Cyber incidents stemming from cybercrime, data breaches and information technology failures featured at the top of the 2022 Allianz Risk Barometer rankings, regardless of which way the data analysts ‘sliced’ the survey result. At a presentation to announce the 2022 survey findings, Allianz Global Corporate & Specialty (AGCS) Africa confirmed cyber risk as the top concern among 2,650 business leaders whether based globally, in Africa and the Middle East, or in any number of individual country markets, including Kenya, Nigeria and South Africa.
Ludovic Subran, chief economist at Allianz, kicked off the barometer launch event by sketching the macroeconomic context for the survey. “2022 and 2023 will see a split between countries that still benefit from economic tailwinds and those that are still struggling to reconnect with their growth engines,” he said, describing the short-term outlook as one of “uneven post-pandemic normalisation”. Supply chain disruptions featured prominently during his 15-minute introduction, alongside comment that supply chain managers and logistics experts might be more important than CEOs in steering companies back to pre-pandemic output levels.
The global focus is shifting from managing pandemic to managing both the consequences of pandemic and pandemic responses. It is fascinating how intertwined the various economic factors are. For example, the expansionary fiscal and monetary policy adopted in responses to pandemic were as much to blame for spiralling inflation as the global supply chain hiccups caused by national lockdowns. “The impact of vibrant inflation [is clear from] the rather hawkish moves of central banks; from the Federal Reserve, to the Bank of England, to the European Central Bank the central banks [have shown they] are prepared to hike interest rates and decrease their asset purchases,” said Mr Subran. He expected many African central banks to hike rates proactively to avoid a deprecation of their currencies.
The presentation took place on the eve of Russia’s move on Ukraine, drawing some speculation as to the short- to mid-term impact of a likely raft of economic and financial sanctions being put in motion by the West. Aside from an immediate collapse in Russia’s financial markets and currency, the rest of Europe looks sure to face a lengthy struggle with gas and oil prices.
Perhaps the standout moment from the presentation was Mr Subran highlighting the risk of financial sanctions in a world where SWIFT and other payment mechanisms between international banks represented “a global Jenga of relative dependencies”. He topped this catchphrase by suggesting that NATO-aligned Europe “keep some powder dry” and resist going “full bazooka on the sanctions with SWIFT”. Readers should note that the crisis has escalated significantly since these comments were made.
With some of the macroeconomic context covered, attention shifted to the 2022 Allianz Risk Barometer. In keeping with the Africa Ahead mandate of covering sustainability issues in Africa, we focus on the top ten business risks identified by survey participants based in Africa and Middle East (AME). It turns out that the top two risks on this list are identical to those singled out by global risk counterparts, namely ‘cyber incidents’ and ‘business interruption’. AME has, however, placed pandemic outbreak one position higher than the global ranking, in position three.
Selin Özyurt, senior economist for France and Africa at Euler Hermes, suggested that pandemic concerns were heightened in Africa due to the divergent pace of post-pandemic recovery in developed and emerging markets. “The main contributing factor is the limited fiscal space of most African governments to put in place the massive stimulus programs we have seen in advanced economies,” she said.
Risks number four and six on the AME list did not even feature on the global list, for reasons quite obvious. Countries in Africa are more exposed to ‘political risks and violence’ and ‘critical infrastructure blackouts’ than their Western peers, with some notable recent exceptions. Businesses in South Africa have first-hand experience of both infrastructure and political risks thanks to multi-year supply difficulties at state-owned electricity producer, Eskom, and widespread looting and rioting that took place in July 2021. And Ms Özyurt explained the country’s poor 2022 GDP growth forecast as a consequence of “structural impediments due to the slow pace of reforms in the state sector”. Risk number five on the AME list echoed that of the global list, being ‘changes in regulation and legislation’.
It was fascinating, this writer felt – given all the excitement over impact and sustainability at the COP26 summit held in Glasgow, Scotland recently – that concerns over carbon emissions and climate change did not dominate the business risk rankings. A quick scan of the global top ten showed natural catastrophes at position three and climate change at position six. Not too bad coming out of two years of pandemic, one might say, before tutting at the almost hindsight inclusion of climate change at position ten on the AME list. Africa’s business leaders will have to get more serious about tackling climate change and acknowledging the risks under this category if they intend demanding that the West fund their response to the challenge.
It is informative that extreme weather and climate change were frequently mentioned as part of Africa’s overarching macroeconomic risk environment, most notably in contributing into inflation. “Many countries in Africa are suffering from adverse climate events [that contribute to] food insecurity and add to existing inflationary pressures,” said Ms Özyurt, who also commented on the impact of extreme weather events in east Africa, including Ethiopia, Somalia and some areas of Kenya.
Fortunately, there are signs of climate change – which is accepted as a contributing factor to natural catastrophe events – taking its rightful place on the global risk landscape. “Climate change is climbing the rankings, telling us that businesses are thinking about the impact of global warming [both insofar] the reputational implications on their business and how it impacts the rest of the world,” said Senzile Ndlozi, business development manager at AGCS Africa. She observed that ‘climate change’ had risen from position nine to six on the global rankings during the past year, and had entered the AME rankings at position ten for the first time.
Climate change remains a very topical issue for the AME region, and particularly for South Africa. Unfortunately, South Africa’s economy is heavily dependent on coal-fired electricity and resources extraction. “We are seeing a lot of conversation among government and private sector stakeholders around how we manage climate change and how we reduce our carbon emissions,” concluded Ms Ndlozi. “Allianz is positioning to move towards renewable energy and support businesses that gravitate towards it.”