• Wednesday, February 28, 2024
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Here are10 risks facing businesses in 2024

Here are10 risks facing businesses in 2024

Companies will face new rules and regulations in 2024 that will not only require a high administrative burden but could also impose real restrictions on their business activities, an Allianz Commercial Risk Barometer report released Tuesday said.

According to the report, changes in legislation and regulation, for example; tariffs, economic sanctions, protectionism, and euro-zone disintegration ranked highest with 36 percent of votes among the top 10 risks facing businesses in 2024.

Read also: Insurers see strike, riot, protest push up risks for businesses

Other top risks are cyber incidents, macroeconomic developments, market developments, climate change, theft, fraud, corruption, political risks and violence, energy crises, new technologies and business interruption.

Allianz Risk Barometer report identifies major business risks for 2024, being the most important corporate concerns for the year ahead, ranked by 3,069 risk management experts from 92 countries and territories.

“This development is a double-edged sword for companies. On the one hand, they benefit from the subsidy race between states to attract ‘strategic’ industries. On the other hand, this activism is accompanied by a large number of new restrictions on investment protectionism, which has reached a new level,” explains Ludovic Subran, chief economist at Allianz.

According to him, a high level of uncertainty calls for scenario planning, strengthening resilience and open communication with internal and external stakeholders.

Cyber incidents, for example, cyber-crime, IT network and service disruptions, malware/ ransomware, data breaches, fines, and penalties are major threats, with ransomware activity alone projected to cost its victims $265 billion annually by the next decade.

The report notes that most ransomware attacks now involve the theft of personal or sensitive commercial data for the purpose of extortion, increasing the cost and complexity of incidents, as well as bringing greater potential for reputational damage.

Allianz Commercial’s analysis of large cyber losses (€1mn+) in recent years shows that the number of cases in which data is ex-filtrated is increasing – doubling from 40 percent in 2019 to almost 80 percent in 2022, with 2023 activity tracking even higher.

“Protecting an organization against intrusion is a cat and mouse game, in which the cybercriminals have the advantage,” says Rishi Baviskar, global head of Cyber Risk Consulting, Allianz Commercial.

While companies are confident that the worst of two key disruptors of recent times, the pandemic and the energy crisis are behind them, business interruption remains a key concern as firms are challenged to build resilience and diversify supply chains in a rapidly changing world.

Business interruption (BI) ranks second in the Allianz Risk Barometer for the global market, behind the closely linked peril of cyber. It ranks among the top three risks for companies of all sizes and is the second biggest concern in the Americas, Europe, Asia Pacific and Africa and Middle East regions.

With almost all companies reliant on supply chains for critical products and services, business interruption and supply chain disruption remain at the forefront of risk, explains Marianna Grammatika, head of Risk Consulting at Allianz Commercial.

According to the report, physical risks are seen as the key threats for companies, with larger organisations leading the response by shifting to low-carbon business models and improving planning and response to climate events.

The risk is threefold: physical, including loss or damage to assets and business interruption; transition-related, from moves towards a more sustainable economy and regulatory and stakeholder pressures; and liability-related, from climate litigation that could lead to reputational and financial damage.

“Although this year’s Allianz Risk Barometer results on climate change show that reputational, reporting and legal risks are regarded as lesser threats by businesses, ranking outside the top four concerns, many of these challenges are interlinked and we expect climate-related transition and liability risks to increase as companies invest in higher-risk, lower-carbon technologies, where bankability and insurability are a challenge,” says Denise De Bilio, ESG director, Risk Consulting, Allianz Commercial.

In terms of political risks, businesses and their supply chains face considerable geopolitical risks with the war in Ukraine, conflict in the Middle East, and ongoing tensions around the world.

Political risk in 2023 was at a five-year high, with some 100 countries considered at high or extreme risk of civil unrest.

Further unrest is expected in 2024 as economic gloom continues, particularly in debt-crisis countries, while protestors calling for action about a number of different causes will aim to cause more disruptive events, the report said.