According to the results of two new risk surveys, Cyber threats are now considered one of the top risk for global executives and their respective companies.
What’s more, cyber is now ranked as the major environmental, social and governance (ESG) risk for companies, as shareholders and other stakeholders become increasingly interested in the governance measures companies have in place to protect their systems and data.
Cyber threats escalate
Australian respondents to the World Economic Forum’s (WEF) 2022 Global Risks Perception Survey ranked cybersecurity failure as the top risk they face.
The WEF’s Global Risks Report 2022, which is based on findings from the survey, noted that a growing dependency on digital systems, driven by COVID-19, has coincided with the growth of cybersecurity threats, with malware and ransomware attacks up by 358% and 435% respectively in 2020.
In response, the report said cyber insurance pricing in the US rose by 96% in the third quarter of 2021, “marking the most significant increase since 2015 and a 204% year-over-year increase”.
But along with the increase in cyber insurance prices, the WEF identified the growing link between cyber and ESG, meaning that despite the cost, businesses may not be able to afford not having cyber insurance as a demonstrable corporate governance measure to protect against this risk.
“As ESG concerns come increasingly into focus, businesses that fail to demonstrate strong corporate governance around cybersecurity…could suffer reputational harm in the eyes of ESG-focused investors.”
Cyber insurance claims increasing
The risk of cyber incidents also topped the 2022 Allianz Global Corporate and Specialty (AGCS) Risk Barometer, identified as the top risk by 44% of respondents. Along with business interruption, cyber took out top spot among Australian respondents.
In the AGCS survey, cyber ranked as a top three risk in most countries, driven by a surge in ransomware attacks, which were identified as the top threat for 2022 by 57% of respondents.
AGCS says cyber insurance claims have “increased significantly” over the past three years, due to rising losses, as well as the increased uptake of cyber insurance.
Overall, cyber-related claims seen by AGCS increased from almost 500 in 2018 to more than 1,100 in 2020, and the total number of ransomware claims received in the first half of 2021 was the same as those reported during the whole of 2019.
In line with the WEF report, cyber security also ranked as the major ESG concern in the AGCS survey, with respondents acknowledging the need to build resilience and plan for future outages or face the consequences from stakeholders focused on ESG performance.
What this intersection of cyber and ESG risk means is that, looking forward, not having cyber insurance in place could begin to impact the price and terms under which organisations can secure director’s and officer’s (D&O) or management liability insurance.
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