Technology, Supply Chain and Regulatory Risk Management Strategies open Opportunities for Insurers
July 13, 2015
ACE Group, provider of a wide range of insurance products, has published the 2015 version of its “Emerging Risks Barometer,” a report that looks into the risks that challenge businesses particularly in Europe, the Middle East and Africa as a result of globalized and technology-enabled economic growth.
The company’s research found technology risk to be of the greatest concern for its business respondents, with 43 percent citing it as such and 47 percent identifying it as having the greatest strain on time and resources. Technology risk refers to cyber attacks, data loss, systems failures and similar issues that have the potential to significantly interrupt operations or compromise sensitive information.
In second place is supply chain, finance and logistics risk, with 31 percent of respondents listing it as both a top concern and as having a significant financial impact. Companies expanding into new markets must keep in mind that the economic benefits of doing so are kept in check by the increased potential of something going wrong in the growing supply chain. The focus of risk management in this area has gradually shifted from natural disasters to the ethical and trading standards of companies along the chain, especially regarding their impact on a larger corporate reputation.
27 percent of respondents cited regulations and compliance as the third largest risk category and 29 percent as the third greatest strain on time and resources. Again, expanding into new markets is the main cause here as companies invariably have trouble keeping track of regulatory requirements, which can differ considerably depending on the market and/or jurisdiction. Multinational corporations must take a more direct and focused approach to managing risk of noncompliance across the entirety of their operations.
“Our survey results show that European businesses are now facing a landscape of new, complex, risks that change at an astonishing rate, defying previous categorizations,” commented Andrew Kendrick, President of ACE European Group. “In this new environment, piecemeal responses will not succeed. Effective action will require board-level commitment, an integrated approach, and the development of a clearly understood risk management culture across organizations. These imperatives are not new, but their urgency is increasing.”
Beyond the three aforementioned risk categories, respondents gave almost as much importance to people risk, which refers to unforeseen events in employees’ personal lives, differing abilities and talent among people, illegal or anti-company activities, etc., and geopolitical risk, which includes regime changes, asset confiscation, trade credit risk, currency restrictions, protectionism and other events far out of the company’s control. Other risks that pose a problem but are of lesser priority include a company’s reputation, management liability, environmental liability, natural catastrophe and political violence.
For insurance companies, these risks are an opportunity to expand offerings and attain more business. Approximately 80 percent of respondents cited insurance as an integral part of their risk management strategy, with an emphasis on technology risk, supply chain, finance and logistics risk and people risk. ACE Group’s research highlights the need for insurance companies to improve their products in these areas and enable continued development of successful risk management strategies.
Edited by Peter Bernstein