ZtpXj352

1[{"body": "<p>\n\t\tWhere once cyber-experts would warn that \u201cit\u2019s not if, but when\u201d your business would face a cyber-attack, they are now advising their customers: \u201cIt\u2019s not if, nor when\u2014but how big\u201d the consequences will end up being.\n\t</p>\n\t<p>\n\t\tGiven that cyber exposures are now seen as inevitable, it only makes sense for businesses to invest in resilience. The fundamentals of resilience are protecting profitability through business continuity and incident response planning. The best way to assess that resilience is to see how quickly and effectively your business can react to any given scenario. That\u2019s what cyber risks stress tests are all about.\n\t</p>\n\t<p class=\"quote\">\n\t\t\"The idea behind a stress test is to determine the critical systems, people and locations you need to continue to serve your customers and how best to protect and recover them.\"\n\t</p>\n\t<p>\n\t\t\u201cWhile we always aim to prevent a cyber issue, a cyber risks stress test assumes the worst and considers how a business would respond if an incident has already occurred,\u201d says Linda Conrad, Head of Strategic Risk, Zurich Global Corporate, North America. \u201cRegardless of the cause, the point is to assume you\u2019re not going to be without certain capabilities and resources. The idea behind a stress test is to determine the critical systems, people and locations you need to continue to serve your customers and how best to protect and recover them. This cyber scenario analysis and practice can help provide management with the information it needs to adjust risk profiles and response plans to better protect the enterprise.\u201d\n\t</p>\n\n\t<p>\n\t\t<strong>Why you should conduct cyber stress tests</strong>\n\t</p>\n\t<ul>\n\t\t<li>\n\t\t\tThe actual cost of recovering from significant business disruptions, particularly in supplier networks, is up to 10 times more than what is typically allotted to cover them, according to Conrad. Increased dependence on cyber functions could mean even greater costs.\n\t\t</li>\n\t\t<li>\n\t\t\tCyber attacks are considered a risk of high concern to doing business in several major economies, including economic heavyweights such as Germany, Japan, the U.S. and the U.K., according to the World Economic Forum\u2019s Executive Opinion Survey 2015.\n\t\t</li>\n\t\t<li>\n\t\t\tCyber risks are interconnected. A Business Continuity Institute survey found that more than 55 percent of supply chain disruptions were related to unplanned IT or telecom outages.\n\t\t</li>\n\t\t<li>\n\t\t\tBecause you have valuable data to protect, even if you don\u2019t realize it. \u201cIt\u2019s not unusual for businesses that aren\u2019t data-centric to think they have nothing to worry about,\u201d says Conrad. \u201cCyber risks can have substantial effects at the operational levels of any business\u2014production, logistics, availability of services and resources. Disruptions at those levels can do real damage to the revenues and reputation of a business.\u201d\n\t\t</li>\n\t</ul>\n\n\t<p>\n\t\t<strong>How to conduct cyber stress tests</strong><br/>\n\t\t<strong>Have a C-Suite sponsor.</strong> There\u2019s no point in doing a stress test if the findings won\u2019t be acted upon to help improve business resilience. A C-Suite executive should be identified as the \u201csponsor\u201d of the test and make sure all of the necessary resources are acquired. The business will benefit when the sponsor shares test results at the highest levels, including with the board.\n\t</p>\n\n\t<p class=\"quote\">\n\t\t\u201cThere\u2019s a lot of room for testing and validation. You have systems that people are using day to day, but you don\u2019t necessarily understand their vulnerabilities.\u201d\n\t</p>\n\n\t<p>\n\t\t<strong>Seek out expertise.</strong> A large company will likely have in-house risk officers or even a hybrid cyber risks officer who is capable of organizing a stress test. If that expertise isn\u2019t under your roof, seek out an expert who has combined knowledge of holistic and cyber risks management.\n\t</p>\n\n\t<p>\n\t\t<strong>Know your goal.</strong> The brass ring of the stress test is minimizing impact of a potential cyber event. This involves identifying the key people and functions that are mission critical to the business, and prioritizing the order in which they are addressed during incident response, according to pre-agreed recovery time objectives (RTOs).