XL at The World In 2014: The New Risks of an Interrelated World
Recently, XL was pleased to sponsor The World in 2014, a conference produced by The Economist to discuss the state of the world today, and make predictions about what’s to come in 2014.
XL’s Chief Enterprise Risk Officer Jacob Rosengarten was a featured panelist during the strategy session “The New Risks of an Interrelated World,” which took a closer look at the new and growing risks companies should be aware of in 2014. The session also included panelists Karen Berigan, Vice President of Risk Management at Crown Holdings; Tom Fitzgerald, Chief Executive of Aon Risk Solutions’ U.S. retail operations; Howard Mills, Director & Chief Advisor of Insurance Industry Group, Deloitte LLP; and moderator Martin Giles, US technology correspondent for The Economist.
Giles dove in right off the bat asking the panelists to discuss a few examples of major risks that companies should have on their radar in the year ahead. Among those risks included:
- • Emerging Markets and the growth of the middle class which can lead to unrest
- • Risk in Europe due to increasing support of the far-right parties
- • Eurozone Instability and concessionary pressures resulting in lower consumer demand, affecting revenues
- • Regulatory Uncertainty due to transparency issues, restrictions on capital, and competition between regulators
- • Reputational Risk as corporations are easy targets, especially on social media
Additionally, the majority of the discussion focused on supply chain risk and cyber risk – two topics of great concern for 2014.
Supply Chain Risk
With supply chain risk, extreme weather events such as typhoons and tsunamis have proven the damage they can do not only to a company’s factory and production, but also to their demand. Despite the solutions an organization may take to quickly get back on its feet, consumers may not be as quick to recover, affecting the bottom line. Non-major weather events can also have a negative effect on bottom line – An uncommonly cool or wet season can decrease consumer demand, or a crop yield can be low. One preventative measure organizations can take is to spread their risks and assets geographically, as to not be controlled by one bad season. This advice could also be taken when considering a manufacturing location in a high-risk country. If this is the case, it is important to continue monitoring the situation and be nimble about relocating if necessary.
Although cyber risk didn’t truly come onto the scene until the late 1990’s/early 2000’s, it’s certainly making up for lost time now. In 2013, over $1 billion in premium was written in cyber insurance, and it’s expected to continue rising to $7 billion over the next 5 years as organizations learn more about potential hazards. One risk in particular offers daunting statistics – it’s said that every quarter up to 20 million new types of malware (malicious software) are created. Mobile malware is also on the rise, and along with the “BYOD” or “Bring Your Own Device” trend the combination of the two can equal a greater likelihood of cyber concerns for companies with this policy.
However, despite its growing popularity and an increasing number of risks, only 30 percent of public companies purchase a cyber insurance solution. Because of this, many companies have joined the aftermath business, helping organizations affected by cyber attacks handle the recovery and next steps. There are also firms that can be hired to try and attack organizations, testing their vulnerability to determine what further steps should be taken. With so many impending cyber risks out there, companies need to rely on additional resources to stay secure.
As new risks continue to arise and the world becomes even more interconnected, organizations must always be on the defensive, prepared to protect themselves against the worst – whether it be a cyber attack, extreme weather event, or instability in a foreign market.
For a closer look at “The New Risks of an Interrelated World” strategy session and to learn more about what’s ahead for 2014, check out this video courtesy of The Economist.