Approaching the road less travelled
We are all very familiar with the 1920 poem by Robert Frost where he described the divergence of a road in a yellow wood. Down one path was a road frequently travelled, the other road was one less frequently travelled.
In a macabre sense, this is a situation which is facing the financial services industry at the moment. Traditional risks can be found on the path which has been frequently travelled by companies and clients over the years; non-traditional risks (speciality risks) lurk down the road less frequently travelled.
The faceless crime
One of the most pertinent speciality risks is cyber liability, which is estimated to be worth $445 billion annually and is expected to be worth $2 trillion by 2019. One cannot fathom this growth and the fact that just a few years ago we viewed the internet as a tool that has changed our lives rather than a criminal’s playground.
Speaking at the 2016 Insurance Institute of Southern Africa’s annual conference at Sun City, Martin Kreuzer – Head: Information Security and Cyber Risk Management Munich RE – warned the audience that while the world is becoming increasingly aware of this threat, even the slightest under estimation can result in a significant loss.
“It is believed that 32% of South Africa’s corporate space has reported to have been victims of cyber crime. The problems with cyber crime are often that it is a cross border crime and that the role players can be difficult to identify,” said Kreuzer.
Identify the driver
Perhaps the biggest challenge with cyber crime is that we cannot immediately identify where it comes from. While the internet is an impossibly huge space, we are not fully aware on how big it actually is. We only have access to 5% of the internet through conventional browsers; the Deep Web makes up 85% of the internet while the Dark Web makes up 10%. These spaces can only be accessed through special browsers, but this is where the threats are coming from.
“Implementing adequate cyber security controls is non-negotiable for any business. This needs to be determined by the size of the threat, not the size of the company. Many companies are trying to cover their cyber needs by buying individual products which protect pockets of information; this approach will become inadequate very quickly,” said Kreuzer.
Another method of determining the amount of cover that a company needs is to look at its global footprint. Will clients who suffer from a cyber breach be local clients, international clients, or both?
What does the future hold? We already gave an indication at the beginning of the article. However, it is expected that by 2020, there will be 4 billion connected people in the world, there will be over 25 million apps in existence and there will be over 50 trillion GB of data that criminals can access.
While you think this may not affect you or your business; take a step back and assess how much you rely on technology. Do you use internet banking? Do clients interact with your business over social media or through your website? The chances are good that you are more “connected” to technology than what you realise.
The changing face of risk
There are other risks which also present a challenge to our particular situation in South Africa. Global reinsurer, Allianz, conducts an annual survey on the most pertinent risks in the market and has labelled business interruption and the changing legislative and regulatory landscape as risks that are most inherent in our market.
The two are related. Over the past two years, we have seen a rise in politically motivated service delivery protests as well as the ‘Fees Must Fall’ campaign, which is also connected to political policy in a roundabout way. During these protests, the effects on business was at times severe and led to significant interruption, especially in businesses within the immediate vicinities of the protests.
Added to this are protests/strike action which are not politically motivated; think of the recent refinery workers strike and similar strikes in the past where the supply of petrol was affected. How did that impact business operations?
Political risk is a global issue, the rise of the Islamic State and other terrorist organisations was a result of an opposite political viewpoint within countries. In fact, their actions of fundamentalism are also because they are in opposition of policy decisions.
Finally, there are prevailing health issues. Many athletes have pulled out of the 2016 Olympics because of fears surrounding the Zika virus. One hopes that this will not have a similar effect to the Ebola virus of two years ago, but this impact is a risk we need to prepare for. Rather be over prepared than under prepared.
Editor’s Thoughts:
The ending of Frost’s poem said that the traveller chose to travel down the lesser known road, and that made the difference. While speciality risks may be risks that affect companies in exceptional circumstances, isn’t that what insurance is about, to cover a policyholder should a loss occur? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments