Allianz Risk Barometer 2025 -
Global risk #2: Business interruption (31%)

“Last year’s outage affecting CrowdStrike and Microsoft users was a reminder that IT and software supply chains can go down, and when they do, it can have a global impact,” says Rishi Baviskar, Global Head of Cyber Risk Consulting, Allianz Commercial.

“Our reliance on technology companies for infrastructure, software, and services is increasing, and we can expect more disruptive events like CrowdStrike to happen in the future. And with AI and generative AI, our dependency on a relatively small number of technology providers will intensify.”

Concern for BI is also being driven by supply chain disruption and geopolitical risks. Supply chain disruptions with global effects occur approximately every 1.4 years, and the trend is rising, according to a white paper from Circular Republic, in collaboration with Porsche Consulting [2], Allianz and Agora Strategy. Those disruptions cause major economic damages, ranging up to 5% to 10% of product costs and additional downtime impacts.

Major disruption to shipping and transport is also seen as a higher risk for BI in 2025 than in previous Allianz Risk Barometers, reflecting disruption brought by Yemen’s Houthis in the Red Sea, and restrictions on transits in the Panama Canal due to drought conditions.

With 90% of global trade conducted by sea, disruption can have substantial economic consequences. The six-day blockage of the Suez Canal by the Ever Given container ship in 2021 is estimated to have cost as much as $60bn [3].

Physical damage and business interruption are the two major impacts of climate change that companies fear most, according to Allianz Risk Barometer respondents. Meanwhile, managing climate change transition risk (e.g., decarbonization and net zero strategies) ranks as the environmental, social, governance (ESG) and sustainability risk trend of most concern to companies for the first time, with the sheer volume of regulations, policy uncertainty and problems with data transparency cited as being among the most significant challenges.

Combating climate change is the biggest challenge for society, according to Daniel Muller, Emerging Risks and Trends Manager, Allianz Commercial: “Every action we take has an impact. To reduce greenhouse gas emissions, we must collectively change our behaviors, such as reducing waste, conserving energy, and adopting sustainable practices.”

The world has long passed the point where a smooth transition is possible to achieve the Paris goals and keep the rise in global temperature below 1.5C. Consequently, trade-offs between affordability and insurability are becoming more challenging.

“The burden of natural disasters will increasingly fall on governments and taxpayers in areas prone to costly hurricanes, storms and floods. Climate change raises critical questions about the insurability and affordability of coverage for frequent or likely events. Therefore, the focus must urgently shift to loss prevention and mitigation, involving governments, insurers, and communities,” says Muller.

On a positive, note the Allianz Risk Barometer results show that awareness among businesses of the need to deploy climate resilience measures, which can include a mixture of physical measures, nature-based solutions and behavioral change is growing, given they can help safeguard business operations and contribute to a more sustainable future.

The same applies to considering nature risk, which refers to the potential negative impacts on businesses, economies, and societies that arise from degrading natural ecosystems, biodiversity loss, and the decline of ‘ecosystem services’. Growing awareness is driven by the mounting costs firms face from regulatory compliance on disclosing physical climate risks, as well as operational disruptions caused by more extreme weather events and ecosystem degradation.

Yet many companies still underestimate the impact of chronic perils (such as drought) because their impact is more gradual. Similarly, the impact of climate change on aging and interdependent infrastructure can also be underestimated, as can the impact of extreme heat on the workforce, for example disrupting labor, explains Lena Fuldauer, Global Sustainability and Resilience Solutions Lead at Allianz Commercial.

Despite ongoing geopolitical and economic uncertainty, political risks and violence drop one place to #9 year-on-year, albeit with the same share of respondents as 2024. At the same time, it ranks as a more concerning risk for large companies, up to #7, while it is also a new entry into the top 10 risks for smaller companies at #10. Companies in countries such as France, Italy and the UK (where it is a top five risk in all three countries) regard this peril as a greater concern than in 2024.

The impact of civil unrest and riots is the political risk exposure companies fear most, given such events are becoming frequent, disruptive and costly. In addition to endangering the safety of employees and customers, those in the immediate vicinity of unrest can suffer business interruption losses and material damage to property or assets, while indirect damage can be inflicted on companies in the form of ‘loss of attraction’ or ‘denial of access’ to their premises.

The impact of war, and disruption to supply chains are other major concerns in the Allianz Risk Barometer, while terrorism and sabotage risks are also heightened.

Political risks are a multiplier for other risks, according to Michael Bruch, Global Head of Risk Advisory Services, Allianz Commercial: “Conflicts and geopolitical tensions have the potential to disrupt supply chains and cause physical damage. In export-driven economies like Germany, such geopolitical risks can significantly impact economic stability. However, these political risks can also create opportunities; some companies manage to adapt and continue operations effectively, leveraging new market conditions. While the geopolitical landscape is complex and trends can vary, businesses that are agile and resilient may find ways to thrive amidst these challenges.”

Political risks, be they trade disputes, civil unrest, or military conflicts, significantly challenge supply chain stability. High tech and green energy sectors, which have been the subject of trade wars and protectionism, are particularly at risk. For example, in 2023 China restricted the export of graphite, an essential component for lithium-ion batteries used in electric vehicles. Analysis by Allianz [6] and others shows that within the last decade export restrictions on critical raw materials increased by a factor of five. Some products in electric vehicles and consumer goods are as much as 91% dependent on China.

Companies are most likely to consider developing alternative/ multiple suppliers when taking measures to de-risk their supply chains and make them more resilient, according to the Allianz Risk Barometer. A greater proportion of respondents than last year also cited geographical diversification of supplier networks in response to geopolitical trends.

“A circular economy can mitigate supply chain risks, but onshoring and insourcing everything is impractical due to cost and resource constraints. Managing supply chain risks also requires strategies like diversification, strategic partnerships, and technological innovation, creating more resilient and adaptable supply chains,” says Michael Bruch, Global Head of Risk Advisory Services, Allianz Commercial.

When it comes to mitigating the direct impact of climate change, adapting or increasing insurance protection, including alternative risk transfer, is the top action that companies are taking – the first time it ranks top. This is followed by adopting carbon-reducing business models and creating contingency plans for climate-related eventualities. More companies say they are investing in clean technologies to reduce emissions.

However, to keep insurance affordable, businesses must focus more on loss prevention and resilience. Allianz continues to invest in and expand its risk management and loss prevention services, with a dedicated climate risk engineering service and the development of climate adaptation and resilience tools.

Loss prevention is an increasingly important aspect of risk management, says Bruch. “Businesses are looking for more support from insurers across the risk management cycle. We have seen this clearly with cyber risks over the last few years, and increasingly it is the case for climate and transition risks. Loss prevention is key to these risks and insurers have an important role to play in developing solutions for new risks, like green energy and technology.

“For insurers this will mean more entrepreneurial risks, and less historical claims data with which to assess and price risk. But we can help clients understand the risks and take loss prevention and mitigation action, supporting the full cycle of risk management.”

The short-term nature of business decisions can make it difficult for risk managers to make the case for investments in resilience.

“Investments in protection and loss prevention in physical hazards and transition risks might not pay off for years, or even decades. We are developing tools that help businesses identify and quantify the risks of different climate change scenarios and help them decide where best to invest in resilience,” says Bruch.

“As an insurer, we are working to link resilience with underwriting and make it more tangible. We need to get better as an industry at incentivizing change in behavior and helping businesses and society build resilience.“