June 17, 2019 by Greg Meckbach
If you place commercial insurance, you probably have clients who are very concerned about the risk of making large investments in information technology projects.
“The failure rate of IT projects is quite high and the returns are often not what they were promised to be,” Nick Creatura, chief executive officer of commercial insurer CNA Canada, said in a recent interview.
He was discussing the 2019 Global Risk & Confidence Survey, released May 30 by CNA Hardy.
Respondents – 100 of whom are based in Canada – were asked which risk concerns their business the most now and in 12 months’ time. Technology was one of the top three risks, with 15% of respondents indicating technology is a risk now and a year from now. The other two in the top three were cyber (16% now and 17% a year from now) and economic (20% now and 18% a year from now). Worldwide, most respondents were C-suite executives The drivers of economic risk concern included trade barriers, tariff threats and Britain’s impending exit from the European Union.
Technology risk is more about investment in technology whereas cyber is more around things like cyber attacks and ransomware, Creatura said.
“With advancements in technology, there is great opportunity. On the other hand, it comes at a very high cost and the risk of getting it wrong is quite high, but in order to compete, firms cannot avoid tech investments.”
Creatura is not aware of any pre-packaged insurance products that would cover the risk that an IT project would fail, other than third party negligence or breach of contract.
There is insurance for negligence and there are product warranties, but insurers generally do not insure business results, said Creatura.
CNA Hardy – which writes commercial insurance through a Lloyd’s syndicate – has been doing the Global Risk & Confidence Survey every six months since May 2017. Hardy Underwriting Bermuda Limited was acquired in 2012 by Chicago-based CNA Financial Corp.
Nearly a third (450) of respondents were based in the United States and Britain while another 500 were based in France, Germany, Singapore, Australia and South Korea.
About one in 13 (8%) said they were concerned about corporate risk, which includes fraud, corruption and governance failures.
The other risks on the list were political (9% now and 11% a year from now), terrorism (4% now and a year from now), regulatory and compliance (11% now and 10% a year from now), supply chain (9% now and 8% a year from now), and reputation (7% now and 9% a year from now),
Reputation was the fastest-growing concern among respondents. The ability of social media to spread false rumours globally in an instant is one driving force behind reputational risk concern, CNA Hardy suggested.