Cyber Security: An Innovative Approach
In the latest of our articles with academic leaders, Moon Consulting talk to Dr Amit Mitra, Senior Lecturer, Bristol Business School at UWE about the changing nature of cyber security and an innovate approach to insurance of cyber assets.
Increasing reliance on online commerce is simultaneously driving the need for suppliers’ digital capacities to cater to their consumers expectations.
Sustaining any type of asset involves risks that every organisation tries to minimise – traditionally risk reduction has been acquired through the use of insurance. However, in a dynamic setting where cyber vulnerabilities imply likely losses to assets, jobs, as well as reputation, the security provided the insurer also becomes critical to the maintenance of digital assets.
In 1970, according to Standard & Poor, 500 companies had tangible assets which accounted for 83% of total asset value, in contrast today where 84% of company assets are intangible or in digital format.
In the content of cyber security, collaborative risk sharing will succeed.
The change towards digital asset structures is underscored by a shift in levels of cyber vulnerability that need to be protected by the insurance industry.
In 2021 it’s estimated that a world population of 6.6 billion[1] will have 22.5 billion connected internet devices. In short, there are going to be more mobile devices than individuals on the planet and concepts such as the sharing economy will be underpinning business growth.
The sharing economy is already becoming a reality which currently supports 17 companies worth more than a billion dollars with 60,000 employees and $15 billion in funding.
The vulnerability of cyber assets has ratcheted up through technological developments like cloud computing, big data, and the internet of things. At the same time, insurers have had to deal with increased online susceptibilities to hacker attacks.
According to Lloyds’ research much of the information is stored in the Cloud provided by a few firms. If one of those cloud providers went off-line for three days due to a cyber-attack, it would affect 12.5 million business users in the US alone.
That is the kind of threat modern businesses are confronted with. The only way to effectively combat these threats is to work collaboratively together.
Dame Inga Beale, CEO of Lloyds of London came up with an approach which synthesises the existing paradigms necessary to deal with both the technological and social expectations of the rapidly changing global cyber environment.
Inga’s approach is novel as a social, collaborative approach has never before been advocated within the cyber asset market. Indeed, the concept of a social contract driving trust building has never been tried in the insurance sector.
Collaborative risk is built on the concept of resilience by protecting, strengthening and helping communities. In addition, governments are actively promoting restrictive trade regulations which affect organisations and people living in the same ecosystems.
Therefore, in the Lloyds’ model they would be able to spread risk by taking risks from one part of the world like Japan and Chile and then spread such risk in other more favourable market environments.
In the content of cyber security, collaborative risk sharing will succeed. If organisations collaborate with one another when dealing with the type of threat that insurance policies are supposed to protect against, then such insurance becomes more likely to succeed as those organisations become more vigilant to attacks.
In conclusion, the strength of conceptualisation of an interconnected environment, coupled with this collaborative social contract, seems uniquely innovative in the world of insurance.
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[1] 2016 figures