Cyber incidents have emerged as the top risk faced by the hospitality, leisure, and tourism sector in 2024, according to the Allianz Risk Barometer.
The report, based on insights from over 3,000 risk management professionals and business leaders, emphasizes the critical need to address these risks to ensure business continuity and protect against potential disruptions.
With 36% of respondents expressing concern, cyber incidents have taken the lead as the most significant and new risk in the hospitality, leisure, and tourism sector. The recent surge in ransomware attacks has resulted in a staggering 50% increase in insurance claims activity compared to 2022. Hackers are now targeting both IT and physical supply chains, launching mass cyber-attacks, and devising new methods to extort money from businesses. Consequently, early detection and response capabilities and tools have become increasingly crucial.
“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. 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,“ explains Santho Mohapeloa, Cyber Insurance Expert, Allianz Commercial.
Investment in detection, supported by artificial intelligence, is expected to enhance incident identification. Without effective early detection tools, companies may face prolonged unplanned downtime, increased costs, and a greater impact on customers, revenue, and reputation.
While cyber incidents take the top spot, business interruption, changes in legislation and regulation, macroeconomic developments, and natural catastrophes jointly rank as the second most concerning risks, each receiving 22% of responses. Business interruption has moved down to the number two threat for the hospitality, leisure, and tourism industry.
The top two causes of business interruption, following cyber incidents, are natural catastrophes and fire, with machinery/equipment breakdown or failure following closely behind. These findings highlight the interconnectedness and volatility of the global business environment, as well as the industry’s reliance on supply chains for critical products or services. Consequently, improving business continuity management, identifying supply chain bottlenecks, and developing alternative suppliers remain key risk management priorities for companies in 2024.
Changes in legislation and regulation risks[1] include increased compliance costs, uncertainty, competitive disadvantages, impacts on tourism demand, damage to reputation and image, operational disruptions, and broader economic repercussions. To ensure long-term success and sustainability, it is crucial for businesses in the sector to understand and effectively manage regulatory risks.
Macroeconomic developments can also significantly impact the hospitality, tourism, and leisure industry, introducing risks[2] such as fluctuations in consumer spending, changes in exchange rates affecting international travel demand, inflationary pressures impacting operating costs, and economic downturns leading to reduced travel budgets and discretionary spending. These risks directly affect businesses’ revenue streams, profitability, and overall competitiveness within the industry.
Furthermore, natural catastrophes risks[3] to the hospitality, tourism, and leisure industry include physical damage to infrastructure, disruption of transportation networks, safety concerns for travelers, and loss of revenue due to canceled bookings and reduced visitor numbers. The recovery efforts following such events may require significant time and resources. The occurrence of natural disasters, such as floods, earthquakes, and wildfires, can result in billions of dollars in economic losses for tourism-dependent regions. This highlights the urgent need for effective crisis preparedness measures and risk management strategies within the industry.
Risk mitigation: how to future-proof your operations
What these risks reveal is the extent to which risks are interrelated and aggregated in the networked world we live and work in. Faced with loss scenarios that can fall like dominoes, businesses need robust, resilient operational processes to safeguard their supply chains and ensure business continuity. Business continuity planning (BCP) reviews are essential and must be regularly updated.
Cyber protection should include regular backups, segmentation of data, the right end-point detection and multi-factor authentication. Data is paramount. Insurers such as Allianz Commercial can leverage your company data to facilitate a tailored risk assessment and help draw up a personalized mitigation strategy.