The constant innovation indigenous to the technology industry may make the idea of risk management seem difficult and sometimes impossible. While challenging, tackling technology risk is not all that different than addressing possible exposures in other industries: Awareness and active involvement in risk management procedures are key. Understanding the potential risks that technology businesses face can help you keep clients better informed and help them consider ways to potentially mitigate those risks and limit costly exposures. Here are some of the key risks that your clients are likely to come across more frequently in 2011.
Everyone goes mobile. Smartphones are no longer the restricted realm of tech savvy professionals or young hipsters. Expect mobile broadband services to become even more mainstream this year, and more consumers to have an iPhone, Android or Blackberry in their pockets. And, as use of mobile Internet increases, so does the risk of security threats. With personal information like bank account numbers being readily transmitted through cell phones, that information can be stolen by an identity thief taking advantage of network vulnerabilities. As vendors of smartphones and related equipment work to develop more secure devices, both individuals and organizations need to take control of their data and be cautious of what they share on mobile networks.
Cookie crumbs. Cookies, seemingly innocuous data collection tools often employed by web advertisers to learn more about their audiences, may see new life in 2011. Data aggregators compile personal information from such cookies, including details such as name, birth date, Web site preferences and even Social Security number, from multiple sources, to assemble sophisticated consumer profiles. With new technologies like the persistent ever-cookie becoming popular, it may be more difficult for Web sites to discover their existence and even more difficult for consumers to get rid of them. Web sites that inadvertently host these cookies need to take particular notice, as the Federal Trade Commission now deems Web site hosts accountable not only for their own data collection, but also for third-party data tracking.
Breakthroughs in medicine.New technology isn’t restricted to just computers. Each year, new breakthroughs in medical science change the way doctors administer care and improve the lives of patients around the world. With biotechnology, medical devices and pharmaceuticals poised to continue to grow exponentially in 2011, companies in these industries can expect their risks to grow in kind. Research and development, clinical trials and the production process need to be considered carefully when assessing any products being developed for human medical care, as they can expose companies to significant liabilities.
To the cloud. An emerging trend often discussed in 2010, the concept of cloud computing will likely continue to gain steam this year. By outsourcing certain parts of an organization’s technology to a third party, a company can potentially see great cost savings and greater flexibility when it comes to IT services. But outsourcing the functionality does not translate to outsourcing the associated risks. Data compliance and integrity, while seemingly in the hands of the cloud provider, need to be tightly managed by the originating company. If the data stored in the cloud is breached, both parties could potentially be held liable, which makes it imperative that companies audit exactly how cloud providers are managing their data.
Solar heats up.Energy costs for traditional fuels — coal, oil and natural gas — continue to rise rapidly. Look for renewable energy sources, particularly solar power, to see greater demand this year. A spike in investment in solar development in emerging economies, like China and India, also suggests growth to come in the sector. With solar power comes a unique set of risks, from the production of the photovoltaic cells to the actual installation of the finished panels. As demand for renewables grows, these types of risks will need to be considered and managed appropriately.
The only guarantee in the technology industry is that it will continue to grow and change, with new tools available to improve our lives and the ways we do business. But with new technology come new, unknown risks. By continuing to be vigilant, staying abreast of current trends and using a bit of common sense, technology risks can be managed and appropriately addressed before they become costly losses.
Wurzler is president of OneBeacon Technology Insurance, a member of OneBeacon Insurance Group. This article is provided for general informational purposes only and does not constitute and is not intended to take the place of legal or risk management advice.
Editor’s note: This column appeared in the Jan. 24 issue of Insurance Journal magazine. In October, Wurzler spoke with Insurance Journal in a podcast about OneBeacon’s growing focus on technology insurance.
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