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# 3 CYBER INCIDENTS A survey by McKinsey3 found that The pandemic may have opened a
companies may have accelerated the “Pandora’s Box” of cyber business
digitalization of supply chains and interruption risks, according to Pachov.
operations by three to four years, while “The pandemic has demonstrated the
the importance of digital products has need to ‘expect the unexpected’ and
accelerated by seven years. watch out for the pitfalls of digitalization.
We may be about to open a box of
Society’s growing reliance on technology ‘Black Swan’ events, with unexpected
and the threat posed by cyber is a consequences from the pandemic, such as
particular area of concern. Technology future cloud outages.”
is a double-edged sword for business
interruption. While it can be a useful “Everybody is rushing to embrace
CYBER, A “BLACK SWAN” IN THE tool for business continuity, for example technology and embark on digital
MAKING? by switching to remote working and transformation, which could put
process monitoring or online sales technology companies under immense
and servicing, it also brings new risks. pressure to meet growing demand for
Pre-Covid, both society and business The digitalization of supply chains could cloud and other IT services.
were already growing more dependent potentially reduce the frequency of
and reliant on technology and intangible business interruption events, but it may Tech companies will be working close
assets and this trend is likely to accelerate also lead to more severe disruption when to capacity and there will come a point
as companies change business models the underlying technology goes wrong. when technology and servicing will
and ways of working. Covid-19 will likely “Digitalization increases transparency become stretched or reach their limitations.
spark a period of innovation and market in the supply chain, which means If digitalization is not done properly
disruption, accelerating the adoption organizations can react faster and better,” [with due consideration for the risk/
of technology, leading to regulatory says Pachov. “However, a cyber-attack building resilience] then a future ‘Black FEATURE
changes, as well as hastening the demise or a technical failure causing a major Swan’ scenario involving the failure of
of incumbents or traditional sectors, and outage could lead to a severe business a major cloud provider could become a
giving rise to new competitors. interruption event.” reality,” says Beblo.

Swan” events will be challenging, but the key to survival will be the ability for insurance. The insurance industry cannot take away all
for businesses to respond quickly. challenges but we can work in partnership with clients. We
are able to underwrite some of the biggest drivers of business
“The best way for businesses to approach these types of situations is interruption – such as natural catastrophes and fire, as well as
through business continuity scenario planning that challenges working some cyber – and offer risk engineering services and alternative
environments and the ability of supply chains under various scenarios,” risk transfer solutions to support our clients in these challenging
says Varney. “The ability to understand and proactively handle potential times.”
business impact scenarios is better resolved when the crisis is not upon a
business.” THE OTHER 6 THE MOST IMPORTANT GLOBAL
BUSINESS RISKS FOR 2021
“Companies need to think ahead and consider how their business, market, # 4 Market developments
customers and suppliers might change in a given scenario,” adds Pachov. (e.g.volatility, intensified competition/new entrants, M&A, market
stagnation, market fluctuation)
Meeting the challenge of business interruption risk will require risk # 5 Changes in legislation and regulation
professionals to find ways of quantifying exposures, including areas like (e.g. trade wars and tariffs, economic sanctions, protectionism, Brexit,
nonphysical damage business interruption and emerging risks. Euro-zone 4 5 disintegration)
“Businesses need to focus more on the quantification of business interruption # 6 Natural catastrophes
triggers and their potential impact, and not just rely on high level risk (e.g. storm, flood, earthquake, 6 wildfire)
management strategies or ‘blue sky’ thinking. They need to develop the
tools and systems needed to understand business interruption triggers and # 7 Fire, explosion
measure the impact,” says Pachov.
# 8 Macroeconomic developments
(e.g. monetary policies, austerity programs, commodity price increase,
“The pandemic has shown there is still a lot of work to be done on business deflation, inflation)
continuity and business resilience,” adds Beblo. “In order to manage the
risks and develop solutions, they will need to collect data, utilize analytics, # 9 Climate change/ increasing volatility of weather
and then consider what is insurable. Risk management today is very good # 10 Political risks and violence
at insurable risks, but could do better when it comes to the non-insurable (e.g. political instability, war, terrorism, civil commotion, riots and looting)
risks, like intangible assets, supply chains and reputation.

“Resilience will be critical to surviving future business interruption events. Extract from the full report
It needs to be embedded in the organization’s culture and helps to make https://www.agcs.allianz.com/content/dam/onemarketing/agcs/
the remaining business interruption insurable. Resilience is also good agcs/reports/Allianz-Risk-Barometer-2021.pdf
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