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Cyber, supply chain, environmental issues seen as top threats

Posted On: Jan. 18, 2022 7:00 AM CST

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Cybersecurity, supply chain interruptions and resilience, and environmental issues dominate two key reports released last week.

The World Economic Forum’s Global Risk Report and Allianz Global Corporate & Specialty SE’s Risk Barometer 2022 also note the interconnectedness of risks and the continuing influence on other risks of the COVID-19 pandemic, which itself still ranks among the top exposures.

The Risk Barometer, based on a survey 2,650 risk management professionals, including Allianz customers and staff, from 89 countries, pegged cyber incidents, business interruption, and natural catastrophes as the most important global business risks for 2022. Climate change placed sixth, its highest rank ever, rising three positions from the 2021 barometer.

Cyber reclaimed the top spot after slipping to second last year, noted Rani Christie, regional head of distribution, North America, in Alpharetta, Georgia, for AGCS.

“Ransomware attacks, data breaches and information technology outages are at unprecedented levels. We’ve seen a trend over the last few years almost like a commercialization of cybercriminal activity,” Mr. Christie said.

Risk managers are building resilience to contend with cyber criminals facing a much lower barrier to entry in terms of technical skills and financing, and who have a global reach, he said.

The WEF’s Global Risk Report identified heightened supply chain and cyber risks among top near-term challenges, as  climate and environmental issues dominated the long view. The report is based on the organization’s Global Risks Perception Survey, using 959 responses from professionals across eight regions in technology, economics and other fields.

Risk factors often bear upon one another, as events such as the pandemic led to changes, such as working from home, that in turn heightened cyber exposures, said Colleen Zitt, chief risk officer at Zurich North America in Schaumburg, Illinois.

“The digital transformation and working from home certainly has attracted bad cyber actors and ultimately increased the risk to companies and businesses,” she said. “Last year’s report talked about COVID overshadowing much of the risk landscape. This year, it hasn’t gone away, highlighted by how COVID-19 is pushing and causing things as a knock-on effect.”

“The remote work environment we’ve been in for the last couple of years, that’s obviously created vulnerability,” Mr. Christie said.

The pandemic has acted almost like a stress test for business systems such as supply chains, highlighting weaknesses.

“We started to see where the limits of our supply chain and the resiliency were,” said Reid Sawyer, head of the emerging risks group and U.S. cyber consulting practice in Chicago for Marsh LLC.

The interconnectedness of the risk factors complicates addressing exposures, Mr. Sawyer said. “How do you stress test for pandemic, even environment, because all of these things intersect with supply chains at some point.”

Business interruption, the second greatest threat according to Allianz’s Risk Barometer, can directly affect supply chains, Mr. Christie said, again showing how the perils impact each other. “The ripple effect of business interruption is massive,” he said.

Environmental concerns dominated the WEF Global Risk Report’s long-term view, with “climate action failure,” “extreme weather events” and “biodiversity loss” ranking as the top three most severe risks over a 10-year horizon. “It’s clear that a transition is needed from fossil fuels,” Ms. Zitt said.

Mr. Sawyer said climate change poses some of the same comprehensive risk and exposure challenges as COVID-19. “How do we think about systemic risk? It’s the same system dynamics that are now being tested in ways they haven’t been over the past 10 to 15 years,” he said.