Specialty: Tech Risks

Tech’s Advancing Risks

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 have 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

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Employment Practices


Sexual harassment is a growing concern for corporate America. Risk managers can pave the way to top-down culture change.
By: | March 5, 2018 • 12 min read

The #MeToo and #TimesUp movements opened up Pandora’s Box, launching countless public scandals and accusations. The stories that continue to emerge paint an unflattering picture of corporate America and the culture of sexual harassment that has permeated it for decades.


“The clock has run out on sexual assault, harassment and inequality in the workplace. It’s time to do something about it,” reads the official tagline of Time’s Up, one of the most vocal groups demanding change.

The GoFundMe campaign that supports the Time’s Up Legal Defense Fund raised more than $16.7 million in less than a month, making it the most successful GoFundMe initiative on record.

Funds will be used to help victims of sexual harassment and assault bring legal action against harassers, as well as provide public relations consultation to manage any media attention such suits might attract.

The problem was never really a secret.

In surveys conducted since 1980 by the U.S. Merit Systems Protection Board, 40 percent of women and 15 percent of men consistently reported being sexually harassed at work.

In a sweeping meta-analysis of 25 years’ worth of research data, published in “Personnel Psychology,” an average of 25 percent of women reported experiencing sexual harassment at work. When respondents were given clear definitions of harassing behavior, that figure shot up to 60 percent.

The current climate is just now pushing awareness to the forefront. It was reported last November that law firms in the nation’s capital are seeing a spike in inquiries about sexual harassment cases.

Laura Coppola, regional head of commercial management liability in North America, Allianz Global Corporate & Specialty

In addition, the Equal Employment Opportunity Commission (EEOC) website is seeing visits to its harassment web page double.

There’s no question the costs to businesses can be staggering. Twenty-First Century Fox reportedly incurred $50 million in costs tied to the settlement of sexual harassment and discrimination allegations in its Fox News division, as well as a $90 million settlement of shareholder claims arising from sexual harassment scandals.

In June, the company disclosed in a regulatory filing that it had $224 million in costs during the fiscal year related to “management and employee transitions and restructuring” at business units, including the group that houses Fox News.

If time is indeed up, it won’t just impact Hollywood, Silicon Valley or Capitol Hill. It will impact every workplace, in every industry.

“It affects everybody,” said Marie-France Gelot, senior vice president and insurance & claims counsel for Lockton’s Northeast Claims Advisory Group.

“I think anybody in corporate America — at some point — has seen it or been aware of it or been around it.”

“This particular phenomenon is certainly at a much wider scope than we’ve seen in the last decade or so,” said Laura Coppola, regional head of commercial management liability in North America, Allianz Global Corporate & Specialty.

“This is going to touch many industries, many segments, and many people.”

Employers are beginning to wonder if their workplace could be next.

“I think if you’d been asking [insureds] a year ago, ‘Are you interested in hearing about sexual harassment prevention?’ I think the answer would have been, ‘No, we’re good, we’ve got it,’ ” said Bob Graham, vice president, HUB International Limited.

“But I think now everyone’s saying ‘Sure, yes, we’d like to hear something.’ ”

Leading the Conversation

As American workplaces come under increasing scrutiny, the time is ripe for a large-scale pivot in the way employers manage risks related to sexual harassment.

The co-chairs of the EEOC’s select task force on the study of harassment in the workplace expressed it aptly in 2016:

“With legal liability long ago established, with reputational harm from harassment well known, with an entire cottage industry of workplace compliance and training adopted and encouraged for 30 years, why does so much harassment persist and take place in so many of our workplaces? And, most important of all, what can be done to prevent it? After 30 years — is there something we’ve been missing?”

Experts in the management liability field unanimously told Risk & Insurance® these issues should be elevated to the board level and the C-suite.

“Just as cyber liability shifted rapidly from an IT discussion to a board level discussion, so too will the harassment and discrimination discussion go beyond HR and be elevated to the highest levels,” said Coppola. It will become a corporate-wide, enterprise-wide conversation.

“It’s going to take some time to get to that board level, but it’s going to have to happen,” said Paul King, national practice leader, management and professional services, USI Insurance Services.

