Today? The bakery has changed into something much more intricate.
These days, it takes more than simply bread, sugar, and a cozy shop. It’s:
Point-of-sale platforms connected to outside suppliers
A website that sells both domestically and abroad
Payroll and accounting systems hosted on the cloud
Worldwide vendors for branded merchandise, personalized boxes, and ingredients
The risk profile of the company is pulled by each digital thread and remote supplier. All of a sudden, there are more concerns than just a basic oven fire. Everywhere you look, you may see supplier problems, third-party outages, cyber breaches, and regulatory blunders.
There was a time when risk was local. It is planetary now.
A Web of New Dangers Like a Spider
The change is exponential rather than merely apparent.
According to Accenture’s most recent Pulse of Change Index, since 2019, the rate of disruption affecting organizations has increased by 183%. Today’s risks are not neatly grouped in silos; rather, they intertwine to create an exposure web that is nearly impossible to unravel.
According to Accenture’s Risk Survey, 88% of insurers believe that complex, linked risks are emerging more quickly than in the past. These days, operational, financial, and regulatory risks are not separate dominoes; rather, they collide with shocking power and speed.
Even worse, according to 84% of insurers, they are currently experiencing repercussions from completely unrelated industries. It appears that risk no longer respects boundaries.
If one thing is evident, it is that a single spark has the power to ignite the entire network in a linked world.
When the Risk Business Turns Into a Risk in and of Itself
Consider the possibility of cyberattacks.
A cyberattack can occur anywhere, at any time, and with devastating rapidity, unlike a flood or wildfire. The impact on cyber insurers of a large cloud provider experiencing a severe outage tomorrow might easily surpass that of a Category 5 storm.
Because insurers are linked to risk on three levels, this susceptibility is profound:
Carrying exposures for their clients in their capacity as underwriters
As investors, we have portfolios linked to industries that are vulnerable.
Businesses that are battling their own operational risks
Consider a large maritime port being closed due to a fire.
The insurance company may:
Deal directly with the impacted firms’ claims
Observe the repercussions of delayed goods and interrupted supply networks.
Lose money on investments if the value of the impacted companies declines.
Deal with their own operational setbacks in the event that vital equipment becomes stranded offshore.
The risks of today are not isolated. They go together in packs.
The Reasons Why Risk Management Is Riskily Lagged
The majority of insurers acknowledge they are playing catch-up despite valiant attempts.
This is the reason:
Data is imprisoned:
According to 72% of respondents, their risk management procedures have not kept up.
Because their primary data is dispersed across outdated systems, hidden in manuscript endorsements, or locked away in PDFs, 30% of businesses are still not using cloud solutions.
In short: Without a professional navigator, an antiquated chart, and a broken compass, insurers are flying in a cyclone.
The Emergence of Risk-Taking Executives
There is hope for the future.
About 14.5% of insurers are becoming true risk leaders, which is a small but growing number. These businesses not only identify dangers more quickly, they also take action more quickly.
They are:
Using generative AI to sort, process, and comprehend enormous amounts of data
updating their systems to eliminate tech debt
Predictive analytics can be used to anticipate issues before they arise.
According to Accenture’s Fuel the Future of Insurance research, the key performance indicator for the next generation of insurance business may be the removal of legacy tech debt and the development of agile, networked systems.
The leaders in this new game will be distinguished from the laggards by their ability to act and gain insight quickly.
Creating a Culture of Genuine Risk
The harsh reality is that risk management cannot remain confined to the C-suite any longer. It must be present at all levels, including customer service, claims, and underwriting.
According to 75% of insurers, their risk operations are finding it difficult to keep up with the growing risk awareness of wider business teams. Just 36% of respondents are genuinely happy with the way their companies are enhancing risk resilience.
Having a risk department raising red flags in the corner is insufficient.
Risk must be ingrained in the organization’s collective memory.
Using Risk as a Source of Growth
The best risk teams do more than just play defense.
They are doing daring things like:
Using intelligent technologies to enhance decision-making
Employing individuals with knowledge of technology, data, and intricate systems
Keeping the boardroom extremely vigilant about new dangers
However, resources are limited and priorities are mounting
78% of risk executives in insurance say they would like to spend more time on innovation and value development, while 73% claim they are not involved enough in the company to be effective.
That is, they are attempting to run while wearing a straightjacket.
Reasons for the Failure of “Back to the Future” Risk Models
The old model, which used to estimate tomorrow’s losses based on yesterday’s, is no longer effective.
In a city full of skyscrapers, it is like attempting to navigate by the stars.
The new North Star is data. However, it must be accessible, shareable, and actionable within the company; it cannot simply exist.
Underutilized data from the following sources is a gold mine for insurers:
Telematics
Internet of Things sensors
Interactions with customers
Databases from third parties
That hidden gem may be turned into decision-making gold with a contemporary data lake design that breaks down silos and powers real-time predictive analytics.
Insurers will not only survive but flourish if executives, claims analysts, and underwriters are equipped with up-to-date, risk-aligned knowledge.
Otherwise?
The risk web will only become more intricate, sticky, and dangerous.
