6 global business threats employers should plan for in 2023

January 31, 2023 4:29 PM

If the last few years have proven anything to businesses, it's that the world is unpredictable — but that doesn't mean employers can't prepare for the inevitable wrenches that get thrown into their plans.

Allianz Global Corporate & Specialty (AGCS), a risk consultancy and insurance carrier, released its 12th annual Risk Barometer, a survey of nearly 3,000 business leaders and risk management professionals in 23 different industries and across 94 countries and territories. The survey asked respondents to vote for the biggest business risks they are facing in 2023, and the results are in.

From cybersecurity threats to natural disasters, leaders name what global threats are likely to make it harder for their businesses to operate consistently and effectively. Yet, not all hope is lost if businesses are willing to acknowledge the possible risks coming their way and be flexible, says Tom Varney, head of risk consulting in North America at AGCS.

"The world continues to change, and we need to understand how various [factors] are impacting businesses as we go forward," says Varney. "Focus on business resiliency — those businesses that are agile within their approaches and continuity plan will be in a good position."

In other words, companies will need to prepare backup plans and alternative solutions that allow their company to remain functional, even if disaster strikes.

Here are 6 global business risks employers should be prepared for in 2023.

Cyber incidents

Cyber security threats take the number one spot on AGCS's Risk Barometer, and have ranked in the top three of business risks for the past five years. Given that cybercrime incidents cost the global economy an excess of $1 trillion per year, it's not too surprising that respondents are worried about being victims of cyber threats.

"It's an issue that needs to be addressed as we go forward, especially in small or medium-sized companies where they may not have somebody devoted to cybersecurity," says Varney. "Ransomware, malware and hacking are starting to spike, and it's costing companies."

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Varney notes that businesses operate mainly, if not solely, online through countless devices that may be distributed across offices and employees' homes, making cybersecurity the responsibility of everyone in the company. Varney advises employers to continue training and informing employees about common scams and hacking devices, namely deceitful emails with links or downloads that could cause havoc to a company's security. Otherwise, companies risk their bottom line as well as their reputation every day, Varney says.

Business interruption

Varney defines "business interruption" as a consequence of the widespread supply chain disruption companies witnessed in 2022. A close second to cyber security threats, respondents underline how the pandemic and the war in Ukraine have led to delayed operations, higher prices and global shortages in essentials, from lumber and gasoline to baby formula. As a result, companies are finding it harder to deliver products to their customers.

"One of the things we are seeing clients do is plan for these types of events," says Varney. "If I need specialty parts from this specific manufacturer, should I stockpile it? Should I look for alternative suppliers in different regions of the globe?"

Macroeconomic developments

Macroeconomics, or the performance of other economies around the world, is the next biggest looming threat to businesses. Respondents are not confident they will see mass economic recovery in 2023, noting that record inflation rates and the expected global recession in 2023 is putting everyone on edge.

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In a globalized economy, there's bound to be a problem thousands of miles away that impacts one's business, underlines Varney.

Energy crisis

The energy crisis made it to the top 10 for the first time in ACGS's history, emphasizing just how much increasing fuel costs and supply disruptions are impacting businesses. And given that Russia, one of the world's largest exporters of fossil fuels, is being economically shunned by some of the world's biggest economies due to the invasion of Ukraine, energy prices aren't likely to significantly drop in the near future.

"We know industries like the pharmaceutical and agricultural industries require a significant level of energy to operate," says Varney. "It's a factor that can play a big part in the dynamic of your profitability."

Natural catastrophes and climate change

Natural disasters ranked just one place above climate change, however, these two risks go hand in hand. Varney notes that while businesses may find themselves more immediately concerned about something like a hurricane or flooding stopping their operations, climate change will only worsen these threats down the line.

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"Climate change is impacting the severity of the things that we're starting to see, and it's getting harder to overlook," says Varney. "Natural catastrophes are historically more in vogue in terms of business risks, but climate change has started being part of that picture."

Respondents did report that their companies were taking action by adopting carbon-reducing business models and developing a risk management strategy for climate risk.

Shortage of skilled workers

Out of the 12 risks named by AGCS, a shortage of skilled workers got 14% of the votes, landing in the top 10 for the first time since 2019. Between the mass quitting across the globe and many highly skilled, older workers finally retiring, companies fear that hiring challenges will persist into 2023 and beyond, explains Varney.

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"There's a significant amount of people who are interested in leaving their current position," he says. "So what's the succession plan? Companies have to be able to hire employees who can continue to operate at the same level as the senior worker who left."

Varney encourages employers to consider apprenticeship programs and reevaluate whether their world culture is attractive to today's working class.

"The people coming out of college are seeing things differently," says Varney. "That means employers and managers need to look at what they consider a workday differently."