“Risk management and HR cannot go down parallel paths, not understanding one another. Not anymore. There’s too much at stake.” — Paul King, national practice leader, management and professional services, USI Insurance Services

Risk managers, said Kelly Thoerig, U.S. employment practices liability coverage leader, Marsh, are well suited to lead this conversation, which means actively partnering with human resources, the legal department, the general counsel’s office and outside counsel.


“Just like the quarterback depends on the offensive line, on receivers, on the running backs, it’s not a one-man show,” said King. “This can’t be the risk manager operating in a vacuum; they have to be liaising with multiple parts of the organization.”

Added King, “Risk management and HR cannot go down parallel paths, not understanding one another. Not anymore. There’s too much at stake.”

Connecting with outside counsel can also be of great benefit to risk managers, said Coppola.

“[They can] provide a very independent objective view of what they see in the overall market and how their knowledge of the individual client’s best practices can be improved and enhanced to ensure that they are protecting employees and the organization.”

Brokers and carriers also may be able to offer insights and services. Unfortunately, that piece is often lost because risk management and HR are siloed.

“The [knowledge of the] services that come with the insurance policy end up with the policy — in a drawer in the risk manager’s office,” said Tom Hams, employment practice liability insurance leader, Aon.

“HR doesn’t know that they exist. Even if they’re just online blogs or something like that, they could be more meaningful to the HR department than they are to risk management.

“So it’s important to make sure that companies are aware they’ve got those tools and — more importantly — to share them internally.”

Expediting Cultural Change

The X factor that underpins every aspect of these efforts is culture, experts agreed.

“It’s not so much ‘does the company have best-in-class policies and procedures in place;’ I think many of them do. I think that a significant change needed is doing a full overhaul of corporate culture, and that’s no small feat,” said Gelot.

Paul King, national practice leader, management and professional services, USI Insurance Services

True culture change can only come from the top level. But that isn’t likely to happen unless everyone at the top understands what the scope of the exposure could be if it’s not addressed appropriately on the front end. And for that, money talks, said Thoerig, who will be presenting on the topic at RIMS 2018 in San Antonio.

“Nothing is more instructive than real tangible claims examples and settlement amounts. Arm yourself with … recent, relevant claims examples specific to the industry and the jurisdictions the company operates in.”

In addition, said King, HR and legal should be regularly feeding claims information to risk managers to share at quarterly meetings of the board and give specific updates around these issues.

Armed with that level of intelligence, top brass can set the goals that will drive all anti-harassment efforts, said experts, putting an emphasis on identifying and correcting behavior that could potentially expose a company to liability.

Better Training and Reporting 

The best anti-harassment programs are multilayered, said Hams, with each facet carefully tailored to suit the employee population, the industry and the organization’s goals. A clearly defined policy is essential, stating that harassment will not be tolerated and neither will retaliation against those who report it.

The policy should be clear that employees are expected to report harassment or unacceptable behavior. Hams said he’s seen companies go so far as to state employees who don’t speak up are in violation of the policy.

“At least it should give them pause to stop and think about what they might have seen before they click the button or sign the document,” he said.

Companies should consider how uncomfortable employees may be about speaking up. An open-door policy is a start.

But there should also be multiple reporting points throughout the organization, said Hams, and an anonymous hotline for those reluctant to bring the matter up with anyone in their chain of command, and a multilingual hotline as well.

An effective training plan will have multiple moving parts and should touch every level of the organization from the executive suite to managers and supervisors to the rank and file. Comprehensive training is especially critical for the managers and supervisors who might receive or investigate complaints.

Many large employers already have training programs that can be considered best-in-class. Small to midsized employers, however, may still be using the cookie-cutter compliance-centric training that has dominated the field for decades.

The goal of this training is to hit all the bases related to Title VII of the Civil Rights Act, ticking off a list of acts or speech that would be considered illegal and affirming the company will not tolerate illegal behavior.

Overwhelmingly though, this type of training misses the mark. Studies have shown that this one-size-fits-all training is ineffective, especially when it’s a rote check-the-box exercise. Employees get the message their employer doesn’t take the subject too seriously.

Worse, it can even aggravate tensions, creating more discriminatory behavior from men who avoid working with women just to eliminate the chance of being accused of anything.

