Cyber Incidents Top Concern For Financial Services Sector In 2024, Allianz Risk Barometer Reveals—-The financial services sector is facing a growing threat from Cyber incidents, according to the Allianz Risk Barometer. The report highlights that cyber incidents have emerged as the primary concern for financial institutions in 2024, with 43% of respondents ranking it as a significant risk.
This alarming trend is further exacerbated by the recent surge in ransomware attacks, which has seen insurance claims activity increase by over 50% compared to 2022.
The Allianz Risk Barometer, an annual survey conducted by Allianz Commercial, gathered insights from industry experts and executives across the financial services sector and other industries. The survey revealed that cyber incidents are followed closely by Macroeconomic developments and Changes in legislation and regulation, both ranking at 26%. Business interruption and Natural catastrophes also pose significant risks, with 22% of respondents expressing concern about each.
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.
In addition to cyber incidents, financial services respondents also highlighted macroeconomic developments factors such as inflation, which is one of the most difficult risks to manage in 2024. The impact of inflation can have long-term consequences, with investments taking a while to regain value even after the economy seemingly recovers. Furthermore, inflation triggers higher interest rates, which increases net interest income but slows down loan demand and brings a higher default risk.
Compliance ranks as one of the biggest challenges for financial services companies, with legislation and regulation constantly evolving around digitization, climate change, and environmental, social, and governance (ESG) issues. The compliance burden for financial institutions has significantly increased over the past decade, with regulatory enforcement intensifying. To navigate these challenges, financial institutions must improve the effectiveness and efficiency of their compliance activities and make wise use of data and technology.
Business interruption poses significant risks to the financial services industry, including disruptions to operations, loss of revenue, reputational damage, and regulatory compliance challenges. 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. To mitigate these risks, companies must focus on improving business continuity management, identifying supply chain bottlenecks, and developing alternative suppliers.
Natural catastrophes present significant risks to the financial services industry, including physical damage to infrastructure, disruption of operations, increased insurance claims, and potential liquidity challenges. The financial implications of natural disasters were underscored by the USD 82 billion [1]in insured losses globally in 2021. To effectively manage these risks, financial institutions must prioritize robust risk modeling, diversification strategies, and disaster preparedness measures.
The Allianz Risk Barometer serves as a valuable tool for financial services companies to identify and address the most pressing risks they face. By understanding these risks and implementing proactive risk management strategies, companies can safeguard their operations, protect their customers, and maintain financial stability in an increasingly volatile global business environment.
