These risks converged in 2021 to cause unprecedented levels of disruption to businesses and their supply chains. The ripple effects of the pandemic and surges in Covid-19 infections have combined with crippling cyber-attacks and extreme weather events to test business resilience and push supply chains to breaking point. Covid-19 continues to cast its shadow but it is a digital pandemic – cyber risk – returning to the top of the rankings (it last held this spot in 2020) that is one of the standout findings of the Allianz Risk Barometer.Ransomware and other disruptive forms of cyber-attacks continue to bedevil businesses, while potential risks from digitalization and the shift to remote working are driving growing concern.

Dropping one place to second in the 2022 rankings, business interruption (BI) is synonymous with many of the top ranked risks in the survey. It is only the third time in the 11-year history of the Allianz Risk Barometer that it is not ranked top, reflecting its role as the most feared consequence of threats like cyber, pandemic outbreak and natural catastrophes in particular.

The past 18 months have been a wake-up call for BI and risks are likely to remain elevated for the foreseeable future. The pandemic has exposed the fragility and complexity of modern supply chains, and how multiple events can come together to cause problems, raising awareness of the need for greater resilience and transparency – 45% of respondents said recent supply chain disruption had had a large impact on their sector.

Supply chain disruption is expected to ease in the second half of 2022, Covid-19 permitting, but the vulnerabilities exposed by a host of recent events, ranging from the Suez Canal blockage to the global shortage of semiconductors, could take companies years to fix and involve significant costs if, for example, they are looking to reduce reliance on critical suppliers – such as manufacturers in Asia – to build alternative supplies elsewhere in the world.

Companies’ growing reliance on technology and digitalization is likely to be the biggest challenge for BI going forward. Alongside supply chain disruption these were cited as the biggest changes brought about by the pandemic, while cyber is the most feared cause of BI in this year’s survey. Respondents note that cyber is still not as well understood as traditional BI triggers such as natural catastrophes or fire, therefore mitigations are not as well developed. Cyber security also ranks as companies’ major environmental social governance (ESG) concern, with respondents acknowledging the need to build resilience and plan for future outages or face the consequences from regulators, investors and other stakeholders.

The rise of natural catastrophes and climate change to third and sixth respectively is telling. Recent years have shown the frequency and severity of weather events are increasing. In 2021, global insured catastrophe losses are expected to be in excess of $100bn – the fourth highest year on record.

Hurricane Ida in the US may have been the costliest event, but more than half of the losses came from so-called secondary perils such as floods, thunderstorms, tornadoes and even winter freezes, which can often be local, but increasingly costly events. More are expected.

Respondents are concerned about the physical loss and supply chain impact from climate change-related weather events. However, they are also worried about managing the transition to a low carbon economy and increasing regulation, reporting requirements and litigation with “lack of actions taken to address climate change” being the second highest ESG concern behind cyber.

Although cyber risk is perceived as posing a more immediate threat to business than climate change – it accounts for more responses than climate change and natural catastrophes combined – these two perils are also linked by the fact that two of the most significant impacts expected from changes in legislation and regulation (the fifth top risk) in 2022 will be around big tech and sustainability. Meanwhile, within climate change, resource depletion is a growing risk for companies that is likely to receive increasing attention from regulators in future.

With pandemic outbreak dropping to fourth place in this year’s rankings (from second in 2021), companies’ Covid-19 concerns appear to be easing, although the survey pre-dates the Omicron variant. However, the majority of businesses (89%) say they feel relatively well prepared for a future pandemic event but Omicron is a reminder that Covid-19 remains an unpredictable threat, with potentially long-term and far-reaching consequences. This is reflected in the rankings of BI and cyber, but also by the entry of shortage of skilled workforce into the top 10 risks at number nine, with staff absences and shortages expected to disrupt business again in 2022.