The potentially explosive changes unfolding this year in the world-wide geo-political landscape, and from new developments in AI, are two emerging 2024 risks prompting much attention.
This paper summarizes the top business risks in 2024, with research derived from three top sources, comprising opinions from over 5,000 board members, C-Suite executives and other experts from over 100 countries. This information points to a rapidly changing risk landscape, with a daunting and challenging year lying ahead for businesses.
Finally, in the Conclusions section of this paper, we curate a consolidated short list of five (5) risks which we believe will impact virtually all organizations and should be considered for inclusion on all 2024 risk registers.
Read on to view the top 2024 top risks identified by thousands of business leaders.
Introduction
Deep dives by boards and executives should focus on a short list of the critical risks which could most impact corporate objectives. Corporate directors and executive teams should be reviewing their own prioritization of risks, tracking vulnerabilities through a dashboard or another mechanism prepared by management, and ensuring that deep dives and crisis simulations are run for the biggest threats. From this work, mitigation plans should be formulated. Many leaders prioritize their risk lists drawing from both internal and external sources. Internal sources should reveal the unique risks you face and can be identified by your executive and board teams, unions, workers, line people and people throughout the different areas of your organization. External sources- revealing those risks facing other organizations- can include peers, customers, shareholders, IT/AI and Cyber security specialists, HR experts, suppliers, regulators, experts in your industry, lawyers, regulators, as well as finance and engineering experts and other stakeholders. One key source are surveys complied by risk specialty firms.
One of the best surveys, the Allianz Risk Barometer1. is conducted annually by Allianz Global Corporate & Specialty (AGCS), a leading global insurance company headquartered in Germany. Annually, Allianz identifies important corporate perils for the next 12 months and beyond. The 2024 survey reached 3,069 respondents from 92 countries and 24 Industry Sectors, collected in late 2023. Respondents were asked to name up to three risks they believed to be most important. Large-size companies (>US$500MM annual revenue) comprise 44% of the respondents, Mid-size companies ($US100MM+ to US$500MM) comprise 26%, and while Smaller enterprises (<US$100MM revenue) represent 30%. Surveys were conducted in late 2023.
Allianz Top Risks for 20241.
(Consolidation of global risks from each region, 3,069 respondents from 92 countries)
| Rank 2024 | Rank 2023 | Trend | Risk | Description |
|---|---|---|---|---|
| 1 | 1 | same | Cyber incidents | e.g., cyber crime, IT network and service disruptions, malware / ransomware, data breaches, fines, and penalties |
| 2 | 2 | same | Business interruption | incl. supply chain disruption |
| 3 | 6 | up | Natural catastrophes | e.g., storm, flood, earthquake, wildfire, extreme weather events |
| 4 | 5 | up | Changes in legislation and regulation | e.g., tariffs, economic sanctions, protectionism, Euro-zone disintegration |
| 5 | 3 | down | Macroeconomic developments | e.g., inflation, deflation, monetary policies, austerity programs |
| 6 | 9 | up | Fire, explosion | |
| 7 | 7 | same | Climate change | e.g., physical, operational, and financial risks as a result of global warming |
| 8 | 10 | up | Political risks and violence | e.g., political instability, war, terrorism, coup d’état, civil commotion, strikes, riots, looting |
| 9 | 11 | up | Market developments | e.g., intensified competition / new entrants, M&A, market stagnation, market fluctuation |
| 10 | Shortage of skilled workforce | |||
| 11 | 4 | down | Energy Crisis | e.g., supply shortage / outage, price fluctuations |
| 12 | 14 | up | New technologies | e.g., risk impact of artificial intelligence, connected /autonomous vehicles, lithium-ion batteries, electric vehicles, Metaverse |
Source: 2024 Allianz Risk Barometer (Footnote 1.)
Another important survey of top current risks is conducted annually by the World Economic Forum via their Global Risks Perception Survey (The GRPS)2. This year’s 2024 GRPS brought together insights on the evolving global risks landscape from 1,490 experts across academia, business, government, the international community, and civil society. Responses were collected from 4 September to 9 October 2023.
World Economic Forum (Global Risks Perception Survey (GRPS)2.
(surveyed by WEF in late 2023, 1,490 Respondents from world-wide)
WEF- Five risks most likely to present a material crisis on a global scale in 20242.
| Risk Most Likely to cause a crisis in 2024 | % picking this Risk |
|---|---|
| Extreme weather | 66% |
| AI-generated misinformation and disinformation | 53% |
| Societal and/or political polarization | 46% |
| Cost-of-living crisis | 42% |
| Cyberattacks | 39% |
Source: 2024 World Economic Forum (Footnote 2.)
WEF- Top 10 2024 Responses from US and Canadian Executives2.
| Canadian Executives | US Executives |
|---|---|
| 1. Economic Downturn | 1. Economic downturn |
| 2. Labour and/or talent shortage | 2. Infectious diseases |
| 3. Extreme weather events (floods, storms, etc.) | 3. Inflation |
| 4. Inflation | 4. Weapons- biological, chemical, or nuclear |
| 5. Infectious diseases | 5. Energy supply shortage |
| 6. Energy supply shortage | 6. Misinformation and disinformation |
| 7. Erosion of social cohesion and wellbeing | 7. Extreme weather events (floods, storms, etc.) |
| 8. Household debt | 8. AI Technology- Adverse outcomes |
| 9. AI Technology- Adverse outcomes | 9. Erosion of social cohesion and wellbeing |
| 10. Asset bubble burst | 10. Attacks on critical infrastructure |
Source: 2024 World Economic Forum (Footnote 2.)
