Cyber incidents top concern for financial services sector
The financial services sector is facing a significant threat from cyber incidents, as highlighted by the Allianz Risk Barometer. In 2024, 43% of respondents identified cyber incidents as their primary concern, driven by a surge in ransomware attacks which have increased insurance claims by over 50% compared to 2022.The Allianz Risk Barometer, an annual survey by Allianz Commercial, gathered insights from financial industry experts. It showed that cyber incidents are the top risk, followed by macroeconomic developments and changes in legislation and regulation (both at 26%), and business interruption and natural catastrophes (both at 22%).
Cybercriminals are targeting IT and physical supply chains and using new technologies like generative AI to enhance their attacks. This makes early detection and response critical, with investments in AI-backed detection tools expected to improve incident identification. Without these tools, companies face longer downtimes, higher costs, and greater impacts on customers, revenue, and reputation.
Santho Mohapeloa, a Cyber Insurance Expert at Allianz Commercial, notes that poor cybersecurity in mobile devices, a shortage of cybersecurity professionals, and reliance on IT outsourcing in smaller companies are key factors driving increased cyber activity in 2024.
Macroeconomic developments, particularly inflation, are another major concern for financial services. Inflation impacts investments and triggers higher interest rates, increasing net interest income but reducing loan demand and raising default risks.
Compliance with evolving legislation and regulation around digitization, climate change, and ESG issues is a significant challenge. The regulatory burden has increased over the past decade, requiring financial institutions to enhance the efficiency and effectiveness of their compliance activities through data and technology.
Business interruption remains a significant risk due to disruptions in operations, revenue loss, reputational damage, and compliance challenges. Cyber incidents and natural catastrophes are the leading causes, followed by fire and machinery/equipment failures. To mitigate these risks, companies need robust business continuity management and supply chain strategies.
Natural catastrophes, causing USD 82 billion in insured losses globally in 2021, also pose a threat through infrastructure damage, operational disruptions, increased insurance claims, and liquidity challenges. Effective risk management requires robust modelling, diversification strategies, and disaster preparedness.
The Allianz Risk Barometer helps financial services companies identify and address key risks, enabling them to safeguard operations, protect customers, and maintain financial stability in a volatile global business environment.