Page 21 - Insurance Times August 2023

greenhouse gas emissions, it could help cerns, geopolitical instability - the "So, balancing an organisation's invest-
lower global temperatures. dance card of risk managers is full and ment in resilience against efficiency
it's no surprise that the social capital measures is another area that's taking
However, techniques such as injecting
commanded by experts in risk and in- up quite a lot of time and discussion at
highly reflective particles into the at-
surance is at a premium. senior levels," he said. "Because there
mosphere to reflect sunlight back into
is a cost associated with resilience
space could open up a whole new set Lending his perspective on these chal-
measures - whether it's back-up IT sys-
of environmental risks and the poten- lenges, James Crask (pictured), head of
tems, or additional staff, or extra stock
tial for international conflicts. If imple- strategic risk consulting at Marsh UK
in a warehouse - and that's often the
mented and then suddenly terminated, & Ireland, emphasised the spread and
place you look at when you're cutting
the result of SRM could be fast tem- interconnectivity of the poly-crisis en-
costs in a business. When things aren't
perature increases, bringing on related vironment facing businesses. Taking
going well, resilience measures are an
weather effects. It could lead to an supply chain vulnerability, for example,
easy target for efficiency savings.
increase or geographical shift of ex- he said, it's a risk that came into sharp
"But if you do it wrong, you're threaten-
treme weather events like droughts or focus in response to both COVID and
ing the organisation's long-term viability
hurricanes. The question would be how the ongoing conflict in Ukraine.
against the next big event. And the next
to compensate those experiencing
"What we've learned from those two
one that comes along could be the thing
negative effects.
events, in particular, is that a lot of
that knocks you off your perch. I think
Another emerging risk in the technol- organisations just don't know enough
there is a danger of organisations becom-
ogy space could derive from complex about their supply chain, and where
ing a little too comfortable with their
machine learning systems and artificial their risks are, below the people that
preparedness and questioning why they
intelligence (AI). These two high-im- they're paying invoices to regularly," he
need to continue to invest in risk man-
pact areas are driving the next wave said. "So, you get a part in from a tier-
agement. But the truth is, you're only as
of technological advances. However, one supplier but actually, the risk is some-
good as your last crisis."
as AI use increases, so do the possible where else that's not visible to you.
This behavioural shift is being largely
risks. Professional hackers can not only
"Geopolitical risk is a big focus, particu- driven as a result of organisations hav-
trick models into making mistakes or
larly for our clients that have global ing survived the poly-crisis environment
leaking information, they can also
footprints and are looking at where to
of recent years. However, Crask high-
harm model performance by corrupt-
invest in the future. We've lived
lighted the need for businesses to
ing training data or stealing and ex-
through a period of relative peace and
recognise that their survival is a testa-
tracting machine learning models.
stability in most of the economies that
ment to the success of risk management,
The SONAR report emphasizes how we work and that is coming to an end. not an indication that it's no longer nec-
the rise of AI is increasing opportuni- This is creating more uncertainty be- essary. This should reinforce the need to
ties for fraud and intellectual property cause the decisions that we made in a continue that investment, he said, so
loss, such as phoney creditworthiness more benign risk environment are now businesses can be ready to respond to
ratings or false insurance scores. In car coming under a bit more scrutiny." new risk events as and when they arise.
insurance, AI-based claims manage-
Undermining business resilience And with such a glut of risk factors at
ment systems may even be tricked into
Crask noted that the cost-of-living and play, he said, prioritisation is at the
seeing massive damage where there is
inflationary pressures which have been heart of the conversations risk manag-
none. If AI gets hacked, it could even
dominating headlines are not just issues ers should be having right now.
result in physical harm by causing au-
for individuals and families, but are
"You can't protect yourself against ev-
tonomous car crashes or medical mis-
also impacting the operational effi- erything and you can't predict the fu-
diagnoses.
ciency of businesses and undermining ture," he said. "So, what does that
their resilience. In an environment mean? It means you need to get into
Marsh on championing re- where organisations are financially a position where you're focusing on
stressed, he said, it may not be that what truly matters to the organisation,
silience amid cost-effi-
the economy itself puts them out of on protecting the crown jewels. Not
ciency drives business, but rather that it serves as knowing what the future is going to
Cost-of-living pressures, inflation, cli- the straw that breaks the camel's hold with any great certainty drives
mate risk, cyber risk, supply chain con- back, tipping them over the edge. the need to be a little more selective.
The Insurance Times August 2023 17