Technology risk tops ACE Barometer as risk managers call for better transfer solutions

Respondents from 500 companies also believe that technology risk-which includes cyber-attacks, data loss and business interruption-is the area of cover in which insurers must most improve their offering. Andrew Kendrick, President of ACE European Group, told Commercial Risk Europe that in order to deliver this to clients the insurance industry needs to pull together, stop 'pushing products', standardise their transfer solutions and offer added risk management services. Technology (43%), supply chain (31%) and regulatory and compliance (27%) risks are the top three concerns of companies in Europe, the Middle East and Africa polled in ACE's latest Emerging Risk Barometer. They are closely followed by people (26%), geopolitical (25%) and reputational (21%) risks. hide The top three areas of concern are also expected to have the most significant financial impact on respondents' business over the next two years-technology (47%), supply chain (31%) and regulation (27%)-and currently consume the most time and resource-technology (47%), supply chain (32%) and regulation (29%). According to ACE, technology plays a critical role in almost every organisations strategic planning, but its research shows that companies may not be focusing their efforts in the right areas due to a 'lack of knowledge about the most likely sources of threat'. ACE points to the fact that less than a quarter (23%) of respondents say their biggest concern is violation of customer data, 'in spite of the huge potential financial and reputational cost of such attacks'. Survey respondents rank unethical labour practices as their biggest supply chain worry. 61% admit they cannot always vouch for the ethical and trading standards of every company on which they rely. As companies pursue global growth, regulation is becoming an increasing source of concern with multinational organisations now facing a patchwork of regulatory regimes across markets and jurisdictions, noted ACE. It flagged up the fact that 56% of respondents say their company directors may not fully understand the governance and compliance requirements in every country for which they have oversight/responsibility. The survey also reveals that seven out of ten risk managers are concerned that regulatory demands are diverting resources from other areas of the business. Mr Kendrick told CRE that in the two years since ACE published its first Emerging Risks Barometer the world has changed dramatically. "In one sense you could say that globalisation is now the top risk for European businesses. Technology, supply chain and regulatory and compliance risk are all drivers and by-products, at the same time, of our globalised operating environment. They are also fiercely complex risks to understand and to manage," he said. "Companies across Europe, the Middle East and Africa are actively pursuing growth opportunities and becoming ever more dependent on technology, both as a business enabler; but also as a tool for innovation and competitive disruption in markets all round the world. Consequently, technology risk has come to the fore, outstripping other risk concerns by some margin," he commented. The global nature of business means that supply chain risk also remains high on the agenda, dropping from first to second place in this year’s Barometer, he continued. According to Mr Kendrick, this reflects the fact that international supply networks are continuing to expand, creating a web of interdependencies and exposures that businesses need to manage. Concerns over regulation and compliance reflect a more 'intrusive' supervision and a trend towards direct action against companies and their executives, said the ACE man. Adding: "Many companies admit they are struggling to keep up with the shifting landscape." The survey of risk professionals also reveals that companies want better insurance solutions to the growing array of emerging risks. Almost half (45%) believe the industry could improve its offering around technology risk. It is the area where buyers want to see most improvement. It is followed by people risk and supply chain, both on 28%. "The insurance industry needs to take note that, while companies see technology risk as an area where insurance is very relevant, it is the area of risk where they also say the market's offering most needs to improve," said Mr Kendrick. Despite much discussion about cyber insurance of late he believes there are two reasons why the insurance industry is not responding as risk managers would like. Firstly, he said the insurance industry doesn't seem to be pulling together its skills and experience in a way that is really working for clients. "There is too much energy going into 'pushing product' and I suspect that they [clients] are getting fed up with off-the-shelf solutions for complex risks that don't really address their needs. I think that's why, despite heightened awareness and concern, take-up of cyber insurance remains pretty low. While always striving for efficiency and good process, we also need to avoid the temptation to group and oversimplify," he said. Secondly, he believes there is 'too little energy going into making things easy to understand, through standardised wordings, clear definitions and consistent practices'. "Many emerging risks-already complex-are being further complicated by a patchwork of mismatching and misfiring approaches across the market," he said. He added that the insurance industry must broaden the solutions it provides for emerging risks across the board. "We need to go beyond financial compensation, and into more 'hands-on' incident response services, with risk management expertise and loss management insight offered right throughout the relationship," he said. Despite concerns over insurance solutions, risk managers that took part in the ACE survey believe that the industry has a critical role to play in helping businesses manage the new wave of emerging risks. More than four out of five respondents (82%) say insurance plays an important role in their management of technology risk, for example, while 80% of respondents expect insurance to be very or fairly important in three years' time to manage the top-three emerging risks. "Encouragingly for the insurance industry, this report suggests that risk managers regard insurance as a key part of the solution. But our risk managers warn that this will only remain the case if the industry invests more energy in understanding and developing solutions around non-traditional, non-physical risks," said Mr Kendrick.

Technology risk tops ACE Barometer as risk managers call for better transfer solutions

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