Allianz Risk Barometer 2021 -
Rank 4: Pandemic outbreak

As the emergence of the Omicron variant [1] at the end of 2021 demonstrates only too well, pandemic-related problems are far from being a thing of the past and are likely to overshadow business’ ability to perform in at least the first few months of 2022 due to ongoing restrictions and potential staff shortages and absences. Nevertheless many businesses feel they have adapted well to the pandemic. When asked how prepared their company is for a future event, the majority (80%) of Allianz Risk Barometer respondents believe they are “adequately” or “well prepared”, although only 9% feel “very well prepared”. However, just 11% feel “inadequately prepared”. Initiating or improving business continuity management is the main action companies are taking to make them more resilient.

“Many companies are taking advantage of the increased awareness of business interruption, and we have seen more organizations investing in tools and systems to improve transparency of supply chains, work through scenarios and update their business continuity. Being more flexible and agile is essential in times of crisis, but it will also help with the daily business challenges,” says Philip Beblo, Global Property Industry Lead, Technology, Media &nTelecoms at AGCS. The pandemic may, however, have sown the seed of the next ‘Black Swan’ event, given its acceleration of the digitalization trend. Technology-related issues rank as the biggest and most impactful changes to result from the pandemic (see graphic). The adoption of new working practices and greater digitalization are the two biggest impacts cited by respondents, while increasing cyber risk is fourth. Supply chain disruption ranks highly in third.

“We are already seeing big changes in working practices and business models, many of which are here to stay and that will shape business interruption and other exposures going forward. There will be challenges for cyber security and IT capacity as moves to digitalization and remote working are scaled up. But there will also be opportunities, such as more flexible ways of working and access to more data with which to manage risk,” says Beblo. 

“We are witnessing exponential growth in digital platforms and IT infrastructure: The penetration of smart grids, for example, will soon reach 100% in some markets. However, our understanding of such risks lags behind the pace of technological change, and businesses often underestimate the extent of these exposures,” says Georgi Pachov, Head of Portfolio Steering & Pricing at AGCS.

Another key learning from the pandemic has been the importance of people for business continuity. Workforce-related issues rank as the fifth biggest impact of the pandemic according to respondents, while shortage of skilled workforce is a new entry in the top 10 global risks overall in 2022.

"One of the lessons from the pandemic has been the importance of people for business continuity, as well as the broader societal environment in which business operates," adds Pachov. "The past 18 months has demonstrated the need to focus on the whole business, and not just specific triggers for business interruption."