Every year, Allianz releases its Risk Barometer report. It identifies the top corporate risks for the year ahead, based on the insight of over 2,700 risk management experts across the world.
The report is useful for businesses, because it allows for forward planning around what are likely to be the most prevalent risks, and forward planning has always been key to success and survival.
We therefore thought it would be useful to share with you the risks from the Allianz report that ranked most important by those surveyed in the UK, to help you with your own planning for the next 12 months and beyond.
How COVID-19 has influenced the risk landscape
The unprecedented disruption brought about by the coronavirus situation has led to ‘pandemic outbreak’ presenting itself as a new entry going in right at the top of the UK business risk list, followed by cyber incidents and business interruption.
All three, and many of the others in the top ten, are interlinked. This demonstrates the increasing vulnerabilities and uncertainty of today’s globally connected landscape, where what happens in one area can quickly snowball leading to far-reaching, worldwide effects.
The top 10 risks for businesses in the UK
Here are the top ten risks for businesses in the UK…
Risk #1: Pandemic outbreak
The COVID-19 pandemic has affected everyday life on a worldwide scale, with the economy, society and industry all being hit hard.
One of the most important lessons learned is that business interruption is a very real risk, and that it can happen at any time, without warning.
The coronavirus pandemic led to a number of unexpected consequences, not least a significant move to remote working, digitalisation and ‘going virtual’. It showed the importance of being ready to adapt to fast changing situations, and having measures in place to deal with health and workforce issues, and restrictions on movement.
Risk #2: Cyber incidents
The COVID-19 pandemic forcing many businesses to adapt working practices to digital and remote models led to an increase in cyber related risks, such as IT failure and outage, as well as data breaches and the fines and penalties associated with them.
Organisations can reduce the likelihood of a cyber-attack through various means, such as training and awareness programmes, and by putting policies in place around passwords and general cyber safety and reporting.
Further, double checking insurance policies to be clear on precisely what cyber risks are covered is vital. Cyber risk insurance is generally not covered by a commercial combined policy, so it is important to look into specialist cover.
Risk #3: Business interruption
Again, the pandemic has been a major driver of awareness around the risks associated with business interruption, including supply chain disruption.
With widespread disturbance across the board and on a global scale, many organisations have found it a challenge to remain solvent or stay open due to ongoing lockdown restrictions in the UK and abroad. Many have switched their approach to repair and refurbish rather than replace, simply because buying new simply hasn’t been an option. This could well be a risk management strategy that is adopted long term, and buying locally could be too.
Risk #4: Legislative and regulatory changes
Many of the recent changes in legislation and regulation have been fuelled by Brexit. Implications for businesses that import or export internationally, or that employ staff from outside the UK, have been far-reaching, with financial pressures resulting from a raft of new paperwork and tariff measures.
For those businesses dependant on overseas trade and workforce supply, strategies will need to be adopted in order to manage what are likely to be problematic issues for the foreseeable future.
Risk #5: Changing market conditions
With the economy having taken a serious knock due to ongoing national lockdowns, it is no wonder that changes in market conditions remain a major risk factor for businesses.
With business investment on the wane, UK borrowing hitting its highest level on record, and lingering uncertainty around the UK’s trading relationship with the EU, it is important that organisations factor the likes of market volatility, stagnation and fluctuation into their risk management planning strategies.
Risks #6 & 7: Climate change and natural catastrophes
Climate change and natural catastrophes are commanding a sustained level of concern, especially with the increasing volatility of the weather.
Already in 2021, we have experienced two major storms, Bella and Christoph, with large scale evacuations resulting in some areas of the UK.
Whilst global measures are being adopted in an attempt to address climate change, and progress being made in the quest to cut carbon emissions, there is still a way to go. In the meantime, we remain at the mercy of nature’s force, making planning ahead around the impact of natural disasters crucial.
Risk #8: Increasing reliance on technology
As we all readily adopt newly emerging technologies in an attempt to stay ‘on top’ and competitive, and boost productivity, so the associated risks of cyber-attacks, data theft and the pressure of regulatory compliance increase.
Reliance on technology has amplified considerably during the coronavirus pandemic, as businesses have ‘gone digital’ and individuals turned to the internet to shop, learn and socialise during lockdown.
With this increased reliance come higher levels of risk, making it essential to consider contingency measures for downtime and outage incidents.
Risk #9: Fire and explosion
Whilst digitalisation will continue as a trend, the traditional physical risks of fire and extreme weather will never go away. Risk management may have improved, but fire remains an ongoing hazard, and a considerable cause of business interruption.
Investment in fire safety measures and regulatory compliance therefore continues to be a vital risk management strategy.
Risk #10: Loss of reputation or brand value
Whether as a result of a cyber or data breach incident, or media coverage over poor handling of environmental, social and governance (ESG) issues, loss of reputation or brand value can be incredibly damaging.
Poor ESG ratings pose a risk for those organisations that are reliant on attracting investors, making it important for businesses to take such factors seriously in order to avoid stock values taking a negative hit.
The full Allianz Risk Barometer 2021 provides further insight into the risks posed to business on a global level.
Managing your risk, with help from Robert Gerrard
The likes of cyber risk and business interruption insurance are popular amongst businesses seeking to manage their risks, but there are plenty of other types of cover to consider as risk management strategies, depending on your particular business, industry sector and level of risk.
For advice that’s individually tailored to you and your business, please get in touch.