Risk Mapping 2023

In a geopolitical and economic context marked by a series of catastrophic events, risk mapping [4] has proved to be more unstable than ever.

Year after year, companies' concerns have continued to grow, quickly overtaken by the appearance of even more worrying risks. For example, hazards such as pandemics and natural disasters, which had held the spotlight in 2021 and 2022, are no longer among the top concerns of companies in 2023.

Although their priorities differ depending on their geographical location, their short-term concerns are IT security and economic issues: inflationary pressures, supply chain disruptions, energy crisis and risk of recession.

The Allianz 2023 Business Risk Barometer ⁽¹⁾ confirms this trend. The current year's ranking is, therefore, marked by the dread of cyber risks, business interruption and macroeconomic instability.

Risks such as pandemics or global warming, which shook the planet in 2021 and 2022, are relegated to the background in 2023.

⁽¹⁾ This is the 12^th annual survey of the world's top business risks, conducted by Allianz with more than 2 700 risk management experts from 89 countries.

Risk Mapping: overview of the main threats in 2023

Cyber risks

For corporate entities, incidents related to ransomware, malware and other intrusions into IT systems, top the list of the most important threats in 2023. Cyber risk, ranked 8th in 2014, is now, ten years later, at the top of the list of corporate concerns worldwide.

In fact, the Covid-19 pandemic, telecommuting and the shift to all-digital have only exacerbated companies' fear of cyber risk. In addition, heightened geopolitical tensions and the Russia-Ukraine conflict have led to fears of large-scale cyberattacks orchestrated by States or their affiliated organizations.

According to Allianz Cyber Center of Competence, the frequency of ransomware attacks is expected to remain high in 2023. The average cost of data breach, set around 4.35 million USD in 2022, is poised to exceed 5 million USD in 2023.

Business interruption

Business interruption, pertaining to supply chain disruption or failure, is the second major concern for companies. For several months, the latter have been facing supply shortages, delivery delays and commodity cost increases.

The current logistical disruptions are caused by a combination of failures caused by the Covid-19 pandemic, extreme weather events (drought, floods), cyber-attacks and more recently geopolitical instability (Russia-Ukraine war).

Business disruption, which has topped the Risk Barometer for more than a decade, is still considered a major risk for businesses worldwide. All business models are in fact vulnerable to sudden shocks and changes that impact the revenues and results of market participants.

Macroeconomic instability

Macroeconomic developments, ranked 10^th in 2022, jump 7 places in 2023 to 3^rd place in the rankings. Macroeconomic hazards, such as inflation, financial market volatility and recession, have reached their highest level since their appearance in the Allianz barometer.

Two major events, the Covid-19 pandemic and the Ukraine-Russia war, have contributed to the high economic and financial instability of the overall market. Inflation is particularly feared because of its erosive effects on the corporate profitability margin.

The inflationary trend is expected to continue into 2023 despite efforts by central banks and financial institutions to contain it, reduce the cost of living and avoid recession.

According to Allianz Trade, business bankruptcies are expected to increase significantly (+19%) worldwide in 2023.

Energy crisis

Underestimated in previous years, the energy risk has reached the fourth position of the 2023 ranking. Disruptions and/or interruptions in business supplies have led to a surge in the price of energy products (oil and natural gas).

Energy risk is a real concern for governments and companies, whose costs are rising unusually fast.

Climate risk and natural disasters

Despite their decline, climate risks and natural disasters still stand as major threats in 2023.

The year 2022 was marked by the occurrence of several extreme events including Hurricane Ian in the United States, flooding in Australia and South Africa, drought, heat waves, and devastating forest fires in Europe, North Africa and the US. The end of 2022 was also marked by record winter storms in Europe and North America.

These events and other calamities have resulted in 270 billion USD of economic losses in 2022, 120 billion USD of which were borne by insurers and reinsurers.

Risk Mapping: 2013-2023 comparison

A comparison of the top 10 risks over a ten-year period has revealed that, apart from four traditional hazards - business interruption, natural disasters, fire and legislative changes - the risk landscape has changed significantly.

Over the past decade, new hazards have emerged while others have disappeared or diminished in intensity. This is the case for risks such as market fluctuations, damage to reputation or brand image and the collapse of the Eurozone.

Of the top three hazards faced by companies in 2013, only business interruption risk remains in the top three in 2023. Fire/explosion risk has dropped from 3^rd to 9^th position in ten years. Natural disasters have dropped significantly from 2^nd to 6^th rank.

Finally, three risks from 2013 disappeared from the top 10 in 2023: quality defects and serial defects, which dropped from 6^th to 18^th position, competition, which dwindled from 5^th down to 11^th place, and finally damage to reputation or brand image, which regressed from 10^th to 16^th position.

Allianz Risk barometer 2023

Source: Allianz business risks barometer 2023