By Tony Dowding, | | Published: 17 July 2014
Last month’s JLT Global Digital Risks & Technology Forum saw risk managers and transfer partners gather in Salzburg, Austria to discuss the latest developments in cyber risk and insurance solutions. Tony Dowding was there for Commercial Risk Europe and reports on the highlights from the event.
Cyber risk in its various forms seems to be one of the potential growth areas for the insurance industry and a big issue for organisations. Insurers are launching lots of new solutions and cyber risk continues to rate highly in many risk management surveys. This is, of course, not surprising given the news headlines about data breaches, cyber security issues and privacy debates.
There is also the speed at which new technology changes and evolves—from big data, to cloud computing, to social media—and with it the risks and exposures faced by companies. No wonder that the insurance industry is taking an interest in this area.
Last month’s JLT Global Digital Risks & Technology Forum in Salzburg saw a panel, comprising risk managers and service providers, tackle the issue of cyber insurance, examining whether policies meet the needs of risk managers and how far the insurance market has come in the last 15 years.
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Big data, big risks
As information technology moves on apace, so do the associated risks. New exposures appear with frightening regularity. The latest buzzword/exposure is ‘big data’.
But what is big data? At the heart of big data technology is mathematics, analytics and probabilities. It is about creating value out of data and maximising the potential value of the information.
However, according to one of the keynote speakers at the JLT Global Digital Risks & Technology Forum: “You don’t need to have lots of data to have a big data problem to solve.�?
Mike Merritt-Holmes, Co-founder of Big Data Partnership, continued: “It comes down to variety, velocity and volume. Variety in terms of the type of data, velocity in terms of the speed it comes in, or the speed needed to analyse it, and volume in terms of the sheer size of the data. There is also value—this may be about new opportunities for revenue or reducing risk.�?
The pioneers of big data were companies such as LinkedIn, Amazon and Facebook. It helped them to really understand how people were using their websites. “They were generating so much data, they had to come up with new economical and scalable solutions and new ways to look at that data. From that they were able to come up with recommendation engines driven by big data technology and using machine learning. They developed these technologies and then open-sourced them,�? Mr Merritt-Holmes told the forum.
One of the big challenges when it comes to analytics is dealing with unstructured data. Big data technology allows organisations to bring in data in a variety of forms—such as video, email and documents—without the need to try and convert that information into a different format.
Mr Merritt-Holmes explained that big data provides tools to enable organisations to analyse unstructured data that was technically and economically extremely challenging to process. “Many companies have a lot of data in silos and the challenge is to bring that data together. Companies spend millions of pounds trying to build a 360-degree picture of the customer, and that can be difficult where the data is in silos. All this data can be brought into a ‘data lake’ and analysed and used together without the need to over manipulate existing systems or processes,�? he said.
Finally, he explained that big data offers companies the ability and opportunity to analyse and process data in the cloud using open-source software, without having to invest in very expensive hardware.
Risks associated with big data include its close association with cloud computing and potentially catastrophic data breaches.
According to another keynote speaker at the JLT Forum, Professor Dr Marco Gercke, the move to the cloud can mean additional risks. Professor Gercke, who works as an adviser to different international organisations such as NATO and national governments, as well as big corporations, said that outsourcing to the cloud adds to the risk of insider attacks or illegal access.
For Professor Gercke, the trend towards cloud computing is a big risk issue often ignored by decision makers. “Top management can be disconnected from the rest of the organisation when it comes to cyber security,�? he explained.
And then there is the issue of scale. Professor Gercke said the use of big data technologies amplifies the potential cost of data breaches. Put simply, he said, if the cost of a data breach is around US$200 per data set, then big data represents a substantial multiplier when thinking about the total cost of an event.
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