More than half of the 3,000-plus respondents (51%) identify a global supply chain paralysis due to a geopolitical conflict as the most plausible Black Swan scenario globally, which could impact their company in the next five years, according to new Allianz Risk Barometer analysis. Fear of a global internet outage ranks second (47%), which reflects the increasing awareness of cyber and artificial intelligence (AI) risks among business leaders.
Black Swans are unexpected or unforeseen events that are highly disruptive and economically damaging. Examples include the 9/11 attacks of 2001, the 2008 global financial crisis, and the COVID-19 pandemic.
Allianz Research estimates cumulative global GDP losses from the pandemic between 2020-2023 to be about $12 trillion.
“Although Black Swan events are not seen to be immediately likely, these rare, high-impact scenarios are perceived as increasingly plausible and should be considered by executive boards given their potential consequences. Growing interconnectivity across both physical and digital supply chains means disruptions now cascade much faster and can turn into major losses. In today’s fragmented geopolitical environment, companies must double down on resilience and integrated risk management to ride out the next perfect storm,” says Allianz Commercial CEO Thomas Lillelund.
Key takeaways:
· In the United States, global supply chain paralysis tops the list (52%) followed by global internet outage (45%) and sudden collapse of a major financial institution (33%).
· The threats of tariffs, trade wars and protectionism, as well as disruption to supply chains and shipping caused by regional conflicts in the Middle East and Russia/Ukraine are on the top of every board agenda.
- Allianz Research estimates that cumulative GDP losses over a two-year horizon triggered by a global supply chain disruption on the scale of the war in Ukraine could total $1.5 trillion. In fact, political-related risks stand out as a leading potential trigger for Black Swan events, according to respondents. Mass social unrest and political instability is regarded as the fourth most plausible scenario globally (29%) and is a Top 3 risk in the United States (31%) and Africa and the Middle East (41%) regions, as well as in France (42%), for example. A sudden collapse of a major financial institution or a sovereign debt crisis, leading to a global liquidity crisis and severe market volatility ranks third (30%).
· The third most plausible Black Swan for mid-sized and smaller companies is the sudden collapse of a major financial institution, while larger companies are more concerned about the risk of simultaneous climate disaster and energy grid failure, such as a heatwave triggering wildfires and widespread blackouts.
Top 5 most plausible Black Swan scenarios:
1. Global supply chain paralysis due to a geopolitical conflict involving multiple major economies, halting the movement of goods and raw materials.
2. Global internet outage caused by a major cyberattack or communication failure, disrupting digital operations and communications worldwide.
3. Sudden collapse of major financial institutions or sovereign debt crisis/government-level fiscal instability leading to a global liquidity crisis and severe market volatility.
4. Mass social unrest and political instability such as widespread protests, strikes or populist movements disrupting governance and business continuity in multiple regions.
5. Simultaneous climate disaster and energy grid failure such as heatwave triggering wildfires and widespread blackouts across a region/multiple regions.
“Awareness of Black Swans and the need to build resilience has increased in recent years, but businesses can never fully prepare for rare high impact events such as a global outage or an unforeseen climate-related catastrophe. Building organizational agility, fostering a risk-aware culture and developing scalable response plans for a range of scenarios remain the most practical steps to best prepare for Black Swan events. Insurers can play a critical role in helping businesses strengthen their resilience in areas such as cyber risk and support more informed decisions when assessing and selecting critical suppliers,” says Michael Bruch, global head of risk consulting advisory services, Allianz Commercial.
