Cyber incidents are the top global corporate risk in 2024, by a clear margin and across all company sizes, according to the latest “Allianz Risk Barometer.” The report, which analyzes and reflects the most important corporate concerns in the world for the year ahead, also names several surprising “risers,” or risk concerns climbing closer to the top of the list.
According to the report, which surveyed 3,069 respondents from 92 countries and territories, 36% of respondents cited cyber incidents as the top risk for 2024, followed by business interruption (31%); natural catastrophes (26%); changes in legislation and regulation (19%); macroeconomic developments (19%); fire, explosion (19%); climate change (18%); political risks and violence (14%); market developments (13%), and shortage of skilled workforce (12%).
Cyber Risk in 2024
“Following two years of high but stable loss activity, 2023 saw a worrying resurgence in ransomware and extortion losses, as the cyber threat landscape continues to evolve,” states the report, which states that ransomware claims activity was up by over 50% year-on-year in 2023.
Most attacks involve “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 reputable damage,” according to the report. Furthermore, “Allianz Commercial’s analysis of large cyber losses [over 1 million Euros] in recent years shows that the number of cases in which data is exfiltrated is increasing—doubling from 40% in 2019 to almost 80% in 2022, with 2023 tracking even higher.”
Allianz says, “By the start of the next decade, ransomware activity alone is projected to cost its victims $265 [billion] annually.”
AI can also be used by threat actors to conduct cyber-attacks more quickly by using it to write code, use voice simulation and deepfake video technology, and create new “strains and variations of existing ransomware.” As a result, the need for strengthened cyber security measures is increased, as “[l]ax security and the mixing of personal and corporate data on mobile devices, including smartphones, tablets, and laptops, is an attractive combination for cyber criminals,” according to the report.
“During the pandemic, many organizations enabled new ways of accessing their corporate network via private devices, without the need for multi-factor authentication (MFA). This also resulted in a number of successful cyber-attacks and large insurance claims.” In addition, use of 5G technology can also be an area of concern, as it can power even more connected devices.
Preventing Cyber-Attacks
CLM member Frances O’Meara, Partner, Wood Smith Henning & Berman LLP, commenting on the report’s findings, says, “In this digital age, where technology continues to advance at an unprecedented rate, it is crucial for all organizations to prioritize cyber hygiene. The year 2024 serves as a wake-up call for businesses to remain ever-vigilant and stay at the forefront of cyber developments.”
O’Meara explains that one of the most important ways in which businesses can prevent cyber incidents includes “maintaining the security and integrity of our individual systems…. It is essential to implement proactive risk management strategies to minimize the likelihood of a cyber incident. General counsel and risk managers must be cognizant of handling protocols in the event of a cyber breach.”
Furthermore, she continues, “Education of each individual employee is paramount. This includes having competent cyber legal counsel and well-defined cyber policies in place and, importantly, vigilant enforcement of same. Everyone needs to be ready to respond swiftly and effectively to mitigate the impact of an incident.”
O’Meara concludes, “Cybersecurity is not a one-time effort but an ongoing commitment. By staying informed about emerging threats and best practices, we can safeguard our businesses and protect sensitive data from unauthorized access. Together, let us prioritize cyber hygiene and fortify our defenses to ensure a secure digital landscape for all.”
Other Top Concerns for 2024
On Allianz’s Risk Barometer, natural catastrophes rose from the number six concern in 2023 to number three. According to the report, “2023 was a record-breaking year on several fronts. It was the hottest year since records began, according to the World Meteorological Organization, while insured losses in 2023 exceeded $100 billion for the fourth consecutive year. Losses from thunderstorms reached a new all-time high of $60 billion.” Other factors include rising sea surface temperatures, sea level rise, low Antarctic Sea ice, and climate change.
Fire and explosion rose from number nine to number six as one of the most frequent drivers of business interruption losses. “Disruption from fire can be very high, as it can take longer to recover from than many other perils, and the impact on suppliers can often be great,” according to Allianz. Furthermore, fire is an elevated risk with electrification and the growing prevalence of lithium-ion batteries, the report explains. “Allianz Commercial analysis of more than 1,000 business interruption insurance claims over the past five years, worth more than $1.3 billion, shows fire is the most frequent driver of these claims and ranks second in terms for loss value.”
Regarding political risks and violence, Allianz says, “Unsurprisingly, given ongoing conflicts in the Middle East and Ukraine, and tensions between China and the U.S., political risks and violence (14%) rises up the survey year-on-year to [number eight] from [number 10],” with more volatility and unrest expected in 2024. “The geopolitical environment continues to be uncertain and volatile, and an increasingly relevant source of risk for supply chains and international trade.” Furthermore, 2024 is anticipated to be a record-breaking election year, with 50% of people expected to go to the polls, potentially leading to election-related civil unrest. An increased risk of terrorism in Western Europe and North American is also possible, driven primarily by the Israel-Gaza conflict leading to radicalization of certain parts of these populations.
On the other side of the coin, the pandemic risk has plummeted to the bottom of the risk ratings, according to the report. Although it ranked second in 2021, it now ranks 19th (4%) “following the successful roll-out of immunization programs around the world.”
The energy crisis is the biggest faller for 2024, from fourth to 11th, although long-term concerns remain.