COVID-19: New Report Warns Of Major Global Business Interruption In 2021

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Yemisi Izuora

A new report by the Global Corporate & Specialty (AGCS) has warned of possible COVID-19 related risks on business interruption, pandemic outbreaks and cyber incidents in 2021.

The AGCS 10th annual report on global businesses themed ‘Allianz Risk Barometer 2021’, ranked pandemic outbreak and cyber perils as the first and second risks largely to affect most businesses while macro-development and business interruption stood in the third and fourth positions respectively.

According to the report which incorporated the views of 2,769 experts in 92 countries and territories, including CEOs, risk managers, brokers and insurance experts; 59 per cent of respondents highlighted the pandemic as the main cause of Business Interruption (BI) in 2021, followed by cyber incidents with 46 per cent and natural catastrophes, fire and explosion around 30 per cent each.

The report further noted that prior to the COVID-19 outbreak, BI finished at the top of the Allianz Risk Barometer seven times and it returned to the top spot after being replaced by cyber incidents in 2020.

Hence, the pandemic revealed that extreme global-scale BI events are not just theoretical, but a real possibility, causing loss of revenues and disruption to production, operations and supply chains.

Philip Beblo, expert in AGCS’s global Property underwriting team, said: “The pandemic is adding to the growing list of non-physical damage of BI scenarios such as cyber or power blackouts. The consequences of the pandemic which are; wider digitalisation, more remote working and the growing reliance on technology of businesses and societies will likely heighten BI risks in coming years.

However, traditional physical risks will not disappear and must remain on the risk management agenda. Natural catastrophes, extreme weather or fire remain the main causes of BI for many industries and we continue to see a trend for larger losses over time.”

In response to heightened BI vulnerabilities, the report revealed that many companies are aiming to build more resilient operations and to de-risk their supply chains.

It stated that improving business continuity management should be the main action companies are to take, followed by developing alternative or multiple suppliers, investing in digital supply chains and improved supplier selection and auditing.

According to the AGCS experts, “many companies discovered their plans were quickly overwhelmed by the pace of the pandemic.

Business continuity planning needs to become more holistic, cross-functional, and dynamic, monitor and measure emerging or extreme loss scenarios, be constantly updated and tested and embedded into an organisation’s strategy, it advised.”

On cyber incidents, the report stated that cyber perils intensified and it remains a key risk with more respondents that in 2020 and is still ranking as a top-three risk in many countries, including Nigeria, South Africa, Brazil, France, Germany, India, Italy, Japan, Spain, UK and the US.

The survey attributed this result in the acceleration towards greater digitalisation and remote working driven by the pandemic; noting that cybercrime is now estimated to cost the global economy over one trillion dollars up 50 per cent from two years ago.

“COVID-19 has shown how quickly cybercriminals are able to adapt and the digitalisation surge driven by the pandemic has created opportunities for intrusions with new cyber loss scenarios constantly emerging.

Attackers are innovating using automated scanning to identify security gaps, attacking poorly secured routers or even using ‘deepfakes’ – realistic media content modified or falsified by artificial intelligence.

At the same time, data protection and privacy regulation and fines for data breaches continue their upward trend,” said Catharina Richter, Global Head, Allianz Cyber Center of Competence at AGCS.

On his part, Joachim Müller, Chief Executive Officer of AGCS said: “Business interruption, pandemic and cyber are strongly interlinked, demonstrating the growing vulnerabilities of our highly globalized and connected world.

“The coronavirus pandemic is a reminder that risk management and business continuity management need to further evolve in order to help businesses prepare for and survive, extreme events.

“While the pandemic continues to have a firm grip on countries around the world, we also have to ready ourselves for more frequent extreme scenarios, such as a global-scale cloud outage or cyber-attack, natural disasters driven by climate change or even another disease outbreak.

The COVID-19 crisis continues to represent an immediate threat to both individual safety and businesses, reflecting why pandemic outbreak has rocketed 15 positions up to the second position in the rankings at the expense of other risks.”

The report disclosed that COVID-19 will likely spark a period of innovation and market disruption, accelerating the adoption of technology, hastening the demise of incumbents and traditional sectors and giving rise to new competitors.

Speaking on changes in legislation and regulation, the report added that “the pandemic may have caused some delays of the regulatory train, but did not stop or even derail it.

Quite the opposite, 2021 promises to become a very busy year in terms of new legislation and regulation, particularly in the areas of data and sustainability.”

On macroeconomic developments, political risks and violence; the report noted that for the first time since 2018 the rank went up from the ninth position to the sixth in Nigeria, reflecting the fact that civil unrest, protests and riots now challenge terrorism as the main exposure for companies.

“The number, scale and duration of many recent events, including EndSARS, Black Lives Matter protests, anti-lockdown demonstrations and unrest around the US presidential election, have been exceptional. As the socio-economic fallout from COVID-19 mounts, further political and social unrest is likely, with many countries expected to experience an increase in activity in 2021 and beyond. Socio-economic consequences of the pandemic will also bring more insolvencies and fuel further civil unrests in 2021, insurers should, therefore be ready for the numerous challenges that lie ahead” the report stated.

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