Specialty: Tech Risks

Data Breaches, Hacks and Brand Damage: Welcome to Technology’s Legacy

Maximizing the benefits of new technologies requires a top-down approach to cyber risk mitigation.
By: | October 12, 2017 • 6 min read

Technology’s evolution is moving so quickly that many organizations are struggling to keep pace. While technology is becoming more complex and powerful, it’s also becoming smaller, cheaper, easier to use and accessible to organizations of all sizes.


Deploying new devices, systems and software solutions can increase competitiveness, but can also create new risks and vulnerabilities. Because most emerging technologies are intricately intertwined through the Internet, the potential for data loss is greater than ever. And susceptibility to hacking is also presenting threats to property, labor and brand.

Analysts and risk managers say organizations will need to tread carefully by making a commitment at the top to assess the risks and limit their exposure with planning and insurance.

New Opportunities With New Risks

Virtually every industry is now being disrupted by technology. 3D printers, artificial intelligence, collaborative robots, the Internet of Things, cloud-based software solutions and data are driving rapid change.

Leslie Chacko, director of Marsh & McLennan Companies’ Global Risk Center, Emerging Technology Program, said technologies that have emerged in the past five years are fundamentally disrupting the way companies operate, transact and interact with their customers.

“We are in what is being widely accepted as the fourth industrial revolution … Most companies are looking to leverage these technologies as part of their strategic imperative of ‘going digital,’ ” Chacko said.

“Many companies will need to re-evaluate their cyber risk exposure as a result of adopting these technologies,” — Leslie Chacko, director, Marsh & McLennan Companies’ Global Risk Center, Emerging Technology Program

Many of these technologies are so new that risk managers don’t yet have enough data to accurately identify and assess such risks. Mike Thoma, VP, chief underwriting officer of global technologies at Travelers, said new technologies can carry additional risk of “bugs and kinks that haven’t been worked out.” But problems can extend beyond simple glitches to include data breaches, hacks, financial loss, brand damage and lawsuits.

“Technology is evolving so quickly. You have to evaluate the ROI to ensure a large [capital expenditure] purchase you’re making today won’t be obsolete. And you have new risks associated with it,” Thoma said.

Sam Friedman, insurance research leader, Deloitte Center for Financial Services

These risks are now emerging in nearly every industry. Mark Locke, senior vice president of manufacturing and government contractors at Chubb, said it’s a big issue for manufacturers deploying robotics and IoT devices.

Whereas manufacturers used to be primarily concerned about fires or accidents, they’re now concerned about hacking, data breaches and a “series of exposures that didn’t even exist 10 years ago,” Locke said.

Many manufacturers made the leap to technology so quickly that their security plans haven’t kept pace. Verizon’s 2017 Data Breach Investigations Report found manufacturing to be one of the top at-risk industries for data breaches.

The medical industry is also facing heightened risk. Insurers and hospitals are collecting more data than ever, and physicians are now using collaborative robots to perform surgical procedures. Sam Friedman, insurance research leader at the Deloitte Center for Financial Services, said such devices can muddy the waters of liability in the event of a patient injury.

Liability could be pegged to the doctor’s decision to use the technology, the manufacturers of the robot, the software developer that wrote the program or improper use by the doctor. “You could have a free-for-all if a patient is injured. Who pays? These types of things need to be resolved by the entity’s risk manager as they start deploying these new technologies,” Friedman said.


New risks are also emerging in the financial services industry where firms are using AI to manage portfolios and select investments. Even in the hands of a small business, a tablet-based POS system or smart device can be a portal to hacking and financial loss.

Aftab Jamil, partner and national leader of the technology practice at BDO USA, said for many organizations, the question shouldn’t be “if” but “when” a liability will arise.

Assessing and Insuring Technology Risks

While the risks presented by new technologies can vary depending on how they’re being used, one shared factor is the threat of hacking. Jamil said many businesses now have access to “huge amounts of unstructured data” and need to balance the flexibility to use it with systems to protect that data.

Virtually any device or piece of technology connected to the Internet can be an access point for hacking. Chacko points to the October 2016 Mirai Botnet attack on unsecured IoT devices as an example of how a device can be exploited to conduct a larger-scale attack. Something as simple as a sensor on a machine, a smart thermostat, POS system or software interface can leave an entire company vulnerable.

“Many companies will need to re-evaluate their cyber risk exposure as a result of adopting these technologies,” Chacko said.

High-profile attacks in recent years encouraged more companies to aim for a greater level of preparedness. Jamil said security starts at the top with the CFO, CIO and business leaders with “real decision-making power” who can commit to understanding the risks and creating action strategies to mitigate those risks.

The risks associated with emerging technologies are also creating demand for new insurance products. Insurers wrote more than $1.35 billion in cyber insurance policies last year, a 35 percent increase over 2015.

More companies are also addressing things like IoT, automation, software solutions and robotics in their policies.

Some experts say there’s a need to blend policies that could include all aspects of a tech liability, including data loss and the potential for property damage and liability.

AIG Group last year released CyberEdge Plus, a stand-alone policy that covers cyber-related bodily injury, property damage, business interruption and product liability.

Friedman said the emerging technologies are evolving so quickly that risk managers “cannot assume anything” and need to continually reassess those risks and how they align with their existing policies. He said insurers can be slow to evolve and often take a “reactive” approach — a reason why businesses need to ensure clarification on new technologies.

Friedman said the first instinct of most insurers is to add it to existing coverage, either in the policy or through an additional rider. Many insurers are starting to see claims related to technology that they haven’t dealt with before.

“It’s an exciting time but you don’t want to take anything for granted … You don’t want an insurer to come back and say ‘Wait a minute — you didn’t say anything about robots in your ROR,’ ” Friedman said.


Thoma recommends companies consult with technology-specific experts when evaluating those technologies. Beyond external risks, he said organizations can encounter internal risks to their processes and operations if they integrate emerging technologies without proper planning. Many organizations start with limited pilot programs to test effectiveness and work out bugs before scaling up.

While analysts, insurers and risk managers contemplate new exposures being created by emerging technologies, nearly all agree that the biggest risk will be falling behind the curve. Jamil said organizations will have to move forward by identifying the right technologies and applications for their businesses, creating plans to mitigate risks and double-checking their policies to ensure exposures are covered.

“Any business should be keeping an eye on these emerging technologies. Those that do not will be at a competitive disadvantage,” Jamil
said. &

Craig Guillot is a writer and photographer, based in New Orleans. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession: Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?


I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?


Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?


A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]