Chiamaka Ajeamo, [email protected]
Globally, as businesses continue to evolve, risks become inevitable especially in this digital economy where all operations are needed to be digitalised in order to meet purpose more efficiently.
Business analysts have opined that the business environment is never devoid of threats and every new year, it is either challenged with a new problem or a re-occurring one that takes a new pattern to affect operations. It is in the above light that the Allianz Global Corporate and Specialty (AGCS), a corporate insurance carrier and business unit of Allianz Group, in its 9th Annual survey of top business risks ‘2020 Risk Barometer’, has disclosed that risks related to cybercrimes topped list of threats projected to hit the corporate world in 2020.
According to the report, based on the insight of more than 2,700 risk management experts from 102 countries and territories, cyber risks have become more damaging and expensive for companies and often result in lawsuits and litigation after an event.
As regards cyber crime, the report noted that it ranked highest in the survey, for the first time after receiving 39 per cent of responses from all the risk management experts involved in the survey.
“Seven years ago, cyber risk ranked only 15th position with just six percent of responses. Awareness of the cyber threat has grown rapidly in recent years, driven by companies’ increasing reliance on their data and IT systems and a number of high-profile incidents.
“Businesses face a growing number of cyber challenges including larger and more expensive data breaches, an increase in ransom ware and business email compromise (spoofing) incidents, as well as the prospect of litigation after an event. “Political differences between nation states being played out in cyber space brings added risk complexity, while even a successful merger or acquisition (M&A) can result in systems problems,” the report says.
The Chief Executive Officer of AGCS, Joachim Müller, speaking in the report says: “The Allianz Risk Barometer 2020 highlights that cyber risk and climate change are two significant challenges that companies need to watch closely in the new decade.
“In addition to being the top risk globally, cyber incidents are among the top three risks in many of the countries surveyed. In Austria, Belgium, France, India, South Africa, South Korea, Spain, Sweden, Switzerland, the UK and the US it also ranks as the top business risk.”
“Businesses face the challenge of larger and more expensive data breaches, an increase in ransomware and spoofing incidents, as well as the prospect of privacy-driven fines or litigation after any event.
“A mega data breach, involving more than one million compromised records now costs on average $42 million, up eight per cent per cent year-on-year”.
“Incidents are becoming more damaging, increasingly targeting large companies with sophisticated attacks and hefty extortion demands. Five years ago, a typical ransomware demand would have been in the tens of thousands of dollars. Now they can be in the millions,” Deputy Global Head of Cyber, AGCS, Marek Stanislawski says.
Stanislawski said extortion demands were just one part of the picture, adding that companies could suffer major losses due to the unavailability of critical data, systems or technology, either through a technical glitch or cyber-attack.
He attributed many of the incidents to human error, but said it coul be mitigated by staff awareness training which are not yet a routine practice across companies.
He said business interruption is another issue to be encountered by businesses however, he noted it was a key challenge with digitalisation and civil unrest, creating new causes of disruption and loss of income.
According to him, climate change rose to its highest-ever position and companies are most concerned about physical losses from extreme weather events but also fear consumer criticism and increasing regulatory and legal action.
Reacting to this report, Nigerian insurer and Managing Director, Anchor Insurance, Mr Augustine Ebosa, said various types of risks face businesses every year. But this year, he said what Nigerian insurers fear most is risks from natural disasters.
Ebosa stated that Nigerian operators will be compelled to pay huge claims from this, taking clue from what happened in the country and other countries last year.
Also speaking, an Insurance Consultant and Expert, Ekerete Gam-Ikon said cyber risks has increased as a function of the increased number of people that now use the internet, specifically for financial transactions.
Also, because the cost of maintaining safe and secured channels have heightened especially as the solutions are multiplying and becoming more expensive. The fear has grown that organisations might find it very difficult to keep off hackers and fraudsters.
Commenting on the implications of this to the sector and what can be done to address it, he said, “The insurance industry is fighting its greatest competition from technology which interestingly holds the key to its transformation.
“Technology is providing solutions to risks which insurance continues to offer itself as solution only when something – loss or damage – happens. Now, with technology, those risks are prevented!
“So, we might be having a Catch 22 situation and this is where the regulator, the National Insurance Commission (NAICOM) comes in. There is an urgent need for a national digital agenda for the insurance industry in Nigeria. Ghana and Kenya have launched theirs. This is one way to address the fears and concerns of operators in this regard.
“Remember, that insurers maintain the most detailed information and data on individuals, and this is why globally, they are more targeted than banks by the cyber criminals. Fortunately, the banks have invested more in cyber security than insurers”.
Advising operators, he said, insurers should be more worried about the cyber security industry consuming the insurance industry thus, they should undertake studies that will enable them connect with the larger risk management ecosystem rather than try to protect their turf.
“The days of “our industry” are over because customers are experiencing more seamless and convenient service delivery, Gam-Ikon noted.
Speaking on climate change, he said, “Expectedly, with the changes we have seen in our climate lately, the concern is understandable. However, we know that agriculture insurance has taken shape and some of the insurers permitted to offer it, have already bitten too much.
“When the floods return this year with the projected rainfall for the year, it will be scary and I imagine this is what insurers are concerned about. Notwithstanding necessary measures need to be put in place to avert and manage resultant claims. The discussions on Financial Technology (Fintech) and Insurance Technology (Insurtech) need to be broadened for increased understanding of the challenges and opportunities”.