Cyber threats are the biggest concerns among businesses in the Middle East and Africa, overshadowing supply chain breaks, natural disasters and even Covid-19-related disruptions, according to a new report from German financial institution Allianz Group.
Data breaches or major IT outages worry companies the most, with 44 per cent of respondents saying cyber incidents top their list of concerns, marking the second time in two years that the category has emerged at the top of the rankings, the Munich-based company said in its new Risk Barometer 2022, released by Allianz Global Corporate and Specialty arm.
Business interruption dropped to second (42 per cent), while natural catastrophes rose from sixth to third (25 per cent) and the pandemic outbreak dropped to fourth (22 per cent) among the top concerns. Climate change, now a fundamental global issue, was ranked sixth (17 per cent).
“’Business interrupted’ will likely remain the key underlying risk theme in 2022. For most companies the biggest fear is not being able to produce their products or deliver their services; 2021 saw unprecedented levels of disruption, caused by various triggers," Joachim Mueller, chief executive of AGCS, said in the 11th edition of the report.
"Crippling cyber attacks, the supply chain impact from many climate change-related weather events, as well as pandemic-related manufacturing problems and transport bottlenecks wreaked havoc. This year only promises a gradual easing of the situation, although further Covid-19-related problems cannot be ruled out. Building resilience against the many causes of business interruption is increasingly becoming a competitive advantage for companies.”
Cyber crime is one of the biggest concerns in a rapidly advancing digital world as bad actors on the web keep in step with new technologies to develop more sophisticated hacking techniques, leading to economic, financial and reputational damages.
The number of ransomware attacks surged by 151 per cent worldwide in the first half of 2021, according to the World Economic Forum's latest Global Cyber Security Outlook report released this week.
The MEA region's cyber security market is expected to reach $66.5 billion by 2025, growing at a compound annual rate of 15.62 per cent from 2018 to 2025, research firm Report Ocean said.
Global supply chain disruptions, which was triggered by the Covid-19 pandemic, will continue to linger for years until the backlog of cargo is cleared, Sultan bin Sulayem, group chairman and chief executive of Dubai-based global ports operator DP World, told CNN on Wednesday.
The Allianz report said the top risks in their survey converged in 2021 to cause unprecedented levels of disruption to businesses and their supply chains. The ripple effects of the pandemic and flare-ups of Covid-19 infections have combined with crippling cyber attacks and extreme weather events to test business resilience.
"Ransomware and other disruptive forms of cyber attacks continue to bedevil businesses, while potential risks from digitalisation and the shift to remote working are driving growing concern," it said.
Insurance claims against cyber threats also remain at an elevated level, increasing significantly over the past three years, driven by the rise of losses from external manipulation of systems, as well as the increased uptake in cyber insurance, Allianz said.
Cyber-related claims surged 120 per cent from around 500 in 2018 to more than 1,100 in 2020, with ransomware-related ones jumping 50 per cent to 90 year-on-year. The total number of ransomware claims received in the first half of 2021 was the same as those reported during the whole of 2019 (60) as criminals have become more organised and better resourced, according to AGCS analysis.
“The role of insurance has always been to ensure good risk management and loss prevention. Good cyber maturity and good cyber insurance go hand-in-hand. We buy insurance for our home, but this does not mean we leave the front door unlocked, and the same should be said for cyber security,” said Scott Sayce, global head of cyber at AGCS.
Other notable concerns on the Allianz study include the shortage of skilled workers (13 per cent), which entered the top 10 risks for the first time at ninth, and changes in legislation and regulation (19 per cent), which remained fifth globally but moved three places up to the same spot in MEA.
Fire and explosion (17 per cent), a perennial risk for companies, stayed as the seventh major risk, according to the survey. Market developments (15 per cent) fell to eighth globally but moved two places up at seventh in MEA, while macroeconomic developments (11 per cent) fell to 10th globally and to seventh in MEA.
AGCS also warned that any supply chain disruption can potentially be long-lasting. New Covid-19 infections are likely to drive high levels of supply chain disruption into the second half of 2022, the agency said citing Euler Hermes' recent Global Trade Report. But mismatches in global demand and supply and shipping capacity constraints – key drivers behind disruption in 2021 – are predicted to ease from that point, assuming there are no further unexpected developments.
Longer term, digitalisation and climate change could bring additional supply chain volatility from rising demand for critical materials, such as rare earth elements used in clean energy sources, and stresses placed on power and communications infrastructure, it added.
“Whether it’s a cyber attack, a flood or a fire affecting a critical business location or supplier, business interruption events can have a very costly and long-lasting impact that can extend well beyond an individual organisation," said Philip Beblo, property industry lead for technology, media and telecoms at AGCS.
The Allianz Risk Barometer sought the views of 2,650 respondents from 89 territories, surveying risk consultants, underwriters, senior managers and claims experts in the corporate insurance segment. Most answers (46 per cent) were from large-sized companies, followed by small-sized firms (34 per cent) and mid-sized organisations (20 per cent).
