Emerging technologies continue to rapidly change the way businesses operate and interact with customers, yet risk management processes are not keeping pace with the associated risks, according to a report published in April by global insurance broker Marsh and the risk management society, RIMS.
Only a small percentage of risk managers are confident they have good risk management processes to deal with new technology risks, according to the 15th Annual Excellence in Risk Management report and survey.
The report delves into risk professionals’ role in managing technology innovation such as artificial intelligence (AI), blockchain, and the internet of things (IoT). According to the findings, 59 percent of respondents said their organizations are currently using or exploring the use of IoT systems; 47 percent are using or exploring the use of AI; and 24 percent are using or exploring the use of blockchain.
Despite the growth, only 14 percent said they strongly believe they have a clear process in place for addressing disruptive technology risks. Nearly half could not say there is a clear process at all.
Furthermore, the report found that most risk professionals would benefit from viewing digital technology from a balanced lens. When asked what it means for their organization to be “digital”, a majority cited operational improvements, such as automating core processes, more so than growth initiatives, including new ways of doing business and interacting with their customers.
By ignoring how digitization is changing the way companies interact with their customers, risk professionals cannot fully understand the changing risk profiles of their organizations, the authors note.
According to the authors, risk managers should be aware of how their companies are positioning for growth.
“Risk executives must lean into these changes. They should drive internal conversations to help understand the implications of new business models. And they should deploy an analytical decision-making framework that ensures the risk finance approach is optimized against an ever-changing risk profile,” the report states.
“Emerging technologies like AI, blockchain, and IoT are fast becoming the new normal, yet risk management is not keeping up,” said Brian Elowe, chief client officer, North America, Marsh. “Only by asking questions and understanding the underlying technologies and their uses throughout the organization can risk professionals truly appreciate their risks and respond accordingly.”
Carol Fox, vice president, strategic initiatives, RIMS, said risk managers have a role to play supporting their organizations’ ability to make strategic decisions regarding disruptive technology.
“Engaging in innovation that impacts our companies, customers, industries, and even the practice of risk management itself is a giant first step,” she said.
“While risk professionals do not need to be ‘experts’ in the intricacies of these technologies, they can certainly advance the performance benefits that each new technology brings.”
Other findings from the report include:
The majority of respondents said they are most interested in technology that enables them to identify emerging risks (57 percent) and enhance data security (57 percent).
Of the respondents whose organizations have cross-functional risk committees, 31 percent said disruptive technologies are discussed at every meeting.
40 percent of respondents said they would consider switching insurers and other advisors based on their innovations in the claims area. Another 43 percent wouldn’t rule out such a move.
While only 20 percent of respondents had experienced a cyber claim in the past 36 months, those that did expressed the highest level of satisfaction. The report suggest that this could stem in part from the number of ancillary services that insurers provide in their servicing of cyber claims.
Directors and officers liability claims registered the highest level of dissatisfaction. This may relate to the at times personal nature of such claims, the report says.
The Excellence report, Maintaining Relevance Amid Technology Disruption, is based on 450 responses to an online survey and a series of focus groups with risk executives in January and February 2018.
Topics Cyber Trends InsurTech Tech Artificial Intelligence Risk Management
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