Finally, in their 11th annual survey entitled “Executive Perspectives on Top Risks 2023 & 2032”3., North Carolina State University and Protiviti provide insights revealing boards of directors and executive’s views on current risks, and risks likely to impact them in 10 years (2032). The survey was from 1,304 US based respondents comprising mainly board members and C-Suite executives who provided their perspectives.
North Carolina State University and Protiviti3.
(1,304 US based board members and C-Suite executives on 2023 and 2032 risks)
*Technology related risks
| 2023 Risks | Future State in 2032 |
|---|---|
| 1. Talent | 1. Talent |
| 2. Economic Conditions | 2. *Technology Adoption |
| 3. Labour Costs | 3. *Disruptive Technologies |
| 4. Change of Direction | 4. Change of Direction |
| 5. Supply Change | 5. *Identity Protection |
| 6. Culture Changes | 6. *Legacy Technology |
| 7. *Technology Adoption | 7. *Big Data |
| 8. Not addressing risks | 8. Economic Conditions |
| 9. Work Environment | 9. Regulatory Compliance |
| 10. Crisis Resiliency | 10. Labour Costs |
Source: NCU & Protivity (Footnote 3.)
Conclusions- Top 5 Critical Risks from Directors Global
Our top five list for 2024 is as follows:
- Cyber and IT Security Breaches– virtually every survey reveals concerns by businesses about the potential for them to be seriously impacted or shut down by hackers and criminals gaining access to new technologies or finding ways to exploit old vulnerabilities. Hackers are beginning to utilize AI tools, and this will exponentially increase the frequency and impact of cyber attacks in the next years to come. The 2023 IBM Ponemon Institute “Cost of Breach Report” reveals, from hundreds of attacked organizations, that the average breach cost in Canada is US$5.13 million, and in the United States is US$9.48 million;
- Geopolitical & Military Conflict– in 2024, over 50% of the world’s population, including in India, Russia, the US, and the UK, will stage “democratic” elections. Many elections raise concerns about the fueling of populism and polarization which may manifest in increasing civil unrest activity and violence. The risk of pre-emptive cross-border wars is increasing in certain regions throughout 2024. Expected outcomes include unrest, militarization, and damaging tariffs imposed by governments opposed to globalization. An example is the potential impact of the rise of BYD, the massive company from China which now makes more electric cars than Tesla and offers a base model at $US11,000. Without tariff protection, many car makers will soon cease to compete. Of concern is that many boards are simply not overseeing Geopolitical scenarios;
- Third Party Risk-Supply Chain & Business Interruption– tied into each risk on this short list, Supply Chains and resulting Business Interruption can be the outcome from tariff changes, pandemic concerns, increased hacking by cybercriminals, extreme weather, and militarization such as is currently occurring in the Middle East and in Eastern Europe. It is critical that organizations re-think two areas: sourcing and supplying in dangerous places of the world; and understanding the technology and security implications of contracting with third parties;
- Extreme Weather– 2023 shattered previous climate records including sea surface temperatures, sea levels, and low Arctic sea ice. This situation is reflected in the dramatic rise in natural catastrophes and is resulting in massive physical damage and business interruption events. The transition to low carbon business models is not moving at the speed required;
- AI: misinformation & disruption- the opportunities and threats from AI are too numerous to list. In addition to helping threat actors create new strains of ransomware, AI used proactively by your competitors could propel them into leading market positions rendering your current offerings obsolete in no time. AI is being developed by private firms, run by executives, supervised by boards of directors, funded by investors, and not yet regulated effectively by governments. So will all organizations follow proper governance to ensure societal benefit, or will the deepest pockets driven by the profit motive develop AI to the detriment of competitors and other entities, and possibly without consideration for safety? What are the implications for boards that do not act quickly to protect their organizations?
Footnotes
- Allianz Risk Barometer 2024 (Allianz Global Risks), https://commercial.allianz.com/content/dam/onemarketing/commercial/commercial/reports/Allianz-Risk-Barometer-2024.pdf
- World Economic Forum, The Global Risks Report 2024 19th Edition, November 2023, Marsh McLennan and Zurich Insurance Group https://www3.weforum.org/docs/WEF_The_Global_Risks_Report_2024.pdf
- “Executive Perspectives on Top Risks 2023 & 2032”, North Carolina State University and Protiviti, https://erm.ncsu.edu/az/erm/i/chan/library/nc-state-protiviti-survey-top-risks-2022-2032.pdf
- IBM/ Ponemon Institute, Cost of a Data Breach 2023 https://www.ibm.com/downloads/cas/E3G5JMBP
- “Two Geopolitical Experts on how Boards should Think: Too Much Talk, too Little Action” https://fortune.com/2023/12/05/how-boards-should-think-geopolitics-risk-advice/
- “AI is Testing the Limits of Corporate Governance”, Harvard Business Review, https://hbr.org/2023/12/ai-is-testing-the-limits-of-corporate-governance?tpcc=orgsocial_edit&utm_campaign=hbr&utm_medium=social&utm_source=linkedin
