Ghana Tops 10 Business Risk In 2020 ― Allianz Risk Barometer
Macroeconomic and Market developments (41% of responses) rank as the most important business risks in Ghana in the ninth Allianz Risk Barometer 2020 . Macroeconomic developments also ranks first in Nigeria, #4 in Africa and the Middle East, #7 in Cameroon, South Africa and Tanzania.
Globally, Macroeconomic developments is a new entry in the top 10 risks for 2020 (11%), driven by corporate fears over a global recession and debt accumulation, particularly in the US and China, notably with regards to the private sector.
Market developments is ranked fifth globally as 2019 was characterized by high market volatility, which will continue in 2020. Market developments is ranked #2 in Cameroon, #4 in Nigeria, #6 in Africa and the Middle East, #7 in Tanzania and #10 in South Africa.
Each year Allianz asks CEOs, risk managers, brokers and insurance experts around the world to name their top three risk concerns for the year ahead. For the 2020 study, a record 2,718 experts from 102 countries and territories participated, including more than 350 from across the Africa and the Middle East region. This is the inaugural Allianz Risk Barometer report for Ghana. “The Allianz Risk Barometer has been a point of reference for many businesses globally since its inception nine years ago. We at Allianz are therefore excited to be delivering to businesses in Ghana, a report on what to watch out for this year as far as risks to their businesses are concerned,” says Gideon Ataraire , CEO, Allianz Life Insurance Ghana.
Concerns about currency depreciation and inflation see Macroeconomic and Market developments as leading risks in Ghana. The Ghanaian Cedi ended 2019 with a depreciation rate of about 12.9% to the US dollar, based on data from the Bank of Ghana. This is the highest since 2015. The 12.9% decline in the value of the cedi is compared to about 8.8% depreciation in 2018, 4.45% in 2017 and 9.2% in 2016. Inflation shot up by 0.5 per cent in the month of November to reach 8.2 per cent, the highest since the rebased Consumer Price Index three months ago. 
Changes in legislation and regulation is at #3 with 29% and could be attributed to the upcoming general elections in late 2020. The country has a history of fiscal profligacy in the run-up to polls and investors will watch whether the government is more cautious this time  .
Cyber risk and climate change, a must watch
Business interruption, Climate change/increasing volatility of weather, Critical infrastructure blackouts, Cyber incidents, Natural catastrophes, New technologies as well as Political risks and violence are joint fourth with 18% of responses. Critical infrastructure blackouts also features prominently in the continent at #7, in Cameroon at #2, in South Africa and Tanzania at #5. “The Allianz Risk Barometer 2020 highlights that cyber risk and climate change are two significant challenges that companies need to watch closely in the new decade,” says Joachim Müller, CEO of AGCS. “Of course, there are many other damage and disruption scenarios to contend with, but if corporate boards and risk managers fail to address cyber and climate change risks this will likely have a critical impact on their companies’ operational performance, financial results and reputation with key stakeholders. Preparing and planning for cyber and climate change risks is both a matter of competitive advantage and business resilience in the era of digitalization and global warming.”
Cyber risks continue to evolve
Cyber incidents’ ranks first in South Africa, third in Tanzania, fourth in Ghana, eighth in Nigeria and ninth in Cameroon this year. Businesses face the challenge of larger and more expensive data breaches, an increase in ransomware and spoofing incidents, as well as the prospect of privacy-driven fines or litigation after an event. A mega data breach ─ involving more than one million compromised records ─ now costs on average $42mn  , up 8% year-on-year. “Incidents are becoming more damaging, increasingly targeting large companies with sophisticated attacks and hefty extortion demands. Five years ago, a typical ransomware demand would have been in the tens of thousands of dollars. Now they can be in the millions,” says Marek Stanislawski, Deputy Global Head of Cyber, AGCS.
Extortion demands are just one part of the picture: Companies can suffer major BI losses due to the unavailability of critical data, systems or technology, either through a technical glitch or cyber-attack. “Many incidents are the results of human error and can be mitigated by staff awareness trainings which are not yet a routine practice across companies,” says Stanislawski.
“The results of the risk barometer validate what we are seeing on the ground in terms of the ranking of risks. Most of our clients now recognize that cyber risk is a c-suite topic. New regulations on the protection of data have also raised the awareness of the risk and its impact on businesses. A combination of prudent risk management practices and the optimal use of insurance markets are smart ways to deal with the growing threat of cyber risks,” says Darlington Munhuwani , CEO, Allianz Insurance Ghana.
Larger and more complex business interruption
BI’s ranking in Ghana is a strong indication of the trend for larger and more complex BI. It also ranks in the top three risks in Tanzania (#1), Nigeria (#3), South Africa (#2) and Cameroon (#2). Causes are becoming ever more diverse, ranging from fire, explosion or natural catastrophes to digital supply chains or even political violence. “Digital supply chains and platforms today allow for full transparency and traceability of goods but a fire at a data center, a technical glitch or a hack could bring large BI losses for multiple companies that all rely and share the same system and which cannot switch back to manual processes,” says Raymond Hogendoorn, Global Head of Property and Engineering Claims at AGCS.
“The impact of business interruption in a highly interdependent and integrated environment can be devastating and far reaching. This is a risk that companies in Ghana should continuously monitor not only in terms of their operations but throughout their supply chain,” adds Munhuwani.
Climate change brings added risk complexity
Climate change’s ranking in the top 10 risks in Ghana and the region is driven by risk management experts’ concerns about global warming. An increase in physical losses is the exposure businesses fear most (49% of responses) as rising seas, drier droughts, fiercer storms and massive flooding pose threats to factories and other corporate assets, as well as transport and energy links that tie supply chains together. Further, businesses are concerned about operational impacts (37%), such as relocation of facilities, and potential market and regulatory impacts (35% and 33%). Companies may have to prepare for more litigation in future – climate change cases targeting ‘carbon majors’ have already been brought in 30 countries around the world, with most cases filed in the US.
“There is a growing awareness among companies that the negative effects of global warming above two degrees Celsius will have a dramatic impact,” says Chris Bonnet, Head of ESG Business Services at AGCS. “Failure to take action will trigger regulatory action and influence decisions from customers, shareholders and business partners. Ignoring climate risk is more costly than grappling with it. Therefore, every company has to define its role, stance and pace for its climate change transition – and risk managers need to play a key role in this process alongside other functions.”
New technologies present opportunities and risks
New technologies present considerable opportunities for businesses in Ghana. However, they can also bring risks, sometimes with unintended consequences. According to Allianz Risk Barometer respondents, the increasing utilization of Artificial Intelligence (AI), which is an important driver of change in many industries today, is the new technology that also comes with the greatest future risk potential. “From chatbots to autonomous cars, more widespread implementation of AI applications is transforming industry and society, bringing benefits such as increased efficiencies, new products and less repetitive tasks,” explains Michael Bruch, Global Head of Liability Risk Consulting/ESG at AGCS.
More information on the findings of the Allianz Risk Barometer 2020 is available here: