Page 39 - Insurance Times February 2022

schemes. Claims may be made fraudulently, but processed scenarios to assess a firm's ability to weather an economic
rapidly, with less stringent controls than usual. If approved, downturn can then help it improve efficiency and
funds may be transferred rapidly and with the whole system productivity and find investment alternatives.
under stress, recovering funds due to fraud may be a
relatively low priority. 3. Cyber Attack/Data Breach:
The Risk:
The risk of internal fraud will potentially increase due to
remote working and associated reduced oversight and Every organization is vulnerable to cyber risk, and industries
relying heavily on digital technology to increase efficiency
challenge.
and competitiveness are in particular danger.
Considerations:
Considerations:
a. Employing predictive modeling: Data and analytics could
Every level of an organization must understand the potential
improve organizations' understanding of consumer and
impact of a cyber-attack and data breach and then work
identify factors and elements that can help prevent
cross-functionally to address those risks.
future fraud. The goal is to detect potential fraud as
early as possible in the claims process and thus reduce
Businesses should consider adopting a comprehensive
payments made to fraudsters.
approach to cyber threats to continually assess their risk
b. Using business rules to detect irregularities: Business
profiles, address vulnerabilities and proactively fortify cyber
rules can allow forthe identification of anomalies or
defenses.
irregularities during the processing of claims. Such rules,
for example, compare claims based on various types of
fraud (individual or organized fraud), and determine 4. Cash Flow/Liquidity Risk
whether to have the personnel in charge investigate the The Risk:
fraudulent incidents, and if so, when. An event impairing an organization's cash flow or liquidity
c. Social Network Analysis: Social network analysis has can leave the business unable to meet short- or
proven effective in identifying organized fraud activities intermediate-term obligations. Cash flow risk can be
by modeling relationships between entities in claims. For attributed to economic uncertainty and financial market
example, social network analysis might show a high- volatility.
activity account with links from many accounts, or a low-
activity account with strong links to a master account. Considerations:
It might reveal multiple claims in a short period of time Industry experts recommend that companies concerned
from related parties, such as members of a single family, about cash flow risk should seek to monitor and maximize
or the classic ring associated with staged accident their cash positions. Organizations should also implement
scams. controlled cash management systems; either decrease or

2. Economic Slowdown
The Risk:
Many economists believe world recession is in the cards by
the end of 2021. But due to Covid-19, we are already
entered into recession phase. Such a slowdown could hit
businesses all over the world as declining trade, reduced
earnings, cuts in capital spending and slowed real estate
activity start to bite. An economic slowdown could also fan
the flames of trade wars and geopolitical risks - or vice versa.

Consideration:
Conducting rigorous stress tests and considering hypothetical

The Insurance Times, February 2022 39