Nigerian businesses most worried about regulatory, cyber, economic risks – Report

Allianz Risk Barometer, an annual business risk ranking compiled by Allianz Group’s corporate insurer, Allianz Commercial, has shown that cyber incidents such as ransomware attacks, data breaches, and IT disruptions are the biggest worry for companies globally in 2024.

Specifically in Nigeria, the report found that businesses are concerned about regulatory, cyber, and economic risks

Globally, natural catastrophes went up from 6 to 3 year-on-year, Fire, explosion up from 9 to 6), and Political risks and violence up from 10 to 8, and are the biggest risers in the latest compilation of the top global business risks, based on the insights of more than 3,000 risk management professionals.

In Nigeria, the report highlighted the increasing worries surrounding Changes in legislation and regulation, Cyber incidents, and Macroeconomic developments, which have, according to the report, emerged as joint top risks with 36% of responses.

Changes in legislation and regulation climbed up from the fourth position in 2023 to become one of the most pressing concerns for reflecting the evolving regulatory landscape and the need for companies to adapt to new policies and compliance requirements. Yomi Onifade, the Managing Director/Chief Executive Officer of Allianz Nigeria, stated, “The changing regulatory environment poses significant challenges for businesses in Nigeria. It is crucial for companies to stay updated and ensure compliance to mitigate potential risks.”

Cyber incidents have also risen in prominence, moving up from the third spot in 2023 with businesses recognizing the urgent need to enhance their cybersecurity measures to protect sensitive data and maintain operational continuity. Onifade emphasized, “With the increasing reliance on digital platforms, businesses must prioritize cybersecurity to safeguard their operations and customer information. Failure to do so can have severe consequences.”

Macroeconomic developments have maintained their position as a top risk, indicating the ongoing challenges faced by businesses in navigating economic uncertainties and volatility. Onifade added, “The Nigerian business landscape is constantly evolving, and companies must be prepared to adapt to changing economic conditions. A robust risk management strategy is essential to mitigate the impact of macroeconomic challenges.”

Allianz Commercial CEO Petros Papanikolaou comments on the findings: “The top risks and major risers in this year’s Allianz Risk Barometer reflect the big issues facing companies around the world right now – digitalization, climate change and an uncertain geopolitical environment. Many of these risks are already hitting home, with extreme weather, ransomware attacks and regional conflicts expected to test the resilience of supply chains and business models further in 2024. Brokers and customers of insurance companies should be aware and adjust their insurance covers accordingly.”

Large corporates, mid-size, and smaller businesses are united by the same risk concerns – they are all mostly worried about cyber, business interruption and natural catastrophes. However, the resilience gap between large and smaller companies is widening, as risk awareness among larger organizations has grown since the pandemic with a notable drive to upgrade resilience, the report notes. Conversely, smaller businesses often lack the time and resources to identify and effectively prepare for a wider range of risk scenarios and, as a result, take longer to get the business back up and running after an unexpected incident.

Trends driving cyber activity in 2024

Cyber incidents (36% of overall responses) rank as the most important risk globally for the third year in a row – for the first time by a clear margin (5% points). It is the top peril in 17 countries, including Nigeria, Uganda, Kenya, Mauritius, Australia, France, Germany, India, Japan, the UK, and the USA. A data breach is seen as the most concerning cyber threat for Allianz Risk Barometer respondents (59%) followed by attacks on critical infrastructure and physical assets (53%). The recent increase in ransomware attacks – 2023 saw a worrying resurgence in activity, with insurance claims activity up by more than 50% compared with 2022 – ranks third (53%).

“Cyber criminals are exploring ways to use new technologies such as generative artificial intelligence (AI) to automate and accelerate attacks, creating more effective malware and phishing. The growing number of incidents caused by poor cyber security, in mobile devices in particular, a shortage of millions of cyber security professionals, and the threat facing smaller companies because of their reliance on IT outsourcing are also expected to drive cyber activity in 2024, “explains Scott Sayce, Global Head of Cyber, Allianz Commercial.

Business interruption and natural catastrophes

Despite an easing of post-pandemic supply chain disruption in 2023, Business interruption (31%) retains its position as the second biggest threat in the 2024 survey. In Nigeria, Business interruption moved down from 9 to 10. It ranks in the top five risks in Africa and the Middle East, Ghana, Kenya, Senegal, South Africa, Uganda. This This result reflects the interconnectedness in an increasingly volatile global business environment, as well as a strong reliance on supply chains for critical products or services. Improving business continuity management, identifying supply chain bottlenecks, and developing alternative suppliers continue to be key risk management priorities for companies in 2024.

Natural catastrophes (26%) is one of the biggest movers at 3, up three positions. 2023 was a record-breaking year on several fronts. It was the hottest year since records began, while insured losses exceeded US$100bn for the fourth consecutive year, driven by the highest ever damage bill of US$60bn from severe thunderstorms. In Africa and the Middle East, natural catastrophes have emerged as a new risk, ranking at 6. Notably, Morocco witnessed a significant rise in this risk, climbing from seventh to first place. Cameroon and South Africa also experienced a surge in natural catastrophe risks, ranking among the top five risks in these countries.