Cyber incidents, business interruption and critical infrastructure blackouts are the top three business risks in South Africa in 2022, according to the Allianz Risk Barometer 2022.
However, the country is not alone in this worry, as cyber perils are also the biggest concern for companies globally.
The threats of ransomware attacks, data breaches or major IT outages worry companies even more than business and supply chain disruption, natural disasters or the Covid-19 pandemic – all of which have heavily affected firms in the past year, the risk assessment firm said.
Globally, cyber incidents top the Allianz Risk Barometer for only the second time in the survey’s history (44% of responses); business interruption drops to a close second (42%) and natural catastrophes rank third (25%), up from sixth in 2021.
Climate change climbs to its highest-ever ranking of sixth (17%, up from ninth), while pandemic outbreak drops to fourth (22%).
The annual survey from Allianz Global Corporate & Specialty (AGCS) incorporates the views of 2,650 experts in 89 countries and territories, including CEOs, risk managers, brokers and insurance experts.
“Business interrupted will likely remain the key underlying risk theme in 2022,” said AGCS CEO Joachim Mueller. “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.
“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.”
Biggest risks and worries for businesses in South Africa
- Cyber incidents
- Business interruption
- Critical infrastructure blackouts
- Political risks and violence
- Pandemic outbreak
- Climate change
- Changes in legislation and regulation
- Shortage of skilled workforce
- Fire and explosion
- New technologies
Violence, blackouts rising concerns in South Africa
Political risks, violence and critical infrastructure blackouts are rising concerns for businesses in South Africa.
Political risks and violence moved from sixth to fourth in the local ranking, following major losses from physical damage, business interruption, looting, and vandalism caused by the civil commotion, protests and riots that hit KwaZulu Natal and parts of Gauteng in June 2021.
Critical infrastructure blackouts entered the top three risks from sixth showing that companies are concerned about the impact of blackouts on their businesses and the economy.
“Preparation is key – in particular for exposed sectors such as retail,” said Thusang Mahlangu AGCS CEO in South Africa.
“Businesses need to review their business continuity plans (BCP) and should be aware of what is happening around them. Typically, these only focus on national catastrophes, but there is a need for BCP plans to address political disturbances and other types of business disruption like cyber.
“Having defined, and preferably tested, procedures in place is crucial – these should include staff, client and general communication and social media plans. It is imperative for companies to think deeply about how they can best protect their assets and people.”
Ransomware drives cyber concerns
Cyber incidents ranks as a top-three peril in most countries and regions surveyed, including South Africa. The main driver is the recent surge in ransomware attacks, which are confirmed as the top cyber threat for the year ahead by survey respondents (57%), said Allianz.
Recent attacks have shown worrying trends such as ‘double extortion’ tactics combining the encryption of systems with data breaches; exploiting software vulnerabilities that potentially affect thousands of companies or targeting physical critical infrastructure.
“Ransomware has become a big business for cybercriminals, who are refining their tactics, lowering the barriers to entry for as little as a $40 subscription and little technological knowledge.
“The commercialisation of cybercrime makes it easier to exploit vulnerabilities on a massive scale. We will see more attacks against technology supply chains and critical infrastructure,” said Scott Sayce, global head of Cyber at AGCS.
Business interruption (BI) ranks as the second most concerning risk globally, and in South Africa.
In a year marked by widespread disruption, the extent of vulnerabilities in modern supply chains and production networks is more obvious than ever. According to the survey, the most feared cause of BI is cyber incidents, reflecting the rise in ransomware attacks but also the impact of companies’ growing reliance on digitalization and the shift to remote working.
Natural catastrophes and pandemic are the two other important triggers for BI in the view of respondents.
Pandemic preparations improve
Pandemic outbreak remains a major concern for companies but drops from third to fifth in South Africa and second to fourth position globally – although the survey predated the emergence of the Omicron variant.
While the Covid-19 crisis continues to overshadow the economic outlook in many industries, encouragingly, businesses do feel they have adapted well, said Allianz. The majority of respondents (80%) think they are adequately or well-prepared for a future incident. Improving business continuity management is the main action companies are taking to make them more resilient.
Climate change moved up one place to sixth in South Africa and is a new entrant in Africa and the Middle East.
Allianz Risk Barometer respondents are most concerned about climate-change-related weather events causing damage to corporate property (57%), followed by BI and supply chain impact (41%).
However, they are also worried about managing the transition of their businesses to a low-carbon economy (36%), fulfilling complex regulation and reporting requirements and avoiding potential litigation risks for not adequately taking action to address climate change (34%).
Shortage of skilled workforce (13%) is a new entry in the top 10 risks at number nine globally and eighth in South Africa. Attracting and retaining workers has rarely been more challenging. Respondents rank this as a top-five risk in the engineering, construction, real estate, public service and healthcare sectors, and as the top risk for transportation.
Changes in legislation and regulation is fifth (19%) globally but moves down three places to seventh in South Africa. Prominent regulatory initiatives on companies’ radars in 2022 include anti-competitive practices targeting big tech, as well as sustainability initiatives with the EU taxonomy scheme, said Allianz.
Fire and explosion (17%) is a perennial risk for companies, ranking seventh as in last year’s survey globally and coming in as a new entrant at number nine in South Africa. Market developments (15%) falls from fourth to eighth year-on-year and Macroeconomic developments (11%) falls from eighth to 10th.