\n\t</p>\n\n\t<p>\n\t\t<strong>Make sure the right people are in the room.</strong> The main players in a cyber stress test are employees who have oversight of critical operations and who can affect change by relating findings up the ladder to seek buy-in to solutions. One smart idea: include some of your major suppliers in a stress test. This can help deepen your relationships with them and allow you both to gain insights into business continuity plans, and verify how you can rebound together.\n\t</p>\n\n\t<p>\n\t\t<strong>Consider what employees are doing every day.</strong> \u201cThere\u2019s a lot of room for testing and validation,\u201d says Matthew Lewis, Associate Director, NCC Group, an information assurance firm in the UK. \u201cYou have systems that people are using day to day, but you don\u2019t necessarily understand their vulnerabilities. For example, a phishing attack can be mounted against most organizations that use email. Using a non-malicious link, you can simulate an attack to see how many employees would click on it. This gives you a view of what your exposure might be.\u201d\n\t</p>\n\n\t<p class=\"quote\">\n\t\t\"You should expect to find room for improvement in your business continuity and incident response plans. That\u2019s okay\u2014that\u2019s why you undertook this exercise in the first place.\"\"\n\t</p>\n\n\t<p>\n\t\t<strong>Invest time. </strong> You don\u2019t often get a group of this caliber focused on a common goal and spending time together. A full day or even two days is time well spent creating resilience across the company.\n\t</p>\n\n\t<p>\n\t\t<strong>Be imaginative.</strong> The organizer of the test and exercises should be urged to put multiple bold scenarios before the group. For example, the overall test could include a scenario where a hacker gains access to financial functions. Another scenario could involve a human error internally that disrupts delivery of quality services. A third could be a systems crash at a primary supplier that halts production because vital parts are not delivered to the business.\n\t</p>\n\n\t<p>\n\t\t<strong>Forewarned is forearmed.</strong> For the test to produce usable results, everyone involved must figure out how they will contribute to keeping the business running\u2014or getting it back up to expected productivity levels\u2014without access to the connectivity they have on a normal day. This is the core of the challenge: when the \u201cdisruption\u201d begins, how completely do participants understand and enact the business continuity plan? How effectively are they communicating during the crisis? And how well does the plan hold up? Did it cost more than anticipated in terms of delays or cash flow?\n\t</p>\n\n\t<p>\n\t\t<strong>Act on the findings.</strong> You should expect to find room for improvement in your business continuity and incident response plans. That\u2019s okay\u2014that\u2019s why you undertook this exercise in the first place. The value of the test to the business is what you do with what you\u2019ve learned\u2014strengthening weak points in the plans and improving the ability of employees to execute them. In the end, that is how you proactively increase resilience to cyber risks.\n\t</p>\n\n\t<p>\n\t\t<strong><u>Key takeaways</u></strong>\n\t</p>\n\n\t<ul>\n\t\t<li>A cyber stress test can identify weak points in business continuity and incident response plans. </li>\n\t\t<li>Organized properly, a cyber stress will have a C-Suite \u201csponsor\u201d who can elevate findings to the board level for action, and drive mitigation changes at the operational level. </li>\n\t\t<li>Along with protecting data, bold scenario planning requires the test to include consideration of the broader impacts of a potential business blackout cyber event.</li>\n\t\t<li>You\u2019ll find room for improvement in how you respond to cyber risks\u2014and that\u2019s the point of building resilience. </li>\n\t</ul>", "description": null, "title": "Anatomy of a cyber risks stress test", "image": "/static/images/articles/cyber-risk/anatomy-of-a-cyber-risks-stress-test/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "anatomy-of-a-cyber-risks-stress-test"}, {"tag": "cyber-risk", "slug": "resilience-to-cyber-risks"}, {"tag": "cyber-risk", "slug": "conversations-that-help-boards"}], "header": "FT - Anatomy of a cyber risks stress test", "tag": "cyber-risk", "content_type": "article", "slug": "anatomy-of-a-cyber-risks-stress-test", "thumb": "/static/images/articles/cyber-risk/anatomy-of-a-cyber-risks-stress-test/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tListen in as four experts on cyber risks discuss their accumulation at an enterprise level and the board\u2019s role in building resilience to them.