Cyber incidents a major concern for Financial Services sector in 2024

Cyber incidents are a top concern for the financial services sector. Picture: Andrew Brookes / AFP

Cyber incidents are a top concern for the financial services sector. Picture: Andrew Brookes / AFP

Published Jun 4, 2024


Cyber incidents have become a top concern for the financial services sector, with 43% of respondents highlighting this scourge as a major risk in the latest Allianz Risk Barometer.

The Allianz Risk Barometer is an annual survey by Allianz Commercial that gathers insights from experts and executives in the financial services sector and other industries.

This increase in concern, it says, is driven by a recent spike in ransomware attacks, which has led to a 50% rise in insurance claims since 2022.

According to the survey, macroeconomic developments and changes in legislation and regulation are also significant risks, each cited by 26% of respondents. Additionally, 22% of respondents are worried about business interruptions and natural catastrophes.

Hackers are increasingly targeting IT and physical supply chains, launching widespread cyber attacks, and developing new methods to extort money from businesses. Effective early detection can help companies reduce unplanned downtime, costs, and negative impacts on customers, revenue, and reputation, according to Allianz Commercial.

“Cyber criminals are exploring ways to use new technologies such as generative artificial intelligence (AI) to automate and accelerate attacks, creating more effective malware and phishing,” said Santho Mohapeloa, Cyber Insurance Expert at Allianz Commercial.

“The growing number of incidents caused by poor cyber security, in mobile devices in particular, a shortage of millions of cyber security professionals, and the threat facing smaller companies because of their reliance on IT outsourcing are also expected to drive cyber activity in 2024,” Mohapeloa added.

Apart from cyber incidents, respondents from the financial services sector identified macroeconomic developments, particularly inflation, as a significant risk for 2024.

Inflation is challenging to manage and can have long-term effects, with investments often taking time to regain value, even after economic recovery. Additionally, inflation leads to higher interest rates, which can increase net interest income but also slow down loan demand and raise the risk of defaults.

Compliance is another major challenge for financial services companies. Constant changes in legislation and regulations related to digitisation, climate change, and environmental, social, and governance (ESG) issues have significantly increased the compliance burden over the past decade

To address these challenges, financial institutions need to improve the effectiveness and efficiency of their compliance activities and make better use of data and technology, Allianz Commercial said.

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