Rapid technological change is disrupting numerous business processes and providing huge benefits to organizations as they harness the power of technology to improve their operations, but it is also creating risk management challenges, according to a report by Marsh L.L.C.
Risk professionals need to adopt a more proactive approach to learn about disruptive technologies and assess the risks and rewards of using the technology, the 14th annual Excellence in Risk Management report said.
Produced in partnership with the Risk & Insurance Management Society Inc., the report issued on Monday was based on focus groups with risk executives in a variety of industries and a survey of another 700.
“The pace of innovation globally has made risks more complex and interconnected. This leaves many executives struggling to understand how disruptive technologies affect their business strategies, models and operations,” the report said.
According to the report, many risk professionals are not aware of the scope of technological disruption, the report said.
For example, 52% of risk professionals said that their organization doesn’t use or doesn’t plan to use the internet of things, but some estimates suggest that 90% of companies will be using internet of things technologies within two or more years, the report said.
In addition, 25% of risk professionals said their organization uses or plans to use wearable technology, whereas other studies suggest that 93% of companies are evaluating or using wearables, the report said.
“We believe this shows a gap in understanding: Too many organizations don’t realize the pervasiveness of some technologies,” the report said.
And the technology can make or break a business, the report said. “Risk executives need to fortify their strategic role by understanding how technologies impact business models and the direction of entire industries.”
Yet many organizations are not assessing the emerging technological risks, with 55% of those surveyed saying that their organizations are not surveying the risk of disruptive technology.
“Given the impact that disruptive technology can have on the strategy of an organization, such lack of attention to the risks should be viewed as unacceptable,” the report said.
In addition, the report said its findings show a decrease in the number of organizations that have cross-functional risk committees.
“We would make a case for strengthening connections and discussions across the organization through cross-functional risk committees,” the report says
To address the risk of disruptive technologies, organizations should widen the discussion of the risks within their organizations and with outside service providers, said Brian C. Elowe, Boston-based managing director and U.S. client executive practice leader at Marsh USA Inc.
“There is the opportunity to embed in their governance how to discuss risk inside their organization in a more thoughtful way,” he said in an interview.
In some cases, organizations view disruptive technologies as part of cyber risk, which leads them to not understanding the full extent of the risks they face, Mr. Elowe said.
“There’s a tendency to think of disruptive technology as coming under the heading of cyber, but they are very different risks,” he said.
