2018 RIMS

Risk Executives Must Keep Up with the Pace of Disruptive Technology

This year's Excellence in Risk Management report reveals a gap between awareness of new technologies and the ability to employ them strategically.
By: | April 13, 2018 • 4 min read

While risk managers don’t need to know everything there is to know about disruptive technologies such as AI, Blockchain and the Internet of Things, they do need to understand the full scope of opportunities and challenges these innovations present for the organizations they serve.

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As the pace of change moves ever-faster, it’s time for risk professionals to “lean in” to those changes and help their companies stay on the cutting edge. That’s a key takeaway of the Excellence in Risk Management Report XV: Maintaining Relevance Amid Technology Disruption, published by Marsh and the Risk and Insurance Management Society.

The report shed light on the gap that exists between the awareness of disruptive technologies and the implementation of processes to deal with them from a risk management perspective, said Brian Elowe, chief client officer, North America, Marsh.

“Risk management doesn’t appear to be keeping pace with the implications and the associated risks that are emerging from advances in applications of technology and digital capabilities,” he said.

In fairness, he said, the pace of change is extreme. But the report is a call to action for the risk community to meet that pace.

The report is based on nearly 450 responses to an online survey and a series of focus groups with leading risk executives conducted between January and March of 2018.

“Get involved, help drive the conversation. Not just about the risks and what to do about them, but also how risk management can help the organization understand all of the potential opportunities.” — Brian Elowe, chief client officer, North America, Marsh

Overall, survey respondents felt they didn’t have the expertise to act as strategic advisors on disruptive technologies. Of those using these technologies, less than half felt their level of understanding was at a strategic level.

At least 29 percent of respondents said their organizations were using AI, and another 18 percent were actively exploring its use. Yet of those using it, only 12 percent knew what it was being used for.

Blockchain was being used by 11 percent of organizations, yet only 3 percent of risk professionals knew the specifics of how it was being implemented.

Of those that did know, 70 percent were using Blockchain for supply chain management, while 50 percent were using it for payments and settlements and 30 percent for claims management.

Use of the Internet of Things is more widespread. At least 59 percent said their organizations used or planned to use IoT. Still — 25 percent were unsure of the specifics of how it was being used.

It’s incumbent upon risk professionals to reach out within their organization to get a better handle on which technologies are being used in their organizations and how they are being used. Those who don’t do so run the risk of being left out of decision making. Worse, they may fail to foresee risks or develop adequate strategies to mitigate them.

Only 14 percent strongly agreed their organizations have a clear process for identifying and addressing the risks of new technology before it’s implemented. Nearly half were unclear about their technology risk management process.

Time to Get in Step

While there may still be a steep learning curve on new technologies, risk professionals are more confident than ever on their grasp of cyber risks and cyber coverage.

At least 78 percent said they grasp how the legal liability of cyber risks would affect their organizations. Only 5 percent were still unsure.

Additionally, 75 percent said they understood how their insurance coverage would apply to cyber claims, while only 7 percent did not.

The cyber market also saw a high level of satisfaction with claims outcomes. While only 20 percent reported having cyber claims in the past 36 months, 76 percent of them were satisfied or extremely satisfied.

Overall claims satisfaction was high across several lines, including product liability (79 percent), workers’ compensation (76 percent), general liability (78 percent), auto liability (78 percent), and professional and financial liability (74 percent).

That said, it’s worth paying attention to the fact that 40 percent of respondents said they would consider switching carriers or other advisors based on their ability to provide innovations in the claims arena. Another 43 percent said they wouldn’t rule out such a move.

Asked what area of the claims management process needed the most improvement, 62 percent wanted to see a reduction in the overall claims costs. Also at the top of the wish list for at least a third of respondents: Closing old claims, integrating technology innovations and simplifying the claims process.

To help move their organizations to the next level and stay on track with developing technology, the report advises risk professionals devote extra time to educating themselves on emerging technologies. Risk executives can deliver value to their organizations by providing higher-level insights and analytics related to emerging risks.

Think creatively about the application of new technology in terms of managing risks as well as improving claims management.

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“Risk management is becoming more involved in the strategic direction of organizations,” said Elowe. “Instead of just responding to risks that are coming at the organization, we see more advanced risk management operation actually getting involved in strategic planning and becoming an exporter of knowledge to product development areas and other areas in terms of risks that need to be managed or mitigated.”

Risk executives now understand their role as an enabler of their company’s business, he said, and this is an area where they can demonstrate it.

“Get involved, help drive the conversation,” said Elowe. “Not just about the risks and what to do about them, but also how risk management can help the organization understand all of the potential opportunities.” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]