UNO September 2018

IoT: Innovation, opportunity and risk

We live in a world characterized by unprecedented technological hyper-connectivity, and, as an intrinsic part of this, the Internet of Things (IoT) is an indisputable, irreversible convergence of the physical and digital worlds. The line between the two worlds is becoming increasingly fuzzy. The interconnection of billions of intelligent machines, operating systems, devices and sensors generates and receives an extraordinary quantity of information, with a direct impact on the structure of social spaces, interpersonal relationships and business models.

Microsoft recently announced a $5 billion investment in IoT over the next four years to offer its customers the tools to transform and innovate their own companies using interconnected solutions. Microsoft is just one of the thousands of visionary companies adapting and innovating in the face of this inevitable reality. To the extent that companies—regardless of size or industry—are able to assess, anticipate and prospect the risks emerging from this technological transformation, not only will they have greater control over decision-making regarding business security, continuity and sustainability, but this will also lead to greater innovations, increased returns and new commercial opportunities.

Latin American companies’ lack of awareness regarding the complex risks arising from being part of an IoT system is alarming

Marsh’s most recent 2018 Communications, Media, and Technology Risk Study (CMT) reveals fascinating results in risk assessment and the identification of IoT opportunities. For example:

  • There will be 30 billion IoT devices connected on average by 2030, and the number could grow to over 100 trillion devices by 2050.
  • 65% of respondent companies considered IoT to be a great opportunity in the short term (3-5 years), and 50% said that their organization has already created or provides products and services for IoT devices.
  • 52% of risk professionals said they did not know whether the IoT products and services offered by their company were used by other companies.

The last percentage is particularly disturbing, as it shows companies’ lack of awareness of the full risks’ spectrum that come with being part of an IoT system, highlighting companies’ ignorance of the financial losses in this area.

Almost 75% of survey respondents indicated their companies considered risk professionals to be key partners for innovation. Although that percentage is encouraging for risk management experts, we should not overlook the huge challenges of increasing our importance in the dynamic, evolving, disruptive world of technology. In other words, if we are to exercise a direct influence on companies’ strategic decisions, we must reiterate and prove our expertise to lead discussions on how these technologies will affect our companies’ risk profiles and commercial strategies. And if we hone in on Latin America, there are clear areas to work on.

  • 74% of respondents in Latin America—versus 60% on a global level—indicated they needed more human talent with expertise in cybersecurity to manage and analyze the gigantic quantities of data generated by IoT solutions.
  • 34% of respondents in Latin America did not have the necessary technical skills to guarantee the success of their IoT projects.

When compared to other markets, we in Latin America are at a disvantage when it comes to managing emerging risks, and even more in CTM risks

These figures are revealing, but unfortunately not surprising. When compared to other markets, we in Latin America are at a disvantage when it comes to managing emerging risks, and even more in CTM risks. The reasons for this regional lag fall outside the confines of this article. However, the most recent Benchmark of Risk Management summarizes the three main challenges to an effective, strategic implementation of risk management in Latin America: (1) Organizational culture and values (51%); (2) Its perception as a compliance, not strategy, issue (46%); and (3) The lack of key knowledge regarding its importance and the value it brings (46%).

Faced with this regional landscape, what must risk specialists do to lead change and exert a direct influence on strategic decisions in companies?

  • Conduct ongoing training, local market research and comparative studies to position ourselves as leaders on the subject. As the saying goes, the truly transformative changes come from within. We will thus be able to implement measuring and prospecting tools strategically and efficiently and, above all, customize solutions to suit each client’s needs.
  • Latin American companies’ lack of awareness regarding the complex risks arising from being part of an IoT system is alarming, especially when coupled with their ignorance of how to manage and analyze the overwhelming quantity of data IoT solutions generate. The latter, in addition to the lack of up-to-date IT infrastructure, is even more worrisome when companies in the region have a shortage of human talent trained in cybersecurity, technological transformation and data science and analysis. Our role, therefore, is to insist on the importance of risk management as an integral, decisive process in all areas of the company.

Latin American companies’ lack of awareness regarding the complex risks arising from being part of an IoT system is alarming

Finally, it is essential to design an action plan that includes the incorporation of risk management experts in key areas of the business model, such as the management board, product development, integration of risk solutions in product and service offerings, attracting and training of human talent and promoting investment in risk mitigation technologies or applications.

The key is to insist on risk management as a strategic issue, proving its worth through its applicability in the company’s organizational chart and, naturally, defining opportunities for growth and innovation.

Emanuel Abadia
Country Head & Managing Director at Marsh Semusa
With over 30 years of experience in the Panama insurance sector, Abadia is the Country Head & Managing Director at Marsh Semusa. Together with the multifaceted, dynamic human talent at Marsh Panama, his main goal is to boost growth in the insurance industry, thus contributing to the country’s sustainable growth. He has participated in numerous seminars and conferences, promoting a culture of risk identification, prevention and mitigation. [Panama]

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