🡡 from 2020
The top ten risks for UK businesses in 2021
Posted: 26 January 2021
The Allianz Risk Barometer is an annual report identifying the top corporate risks for the next 12 months and beyond, based on the insight of more than 2,700 risk management experts from 92 countries and territories.
Here we look at the risks ranked most important by those surveyed in the UK.
The top risks for businesses in the UK
The Covid trio
Given the unprecedented disruption caused by the coronavirus outbreak, it’s no surprise that pandemic outbreak, cyber and business interruption respectively have emerged as the top three risks to UK businesses.
Pandemic outbreak is a new entry this year and has entered straight at the top of the list. This is followed by cyber incidents and business interruption respectively. All three risks – and many of the others in this year’s top 10 – are interlinked, demonstrating the growing vulnerabilities and uncertainty of our highly globalised and connected world, where actions in one place can spread rapidly to have global effects.
The top 10 risks for businesses in the UK
1. Pandemic Outbreak (44%; new)
e.g. health and workforce issues, restrictions on movement
The Covid-19 pandemic has affected lives on a global scale, impacting extensively upon society, economics and industry. One of the big lessons learned from the pandemic is that extreme business interruption events are not just theoretical, but a real possibility. While a “known-risk”, the coronavirus pandemic was a surprise event of global magnitude, with many unexpected consequences. Some of these include a wide-spread move to remote working, the repurposing of many business models and online delivery of education and training. Many of the impacts of the pandemic are likely to be felt long-term.
2. Cyber incidents (42%; last year - 51%)
e.g. cyber crime, IT failure/outage, data breaches, fines and penalties
e.g. cyber crime, IT failure/outage, data breaches, fines and penalties
The Covid-19 pandemic has radically changed the working model for many companies, which quickly moved employees to home-working wherever possible. This led to renewed concerns around cyber and data security due an increased use of personal devices and apps for corporate purposes, which may fall short of required security standards. Companies can help their employees to reduce the likelihood of cyber attacks occurring through a variety of methods. These include training and awareness programmes, encouraging the use of strong passwords and use of password manager tools, and embedding robust security breach reporting processes into the organisation. For more information, read our article “The many guises of cyber attacks”.
3. Business interruption (41%; last year - 29%)
e.g. including supply chain disruption
e.g. including supply chain disruption
The pandemic has added to already growing awareness of business interruption exposures triggered by non-physical damage, such as cyber, blackouts, political risk, or disruption caused by third-party suppliers. There’s been extensive disruption to UK businesses across a wide variety of sectors, and many have struggled to remain solvent or even open as a result of lockdown restrictions.
Covid-19 has also impacted upon global production and supply chains; as the pandemic continues to disrupt supply chains, we may see more of a preference for repair rather than replace.
4. Changes in legislation and regulation (28%; last year - 41%)
e.g. trade wars and tariffs, economic sanctions, protectionism, Brexit, Euro-zone disintegration
e.g. trade wars and tariffs, economic sanctions, protectionism, Brexit, Euro-zone disintegration
Brexit has been the catalyst for many changes in regulation and legislation. Green Cards is one such example, where following the UK's departure from the European Union's single market and customs union, customers driving abroad are currently required to carry a physical Green Card. There will also be implications for businesses owners who import good from, or export to international destinations, or employ individuals from outside the UK.
Regulations governing lockdown arrangements in England continue to present challenges for both businesses and individuals with a national lockdown remaining in place at time of writing.
5. Market developments (25%; last year - 26%)
e.g. volatility, intensified competition/new entrants, M&A, market stagnation, market fluctuation
e.g. volatility, intensified competition/new entrants, M&A, market stagnation, market fluctuation
Market developments remains almost static in its rating this year. The economy has taken a further hit with the third national lockdown, sparking a sharp drop in business activity. In January it was reported that UK borrowing had hit its highest December level on record, with borrowing for the financial year at £212.7bn more than the previous year.11 Deterioration in business investment has continued, compounded by lingering uncertainty about the UK’s trading relationship with the EU beyond the transition period.
6 & 7. Climate change (17%; last year - 14%) and Natural Catastrophes (13%, last year - 11%)
and increasing volatility of weather
and increasing volatility of weather
Both climate change and natural catastrophes moved slightly up the ranking from 2020, showing a sustained level of concern around this subject. Already in January 2021, the UK has been subjected to storms Bella and Christoph, with the latter seeing large-scale evacuations caused by flooding. Global measures are being taken to address climate change, with Joe Biden returning the US to the Paris Climate Agreement soon after his inauguration, progress in renewable energy sources and the UK’s targets to cut emissions by 68% by 2030.
8. New technologies (12%; last year - 19%)
e.g. impact of artificial intelligence, autonomous vehicles, 3D printing, internet of things, nano-technology, blockchain
e.g. impact of artificial intelligence, autonomous vehicles, 3D printing, internet of things, nano-technology, blockchain
New technologies2 and digitalisation bring many advantages but also risks in the form of cyber attacks, data theft and compliance with new legislation. Reliance on technology has increased during the pandemic as individuals increasingly look to online platforms for everything from shopping, to delivery of their child’s education and catching up with friends and family during lockdown.
9. Fire, explosion (12%; last year - 12%)
Despite the ongoing trend for digitalisation, traditional physical risks of fire and extreme weather will not disappear. Risk management has improved but fire remains an ever-present risk and a major cause of business interruption. The Draft Building Safety Bill, currently expected to come into force in Q4 2021, will take forward reforms to the building and fire safety system and require that developers join the Homes Ombudsman Scheme.
10. Loss of reputation or brand value (10%; last year - 19%)
Despite moving further down the list, loss of reputation is clearly still a concern for many business owners. Such an event can occur from a variety of sources, such as criticism for actions around environmental, social and governance issues; cyber incidents and data theft and, more recently, how companies are managing their employees’ mental health during the pandemic.
For the full global Allianz Risk Barometer 2021 along with insight, results separated by countries and the risk barometer methodology, please visit AGCS.
1 Public sector finances, UK - Office for National Statistics (ons.gov.uk)
2 New technologies ranks higher than fire, explosion based on the actual number of responses.
