain at a high level. Large companies have become accustomed to being targeted and those with adequate cyber security are able to repel most attacks more effectively. Increasingly, more small- and mid-size businesses are also being impacted. These tend to underestimate their exposure and need to continuously invest in strengthening their cyber control framework,” says Shanil Williams, AGCS Board Member and Chief Underwriting Officer Corporate, responsible for cyber underwriting.

According to the Allianz Cyber Center of Competence, the frequency of ransomware attacks remains elevated in 2023, while the average cost of a data breach is at an all-time high at $4.35mn and expected to surpass $5mn in 2023. The conflict in Ukraine and wider geopolitical tensions are heightening the risk of a large-scale cyber-attack by state-sponsored actors. In addition, there is also a growing shortage of cyber security professionals, which brings challenges when it comes to improving security.

For businesses in many countries, 2023 is likely to be another year of heightened risks for Business interruption (BI) because many business models are vulnerable to sudden shocks and change, which in turn impact profits and revenues. Ranking #2 globally, BI is the number one risk in countries such as Brazil, Germany, Mexico, Netherlands, Singapore, South Korea, Sweden and the US. 

The scope of disruptive sources is wide. Cyber is the cause of BI companies fear most (45% of responses); the second most important cause is the energy crisis (35%), followed by natural catastrophes (31%). The skyrocketing cost of energy has forced some energy-intensive industries to use energy more efficiently, move production to alternative locations or even consider temporary shutdowns. The resulting shortages threaten to cause supply disruption across a number of critical industries in Europe, including food, agriculture, chemicals, pharmaceuticals, construction and manufacturing, although warm winter conditions in Europe and stabilization of the price of gas is helping to ease the energy situation. 

A possible global recession is another likely source of disruption in 2023, with potential for supplier failure and insolvency, which is a particular concern for companies with single or limited critical suppliers. According to Allianz Trade, global business insolvencies are likely to rise significantly in 2023: +19%.

The Energy crisis is the biggest risk riser in the Allianz Risk Barometer appearing for the first time at #4 (22%). Some industries, such as chemicals, fertilizers, glass, and aluminum manufacturing, can be reliant on a single source of energy – Russian gas in the case of many European countries – and are therefore vulnerable to disruption to energy supply or price increases. If such base industries struggle, repercussions can be felt further down the value chain in other sectors. According to Allianz Trade, the energy crisis will remain the largest profitability shock for European countries in particular. At current levels, energy prices would wipe out the profits of most non-financial corporates as pricing power is diminishing amid slowing demand.

Driven by 2022 being another year of turmoil with conflict and civil unrest dominating the news, Political risks and violence is a new entry at #10 (13%). Aside from war, companies are also concerned about increasing disruption from strikes, riots and civil commotion activity as the cost-of-living crisis bites in many countries.

Despite dropping in the ranking year-on-year, Natural catastrophes (19%) and Climate change (17%) remain major concerns for businesses. In a year that included Hurricane Ian, one of the most powerful storms recorded in the US, record-breaking heatwaves, droughts and winter storms around the world, and $100bn+ of insured losses, they still rank in the top seven global risks.