• Business interruption ranks #1 with 42% of responses.
• Data breaches, attacks on critical infrastructure or physical assets and increased ransomware attacks drive cyber concerns to #2 with 38% of responses.
• Product recall, quality management, serial defects features as a new risk in #3 with 32% of responses.

Business interruption and cyber incidents are the primary concerns for the manufacturing sector within the automotive industry in 2024, according to the Allianz Risk Barometer.

The report, based on insights from over 3,000 risk management professionals and business leaders, highlights the growing importance of addressing these risks to ensure business continuity and safeguard against potential disruptions.

Despite a slight easing of post-pandemic supply chain disruption in 2023, Business interruption continues to hold its position as the number one threat for automotive manufacturing, with 42% of respondents expressing concern.

Cyber incidents and natural catastrophes are the top two causes of business interruption feared most by companies, followed by fire and machinery/equipment breakdown or failure.

These results underscore the interconnectedness and volatility of the global business environment, as well as the reliance on supply chains for critical products or services.

Consequently, improving business continuity management, identifying supply chain bottlenecks, and developing alternative suppliers remain key risk management priorities for companies in 2024.

The COVID-19 pandemic and its subsequent disruption to supply chains have served as a wake-up call for companies. Compared to pre-pandemic times, businesses are now better prepared for business interruption or supply chain events.

According to the Allianz Risk Barometer, the most common actions taken to de-risk supply chains include developing alternative suppliers (60% of responses), improving business continuity management (42%), and identifying and remediating supply chain bottlenecks (37%).

According to the Allianz Trade’s Automotive sector risk report, the automotive market is expected to normalize this year as demand loses momentum following a strong rebound in 2023.

The growth of new auto registrations is expected to slow down to +1.9%. New auto registrations saw a significant recovery in 2023 as Covid-induced supply-chain disruptions eased, and pent-up demand released.

Additionally, resilient economic growth and strong, albeit slowing, growth in EVs fuelled car sales – total global auto registrations increased by +11.3% to nearly 88mn, though is still below pre-pandemic levels.

For the second consecutive year, Cyber incidents rank as the second most important risk in automotive manufacturing, with 38% of respondents expressing concern.

The recent surge in ransomware attacks saw insurance claims activity increase by over 50% compared to 2022. Hackers are increasingly targeting IT and physical supply chains, launching mass cyber-attacks, and finding new ways to extort money from businesses.

As a result, early detection and response capabilities and tools are becoming increasingly crucial. Investment in detection backed by artificial intelligence is expected to enhance incident identification.

Without effective early detection tools, companies may experience longer unplanned downtime, increased costs, and a greater impact on customers, revenue, and reputation.

“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 Santho Mohapeloa, Cyber Insurance Expert, Allianz Commercial.

Product recall, quality management, and serial defects emerge as a new risk at #3 with 32% of respondents identifying it as a concern.

The automotive sector bears the brunt of product recall losses, accounting for over 70% of the value of all losses.

The increasing complexity of supply chains and stricter regulations contribute to the rising impact of product recalls on companies’ financials and reputations.

With recalls affecting a higher number of units, driven by factors such as faster speed-to-market and outsourcing of research and development, the automotive sector remains a frequent driver of claims.

As the automotive manufacturing sector faces these risks head-on, companies must prioritize risk management strategies and enhance their resilience.

By proactively addressing Business interruption, Cyber incidents, and Product recall risks, companies can safeguard their operations, reputation, and bottom line.

The post Business Interruption, Cyber Concerns Top Risks for Automotive Manufacturing Sector in 2024 – Allianz Risk Barometer reveals appeared first on Tech | Business | Economy.

After the launch of the top global business risks in the Allianz Risk Barometer 2023 in January, Allianz Global Corporate & Specialty (AGCS) has now published its Global Industry Solutions Financial Services Outlook, one of several risk trend briefings for specific industry sectors including construction, and technology, media and telecommunications.

Cyber incidents rank as the top risk overall for companies and criminals’ tactics are evolving. Martin Zschech, Global Industry Solutions Director for Financial Services at AGCS, says: “Despite investing in significant levels of cyber security spend each year, respondents view the FS industry as highly exposed.

The main threat for financial institutions is the attempt to repossess the assets they hold. This can be achieved in multiple ways – for example, through impersonation, cyber-attack or falsified electronic correspondence.”

The banking industry alone experienced a 1,300%+ increase in ransomware attacks in 2021, according to reports.

“Attack methods evolve quickly,” Zschech explains. “For example, open-source AI tools can be used to craft highly personalized spear phishing attacks. At the same time, the growing reliance of companies on third-party providers, such as cloud computing services, means they can be vulnerable to cyber-attacks that have a knock-on effect across the financial system.” Cyber-attacks often include a human element, where employees, contractors or customers are unwittingly complicit in incidents. Training and technology can help minimize human error. In addition, companies need to operationalize their response to regulation and privacy rights in relevant jurisdictions.

Inflation challenges

Macroeconomic developments are also impacting financial institutions. Inflation is still likely to be one of the most challenging risks to manage. 

A particularly damaging consequence of inflation is its long-term impact. Investments may take a while to regain value even after the economy seemingly recovers. And while inflation triggers higher interest rates, which increases net interest income, it also slows down loan demand and brings a higher risk of loan default.

The Silicon Valley Bank failure in March 2023 also highlights banks’ general macro-financial challenges from restrictive monetary policy, which essentially removes diversification, according to Allianz Research. Negative returns from bonds and equity put pressure on assets while quantitative tightening has led to a contraction of money supply, resulting in greater competition for deposits (as banks lend less).

Compliance with ever-evolving regulation

Compliance is one of the biggest challenges for FS companies, with legislation and regulation around digitalization, climate change and environmental, social, and governance (ESG) issues constantly evolving. “The compliance burden for financial institutions has increased significantly over the past decade,” Zschech explains. Regulatory enforcement has intensified, with companies more readily held to account. At the same time, increases in sanctions, such as in response to Russia’s invasion of Ukraine, also bring unprecedented challenges.

“The growing focus on ESG topics offers the opportunity for many FS companies to step up and lead when it comes to investing in people and the planet, but regulations and guidance will still be a driver of risk going forward,” says Zschech. “Ultimately, the multiple regulatory and reporting challenges facing financial institutions requires them to improve the effectiveness and efficiency of their compliance activities and put data and technology to clever use.”

Claims patterns for financial institutions

Regarding actual claims patterns, in recent years insurers have continued to see large claims relating to compliance and increased regulatory activity, according to AGCS analysis of 7,654 insurance industry claims worth €870mn.

Violations can be contributing factors to each of the top causes of loss by severity. Cyber incidents, including crime, have resulted in some of the most expensive claims in the analyzed dataset. Insurers have seen a growing number of technology-related losses, including claims made against directors following major privacy breaches.

Sizable losses have also come from fraudulent payment instructions while insurers have also handled a number of liability claims arising from technical problems with exchanges and electronic processing systems where systems have gone down, and companies have not been able to execute trades.

More Resources – Download the report. Download the construction report. Download the technology, media and telecommunications report

The post Cyber Incidents, Macroeconomic Devs, Legal Changes Top Risks for Financial Institutions – report appeared first on Tech | Business | Economy.