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Top risks to UK businesses in 2022

Posted: 09 March 2022

Last year’s top identified risk – pandemic outbreak – has dropped into seventh place for 2022, possibly suggesting that many companies have adapted to the ongoing situation and feel more prepared for similar future events. However, the risks occupying the top two slots, cyber incidents and business interruption continue to be shaped by Covid-19 even two years on. Climate change has moved up into third place, no doubt influenced in part by the recent COP26 conference and wider focus on sustainability and Environmental Social Governance (ESG).

Here we look at the Allianz Risk Barometer and select four risks which could have serious legal implications, before identifying ways by which a business can look to mitigate them moving forward.

1. Cyber incidents (#2 in 2021)
e.g. cyber crime, IT failure/outage, data breaches, fines and penalties
The Covid-19 pandemic saw a large-scale move to remote working which many businesses are still adopting 24 months on. Moving employees and equipment offsite introduces new access points for vulnerability, and the geographical spread of staff translates to thousands of routers and networks, increasing exposure across a company’s IT ecosystem. Cyber criminals have exploited these vulnerabilities, plus the increased reliance on video conferencing apps, for commercial gain through activities such as social engineering methods and phishing emails. The reputational damage of a data breach and financial consequences can be devastating to a business. As a result, 63% of UK executives report they plan to increase their cyber budgets over the next year[ 1  ].
2. Business interruption (#3 in 2021)
including supply chain disruption
Over the last 24 months, businesses have had to adapt to both Brexit and the Covid-19 pandemic in quick succession. Repercussions have included higher import and export costs, cash-flow challenges, staff shortages and supply chain disruption. This led to contract disputes for many businesses, with the disruption leaving them unable to fulfil their contractual requirements. 
4. Changes in legislation and regulation (#4 in 2021)

Brexit-related legislation and regulation for businesses continues to evolve, from importing and exporting, to transporting goods to the European Union, exchanging data, and recruitment of people from outside the UK. ESG also remains high on the regulatory agenda, with the publication of the Green Claims Code in Q3 2021 designed to prevent ‘greenwashing’ - businesses misleading customers about environmental claims.

Organisations have naturally also needed to keep up with changing Covid-19-related regulation and measures, and understand their responsibilities regarding keeping employees safe. Most small businesses don’t have the internal legal expertise to keep up with today’s challenges, therefore require assistance in navigating the landscape.

9. Loss of reputation or brand value (#10 in 2021)

This can stem from a number of sources, but businesses have come under particular scrutiny for how they’ve treated employees throughout the pandemic, with a focus on mental health and wellbeing. Firms are also evaluated on treating customers fairly, including vulnerable customers; research shows that 27.7m UK customers[ 2  ] present characteristics of vulnerability. In February 2021, the Financial Conduct Authority (FCA) published its guidance and expectations of firms on the treatment of vulnerable customers. There’s also a strong focus on companies’ sustainability and ESG credentials, linked to concerns around climate change.

For the full global Allianz Risk Barometer 2022 along with insight, results separated by countries and the risk barometer methodology, please visit AGCS.

Although the nature and number of risks can be daunting to many businesses, it’s essential that they’re taken seriously. There are several ways to mitigate the legal implications arising from these business risks:

Legal advice services - most small businesses don’t have the in-house legal expertise to deal with today’s challenges. Therefore, a good legal advice service could help reduce the risk of legal action by giving guidance and ensuring procedures are followed.

Consider protecting your business with legal expenses - it could provide cover for legal representation and cover for legal expenses in the event of a claim.

If something does arise?

Seek advice - it's important that your business seeks advice at the earliest opportunity from a trusted professional.

Clarify current protection - check to see what protection your insurance policies provide, perhaps in conjunction with your broker or preferred insurance professional.