The business and risk challenges of digital transformation
Risk professionals are witnessing first-hand the business and risk challenges of digital transformation
Risk professionals have typically been people with technical excellence. The 2018 Airmic member survey reports that risk professionals recognise they also need to skill-up to meet the risk challenges of the Digital Age.
- Legacy risk and governance models used to be concerned with events, now they are concerned with connected "ecosystems".
The continued increase in the balance of intangible assets is driving the risk profile of organisations with more than 80% of the principal risks reported by members as intangible.
Key issues reported include:
- Cyber risk appears set to take over the top of mind risk spot and risk professionals continue to feel ill-prepared
Many risk managers believe that their ability to respond to cyber-risk is falling short. Just 33% are confident that the main cyber-risks have been identified and quantified. Only 22% strongly agree that the board has sufficient knowledge and understanding of cyber-risks. When it comes to third-party cyber-risks, the picture is darker still, with only 15% strongly agreeing that these are being managed in their organisations.
Asked where they would like to see insurers develop services in response to data breaches, respondents showed an overwhelming preference for support with responding to the data loss, with 58% preferring this option. The focus is also on securing data breaches in the case of interruptions to business, with 48% calling on insurers to do more in this area.
Transferring risk through insurance is favoured for a number of risks whose origins sit outside the direct control of the company, and which are therefore harder to mitigate directly. Natural catastrophe and terrorist attack belong in this category. Cyber-events, both those causing business interruption and loss of data are also singled out for transfer.
The threat of competitors using new technology and business models to gain market share is another rapidly emerging concern, chosen by 21% - with 30% expecting it to feature in three years' time.
The level of trust in broker models and practices is still disappointing but has improved over the last three years. In 2015 7% of members strongly agreed that they had trust in the transparency of their broker's business model - this is now reported at 21%. Trust in broker placement advice, particularly when recommending their own services, is at a positive 71% of those strongly and slightly agreeing.
Risk managers show the most trust in brokers' confidentiality, where only 8% express a strong lack of trust. Even here, just 40% strongly agreed that they trusted brokers to maintain confidentiality. This is low given the centrality of this issue in assuring strong business relations.
Airmic technical director and Deputy CEO Julia Graham said the findings underlined the message that insurers and their buyers need to adapt to the fast-changing business environment. "Intangible risks dominate the concerns of our members and are much less well accommodated by the insurance industry than tangible risks. This is something that underwriters and insureds need to develop further as a matter of urgency," she said.
The survey asked questions relating to the diversity agenda which is reported for the first time in an Airmic survey. Early days, but a subject on which Airmic will research and report on further over the coming months.
The survey was carried out in partnership with Longitude, part of the Financial Times Group. It took place in April, with responses received from 137 Airmic members. There are signs of improvement in innovation in the insurance industry, but there is an onus on the risk professional to talk the language of innovation to convert these opportunities The level of trust in broker models and practices is still disappointing, but has improved over the last 3 years Collaboration across and beyond the business is key to effective risk management Risk professionals place too much trust in legacy systems for managing digital transformation Respondents fear loss of market share to competitors deploying new technology
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