Business Risks and Digital

Raconteur has an interesting article on Cyber Risk in its most recent edition which focuses on business risk.

What was interesting to me was the graphic from successive business surveys on the top 10 uninsurable business risks.

In 2007, just before the big economic downturn, out of the top 10 uninsurable risks, three of them could be seen as involving IT and an organisation's "digital business model". They were:

  (1) Damage to Reputation/Brand,
  (2) Business Interruption,
(10) Failure of Disaster Recovery Plan.

The numbers in brackets show the position in the ranking so (1) for example is top as the first most frequently cited risk. As we have seen in several cyber breaches and other instances where regulatory compliance around protecting consumer data has broken down, IT and Digital are fundamentally linked with reputation and branding and the others are quite obvious.

By 2011, as businesses were fighting to come out from the economic downturn, the top 10 list had evolved somewhat to include:

  (4) Damage to Reputation/Brand,
  (5) Business Interruption,
  (6) Failure to Innovate/Meet Business Needs,
  (9) Technology System Failure.

Last year, 2017, as AI began to take over from Big Data and IoT as the Digital flavour of the month, the top 10 had morphed into:

  (1) Damage to Reputation/Brand,
  (3) Increasing Competition,
  (5) Cybercrime, Hacking, Viruses, Malicious Code
  (6) Failure to Innovate/Meet Business Needs,
  (8) Business Interruption.

I have included increased competition because digital business models are based upon both disruptive product offerings and global reach, so increasing competition.

The prediction for 2020 from the survey also includes Disruptive Technologies, presumably some of which would be digitally enabled.

Additionally there has been a constant theme of legislative change, which usually has IT and digital implications. The other interesting fact on the graphic was the top three risks which risk management experts believe that businesses habitually underestimate in terms of impact: Cyber Incidents, Business Disruption and New Technologies.

Overall, not only are IT and Digital issues assuming great business importance, but addressing them has to be built into an organisation's business model.