Canadian Underwriter

‘COVID Trio’ tops the biggest biz risks for this year

January 19, 2021   by Adam Malik

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Business interruption, the COVID-19 pandemic, and cyber are the top three risks facing businesses this year – and all three are connected to each other, says a new report.

Allianz Global Corporate & Specialty (AGCS)’s Risk Barometer for 2021 found those three risks to be at the top of the list for its customers around the globe, with Canadian results being no different.

Pandemic, business interruption and cyber were dubbed the ‘COVID Trio’ because the pandemic brought about business interruption concerns due to closures caused by government lockdowns and social distancing; increased demands for certain products; and increased cyber threats, since much of the world shifted to a work-from-home model.

Business interruption has long been a concern for businesses around the world. The risk took over the top spot from cyber, with 41% of global businesses citing BI as their top risk. In Canada, however, it was tops for 47% of companies.

Bernard McNulty, Canadian chief agent for AGCS, attributed the Canadian result to the caring nature that businesses generally show toward their employees, in addition to a concern about the impact of an interruption on staff.

“Every client that we speak to, the first consideration — the first thing they mention — is the physical and mental wellbeing of their employees,” he told Canadian Underwriter.

There are also concerns about maintaining productivity among essential companies. This applies not only to companies that have employees working from home, for example, but also to production facilities. An essential business may lose productivity due to physical distancing guidelines. For example, it may not be fully staffed to ensure people are spaced out properly on the premises.

“Every client we talk to [references] at least a 30% loss productivity margin, so [the pandemic] is interrupting their business,” McNulty said.

Other business interruptions could be the result of delays in getting products and materials imported in order to perform a service such as vehicle maintenance, or produce a product that people need to buy.

Pandemic isn’t a covered peril, McNulty reminded. “Clients are, without insurance, having to work around the impact of COVID to maintain productivity as best they can. So, it’s absolutely front and center that way.”

He noted, though, that some companies will benefit from the effects of the pandemic. Think patio furniture or bicycle manufacturers, which have seen business boom as people stay home more and look for new ways to occupy their time. Products in these types of categories have been flying off shelves and it’s difficult for companies to produce enough to meet demand. They’re facing business interruption from another point of view.

“Our clients that produce those things can’t produce as many as they want, so they’re worried about reputation — not being able to meet demand, not being able to make new commitments and so on,” McNulty said.

Pandemic ranked second in Canada (41%) and globally (40%), jumping from the 17th spot. While it was on the radar screens of some companies last year, it wasn’t something they worried much about — until March 2020.

“I think the last [pandemic] incident we had in Canada was SARS,” McNulty observed. “It really didn’t have the same scale as COVID-19, so it was just kind of, ‘Out of sight, out of mind’ for our clients and business partners. And that’s why it was so far down the list. I don’t think anybody anticipated that this would have such a global impact, both in terms of our businesses and also the impact it would have on all of our families, the way that we work, and the way that we communicate and spend our social time. It’s impacted us on so many different fronts; that’s why front and center this year.”

Now, thanks to our acquired knowledge of viruses and what they can do, don’t expect pandemic to drop off the list any time soon, he added. “I think this remains a significant concern for many years to come.”

Rounding out the top three was cyber, last year’s top risk. It’s not that businesses are less concerned about it, it’s just that pandemic and BI have become that much more prevalent. And it would be a mistake to underestimate cyber risks, McNulty warned.

If anything, the pandemic has pushed more companies to become digital, resulting in more data being exposed. “At the same time, I don’t think that the capital spend that companies have for cyber protection has been able to keep pace with the level that we’re depending on our IT infrastructure.”

That’s why cyber is interlinked with BI and pandemic risks.

“It’s absolutely a critical concern,” McNulty warned. “Sophisticated Canadian risk managers are hearing of more and more cyber events. They are very concerned about their ability to make the capital expenditures [required] to invest in cyber protection [and] to advance their level of protection quick enough to avoid these hackers and cyber events.”


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