The Biggest Business Risks in 2021

The Biggest Business Risks Around the World

We live in an increasingly volatile world, where change is the only constant.

Businesses, too, face rapidly changing environments and associated risks that they need to adapt to—or risk falling behind. These can range from supply chain issues due to shipping blockages, to disruptions from natural catastrophes.

As countries and companies continue to grapple with the effects of the pandemic, nearly 3,000 risk management experts were surveyed for the Allianz Risk Barometer, uncovering the top 10 business risks that leaders must watch out for in 2021.

The Top 10 Business Risks: The Pandemic Trio Emerges

Business Interruption tops the charts consistently as the biggest business risk. This risk has slotted into the #1 spot seven times in the last decade of the survey, showing it has been on the minds of business leaders well before the pandemic began.

However, that is not to say that the pandemic hasn’t made awareness of this risk more acute. In fact, 94% of surveyed companies reported a COVID-19 related supply chain disruption in 2020.

Rank (2021)	% Responses	Risk Name	Business Risk Examples	Change from 2020
#1	41%	Business Interruption	Supply chain disruptions	↑
#2	40%	Pandemic Outbreak	Health and workforce issues, restrictions on movement	↑
#3	40%	Cyber Incidents	Cybercrime, IT failure/outage, data breaches, fines and penalties	↓
#4	19%	Market Developments	Volatility, intensified competition/new entrants, M&A, market stagnation, market fluctuation	↑
#5	19%	Legislation/ Regulation Changes	Trade wars and tariffs, economic sanctions, protectionism, Brexit, Euro-zone disintegration	↓
#6	17%	Natural Catastrophes	Storm, flood, earthquake, wildfire	↓
#7	16%	Fire, Explosion	-	↓
#8	13%	Macroeconomic Developments	Monetary policies, austerity programs, commodity price increase, deflation, inflation	↑
#9	13%	Climate Change	-	↓
#10	11%	Political Risks And Violence	Political instability, war, terrorism, civil commotion, riots and looting	↑

Note: Figures do not add to 100% as respondents could select up to three risks per industry.

Pandemic Outbreak, naturally, has climbed 15 spots to become the second-most significant business risk. Even with vaccine roll-outs, the uncontrollable spread of the virus and new variants remain a concern.

The third most prominent business risk, Cyber Incidents, are also on the rise. Global cybercrime already causes a $1 trillion drag on the economy—a 50% jump from just two years ago. In addition, the pandemic-induced rush towards digitalization leaves businesses increasingly susceptible to cyber incidents.

Other Socio-Economic Business Risks

The top three risks mentioned above are considered the “pandemic trio”, owing to their inextricable and intertwined effects on the business world. However, these next few notable business risks are also not far behind.

Globally, GDP is expected to recover by +4.4% in 2021, compared to the -4.5% contraction from 2020. These Market Developments may also see a short-term 2 percentage point increase in GDP growth estimates in the event of rapid and successful vaccination campaigns.

In the long term, however, the world will need to contend with a record of $277 trillion worth of debt, which may potentially affect these economic growth projections. Rising insolvency rates also remain a key post-COVID concern.

Persisting traditional risks such as Fires and Explosions are especially damaging for manufacturing and industry. For example, the August 2020 Beirut explosion caused $15 billion in damages.

What’s more, Political Risks And Violence have escalated in number, scale, and duration worldwide in the form of civil unrest and protests. Such disruption is often underestimated, but insured losses can add up into the billions.

No Such Thing as a Risk-Free Life

The risks that businesses face depend on a multitude of factors, from political (in)stability and growing regulations to climate change and macroeconomic shifts.

Will a post-pandemic world accentuate these global business risks even further, or will something entirely new rear its head?