Risk trends to discuss with financial service clients
The lingering impact of COVID will carry a litany of challenges, with cybersecurity issues running across many of them.
Although the economic outlook is trending up, the financial service industry still faces risks stemming from the pandemic as well as some challenges that existed pre-COVID that were amplified during the past year.
Paul Schiavone, global industry solutions director for financial services at Allianz Global Corporate & Specialty, tells PropertyCasualty360.com the insurance industry should expect COVID to have a lingering impact across lines.
He explains some financial service companies had run models of pandemic scenarios where people were forced to work from home. “They said ‘it won’t happen.’ It happened and showed that we need to start thinking way outside of the box,” Schiavone says.
COVID’s lingering affect
Writers of D&O policies should be aware of potential litigation stemming from failure to foresee or disclose COVID-19-related risks, according to a report for Allianz on risks facing the financial service sector. Further, how companies prepare for similar future events will come under scrutiny.
Additionally, the shift to work-from-home arrangements opened the door to a host of risks, including the well-documented rise in cybersecurity issues. However, working from home also limits managerial oversight, leading to the possibility of other crimes as well as errors.
“What we hear from insureds is a fear of work fatigue. Employees might be at home, but they are working longer hours and ‘always on.’ When there is work fatigue is when errors come in,” Schiavone says. “This is all interlinked through COVID and will carry forward. The whole work/life balance has shifted. The financial service companies we have been speaking to have realized the game has changed.”
To this end, he says that companies shouldn’t monitor just for fraud and errors but also employee wellbeing.
The ever-evolving cybersecurity risk
As seen throughout the past year, COVID offered up cybercriminals the perfect scenario: the rapid adoption of new technology coupled with an unplanned reliance on less secure home networks.
Allianz reports attacks against financial service businesses increased 238% globally from February 2020 through the end of April. Further, around 80% of companies in the sector reported an increase in cyberattacks.
Although players in the financial services market invest heavily in cybersecurity, the wealth of data and other desirable assets will continue to make the sector a popular target.
Companies also have to consider the security measures of third-party vendors, as the wave of supply chain attacks has become a major pain point for the financial industry.
Driven by the growing volume of cyber incidents and rising concerns for data protection and privacy, government regulations are anticipated to increase on a global basis.
“The financial service industry will take the brunt of those regulations because it has so much important data,” Schiavone says. “With 5G and cloud computing, more data is running through the systems and more regulations will come about.”
Related: