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Why cybercrime is a top risk for Kenyan businesses in 2024



The continuous push towards digitalization among Kenyan companies and across the world is increasingly exposing them to cyber criminal activities.

In the world where technology has accelerate individual business growth and enhanced business-to-business and business-to-consumer interaction, it is easy to see why cybercriminals have intensified their attacks through data breaches, ransomware attacks on critical infrastructure or physical assets.

According to Allianz Risk Barometer, majority of risk management professional at 47% cited cyber incidents as the number one risk facing businesses this year, followed by theft, fraud, and corruption at 41%, changes in regulation 35% while macroeconomic developments such as inflation and monetary policies emerged fourth with 29%.

 “Many of these risks are already hitting home, with extreme weather, ransomware attacks and regional conflicts expected to test the resilience of supply chains and business models further in 2024. Brokers and customers of insurance companies should be aware and adjust their insurance covers accordingly,” said Allianz Commercial Chief Executive Officer Petros Papanikolaou.

Business interruptions emerged as the fifth risk for enterprises at 12% same as market developments, climate change, energy crisis, political risk and violence while fire and explosions closed the top 10 risk 6%.

While both large and small enterprises face the same risks, Allianz Commercial says resilience gap between large and smaller companies is widening, as risk awareness among larger organizations has grown since COVID-19 pandemic with a notable drive to upgrade resilience.

However, the firm says smaller businesses often lack the time and resources to identify and effectively prepare for a wider range of risk scenarios and, as a result, take longer to get the business back up and after an unexpected incident.

Even as Kenyan companies anticipate increase spending to fight cybercrime which cost businesses in excess of Ksh 2 billion in annual losses, the attacks are projected to rise as firm take more services online while attackers find new and innovative ways to sustain their illegal activities.

“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,” added Scott Sayce, Global Head of Cyber, Allianz Commercial.

However, Kenya is not a unique market as 36pc of overall responses rank cyber incidents as the most important risk globally for the third year in a row – for the first time by a clear margin (5% points), Allianz Commercial says.

Cyber incidents is also a top risk in Middle East, Nigeria, Uganda, Mauritius, Germany, India, Japan, the UK, and the USA.

“A data breach is seen as the most concerning cyber threat for Allianz Risk Barometer respondents (59%) followed by attacks on critical infrastructure and physical assets (53%). The recent increase in ransomware attacks – 2023 saw a worrying resurgence in activity, with insurance claims activity up by more than 50% compared with 2022 – ranks third (53%),” said Allianz.

Other emerging risks

Even as the business activities return to pre-covid levels, the Allianz Risk Barometer shows that 31% of respondents indicated that business interruption is the second biggest threat for firms worldwide. However it is the second biggest threat to businesses in in Africa and the Middle East and ranks in the top five risks in Ghana, Senegal, South Africa, and Uganda, Allianz said.

On the other hand, natural catastrophes rose to become the third biggest threat facing enterprise globally.

Insurer says 2023 was the hottest year since records began, while insured losses exceeded $100 billion for the fourth consecutive year, driven by the highest ever damage bill of US$60bn from severe thunderstorms.

“In Africa and the Middle East, natural catastrophes have emerged as a new risk, ranking at number 6. Notably, Morocco witnessed a significant rise in this risk, climbing from seventh to first place. Cameroon and South Africa also experienced a surge in natural catastrophe risks, ranking among the top five risks in these countries,” the firm stated in the report.

Additionally, climate change which was cited by 18% of respondents was ranked 7th biggest threat for businesses worldwide and top three for firms operating in Brazil, Greece, Italy, Turkey, and Mexico while in Kenya, the risk moved to seventh place from 3rd last year.

In Africa and the Middle East, climate change risk dropped from fourth to 10th place. However, it remains a top-five concern in countries such as Ghana, Mauritius, Morocco, and Nigeria.

Physical damage to corporate assets from more frequent and severe extreme weather events are a key threat. The utility, energy and industrial sectors are among the most exposed. In addition, net zero transition risks and liability risks are expected to increase in future as companies invest in new, largely untested low-carbon technologies to transform their business models,” noted Allianz Commercial.

Other risk facing business this year includes political risks and violence as a result of ongoing conflicts in the Middle East and Ukraine, and tensions between China and the US.