Risk managers face up to tech advancesReprints
The acceleration of technological change in business is outpacing the risk management community’s response to the exposures and challenges created by that change, according to the Marsh L.L.C. Excellence in Risk Management report, released Monday.
There is, however, evidence that risk managers are learning and confident about supporting innovation within their organizations.
The report found, for instance, that 89% of respondents to the 2018 Excellence survey said risk management in their organization supports, promotes or acts as a “needed brake” on innovation. Only a few, 11%, believe risk management has no effect or slows, at 1%, innovation, and none saw it as a barrier.
“Inside of corporate organizations, it is clear that the knowledge about the technological applications is rising, and there is a growing understanding of things like artificial intelligence, blockchain and the ‘internet of things,’” said Brian Elowe, Boston-based chief client officer for North America at Marsh.
“What’s lagging is an understanding of the risk management processes that should address the risks associated with these emerging technologies,” Mr. Elowe said.
Just 14% of respondents strongly agree with the assertion of “There is a clear process at my organization for identifying and addressing potential risks when considering and implementing emerging technology.” Many more, 37%, said they agree, while 30%, or almost one in three, said they are neutral.
A combined 18%, however, said they disagree or strongly disagree, which, when added to the 30% who are neutral, means that almost half of respondents are not confident about their organization’s approach.
“The key message is that risk management in general doesn’t appear to be keeping pace with the implications and associated risks emerging from advances and applications of technology and digital capabilities, which is not a surprise in some respects because of the pace of change in business these days,” Mr. Elowe said.
“I do think it’s a bit of a call to action,” he added.
The report takes a closer look at three of the main emerging technologies, finding that 49% of respondents who are using or exploring the use of the internet of things think that their risk management function is well-informed enough to be a strategic adviser, compared with 42% for artificial intelligence and just 39% for blockchain.
“I think the internet of things started earlier than some of the other applications, and therefore there’s a greater understanding about their uses,” Mr. Elowe said.
“Artificial intelligence and blockchain are emerging capabilities, so there’s more of a learning curve associated with them,” he added.
The report also says that what it calls “cyber maturity” is increasing, with 21% of respondents saying they strongly agree with the statement “My organization understands how legal liability will be applied to it regarding cyber risks,” and another 57% saying they agree.
Only 16% and 5%, respectively, said they are either neutral or disagree, meaning that some 78% appear comfortable with their level of understanding.
“Cyber maturity is increasing,” Mr. Elowe said. “Organizations are becoming more sophisticated in terms of understanding not only a direct cyber loss, but also about the potential implications for related risks associated with business interruption and downstream supply chains.”
ABOUT THE REPORT
The 15th annual Excellence in Risk Management report, Maintaining Relevance Amid Technology Disruption, is based on 450 responses to an online survey and a series of focus groups with leading risk executives in January and February 2018. The survey was conducted by Marsh L.L.C. and the Risk & Insurance Management Society Inc.