One study even found that men were more likely to place blame on the victim of sexual abuse after they’d received that type of anti-harassment training.

Even at best, compliance-centric training will still fail, because it only addresses behaviors that violate the law. But there is a broad array of behavior that — while not quite illegal — shouldn’t be tolerated.

When this kind of activity is allowed to flourish unchecked, the environment becomes increasingly toxic for those on the receiving end. It also tells employees that the company will tolerate harassment as long as it’s not overly egregious. In that case, it’s just a matter of time before the company is faced with a serious claim.

“Nothing is more instructive than real tangible claims examples and settlement amounts. Arm yourself with … recent, relevant claims examples specific to the industry and the jurisdictions the company operates in.” — Kelly Thoerig, U.S. employment practices liability coverage leader, Marsh

In its 2016 report, the EEOC’s harassment task force recommended changing tactics, exploring alternative training models such as respect-based civility training — what some call professionalism training.


The theory is “if you train them to act in a professional manner, these things tend not to happen at all,” said Hams.

The EEOC also suggested bystander intervention training, which is designed to empower employees to intervene when they witness harassing behavior.

Experts agreed whatever training programs or modules a company chooses, it’s important the training material reflect the workforce and be continuous and regularly refreshed.

A certification scheme also should be put in place to ensure the training is hitting the mark. While the law does not yet require companies to prove the effectiveness of their programs, some suggest it’s only a matter of time before the courts catch up to the problem.

What’s more, said Coppola, it’s simply the right thing to do for companies that want to confirm they’ve created a culture where all employees can expect to be treated professionally.

Zero Tolerance

Gelot and others believe a zero-tolerance policy should be a key component of an effective anti-harassment program.

“There are many companies that have Harvey Weinsteins and Matt Lauers and Kevin Spaceys working in their midst and those people are tolerated. Employees know about them — it’s not a secret.”

Bob Graham, vice president, HUB International Limited

Particularly when the harasser is a high-level executive, companies may wrestle with the decision to look the other way or lose a key rainmaker. In a zero-tolerance environment — one that starts at the top — the decision would be clear.

“What we saw with Matt Lauer and Charlie Rose — they were terminated immediately as the accusations came out. That’s zero tolerance. That’s sending a message to all of the employees within the company that this is completely unacceptable, we won’t tolerate it, and [it] clearly sends a message to the public at large.”

Employers should promote a workplace culture where all forms of harassment and discrimination are unacceptable and reportable, said Gelot. That’s the only way to take the fear and the stigma out of reporting.

That said, the EEOC offers a word of caution on zero-tolerance policies applied militantly without regard for common sense. Employers should hash out the specifics of which acts merit immediate termination versus a warning.

Overzealous application of the zero-tolerance doctrine can backfire if an employee fears her coworker’s children will go hungry if she reports his lewd or sexist jokes.

Creating a Dialogue

As with managing any other exposure that touches everyone, robust sharing of ideas and best practices has the power to improve the risk profile of entire industry sectors.

Facebook raised eyebrows in December, making public its sexual harassment policy in full.

“I hope in sharing it we will start a discussion, both to help smaller companies thinking about this for the first time, and to improve our own practices by learning from other companies,” wrote Lori Goler, Facebook’s global VP of people, about the company’s bold move.


That level of disclosure is making some risk professionals uncomfortable. But others acknowledge the wisdom of it.

“Any time you can share best practices that’s probably a great idea, because no one has all the answers … or at least not all the right answers,” said Graham.

“There’s a reason they did that, and I think it’s for all the right, positive reasons. They want to drive the momentum that is going to reduce or even eliminate what we have seen in corporate America over the last 50-plus years. They want to lead by example, they want to be the model and rightly so,” added Coppola.

“I think we are at a perfect time in our economic environment that allows the evolution of equality in our workplace.”

Part of that should involve making the workplace more egalitarian, said Gelot, and figuring out “how to make female employees not feel ostracized by a ‘boys’ club’ atmosphere, and actively championing the ascension of women into senior rolls.”

“We can’t focus on the past,” said Coppola. “But we can work very hard collectively as a community, and within the insurance industry specifically, to move forward.” &

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