\n\t</span>\n\t<p>Among key points made:</p>\n\t<ul>\n\t\t<li>An effective strategy for cyber risks is imperative as they move beyond data loss to disrupt infrastructure and operations.</li>\n\t\t<li>There is no longer a \u201cphysical perimeter\u201d to help defend against cyber risks.</li>\n\t\t<li>Businesses are digitally storing more and more of their most valuable assets.</li>\n\t\t<li>Conversations with the board on cyber risks must \u201cwiden the circle.\u201d </li>\n\t\t<li>With the right information, boards can help identify what a business is trying to protect, and lead strategy on cyber risks.</li>\n\t</ul>", "thumb": "/static/images/articles/cyber-risk/conversations-that-help-boards/thumb.jpg", "description": "Listen in as four experts on cyber risks discuss their accumulation at an enterprise level and the board\u2019s role in building resilience to them.", "title": "Cyber risks conversations that help boards", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/cyber-risks-conversations-that-help-boards.mp4", "image": "/static/images/articles/cyber-risk/conversations-that-help-boards/video.jpg", "related_items": [{"tag": "cyber-risk", "slug": "cyber-risks-spill-over-into-the-physical-world"}, {"tag": "cyber-risk", "slug": "the-ins-and-outs-of-cyber-risks"}, {"tag": "cyber-risk", "slug": "cyber-house-rules"}], "header": "FT - Cyber risks conversations that help boards", "tag": "cyber-risk", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/cyber-risks-conversations-that-help-boards.ogv", "slug": "conversations-that-help-boards", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/cyber-risks-conversations-that-help-boards.webm"}, {"body": "<p>\n\t\tCyber risks are often viewed as new and challenging, but effective boards and management teams can set the tenor for the organization-wide effort and awareness necessary to mitigate them. Every company operates in its own unique way, but any company can use the below chart as a blueprint for establishing expectations and responsibilities across an enterprise.\n\t</p>\n\n\t\n\t<img src=\"/static/images/articles/cyber-risk/cyber-risks-responsibilities-at-every-business-level/infographic.jpg\"/>\n\n\t<p>\n\t\t</p><h4>Board of Directors</h4>\n\t<p></p>\n\n\t<ul>\n\t\t<li>Validate risk appetite</li>\n\t\t<li>Validate security strategy</li>\n\t\t<li>Push bold scenario planning</li>\n\t\t<li>External collaboration with policymakers and peers</li>\n\t</ul>\n\n\t<p>\n\t\t</p><h4>CEO/C-suite</h4>\n\t<p></p>\n\n\t<ul>\n\t\t<li>Drive common understanding of risk appetite</li>\n\t\t<li>Define/approve security/risk management strategy</li>\n\t\t<li>Define/approve risk management controls/internal control measures</li>\n\t\t<li>Ensure sufficient investment</li>\n\t\t<li>Execute scenario planning/stress testing</li>\n\t\t<li>Business continuity/incident response</li>\n\t\t<li>Quality checks/compliance/internal audit </li>\n\t\t<li>External collaboration with policymakers and peers</li>\n\t</ul>\n\n\t<p>\n\t\t</p><h4>Senior management</h4>\n\t<p></p>\n\n\t<ul>\n\t\t<li>Identify specific vulnerabilities, report up</li>\n\t\t<li>Drive culture/education/awareness</li>\n\t\t<li>Enforce process awareness/policies</li>\n\t</ul>\n\n\t<p>\n\t\t</p><h4>Primary workforce</h4>\n\t<p></p>\n\n\t<ul>\n\t\t<li>Policy awareness</li>\n\t\t<li>Know business continuity/incident response responsibilities</li>\n\t\t<li>\u201cIf you see something, say something\u201d</li>\n\t</ul>", "description": null, "title": "Infographic: Cyber risks responsibilities at every business level", "image": null, "related_items": [{"tag": "cyber-risk", "slug": "anatomy-of-a-cyber-risks-stress-test"}, {"tag": "cyber-risk", "slug": "resilience-to-cyber-risks"}, {"tag": "cyber-risk", "slug": "conversations-that-help-boards"}], "header": "FT - Infographic: Cyber risks responsibilities at every business level", "tag": "cyber-risk", "content_type": "infographic", "slug": "cyber-risks-responsibilities-at-every-business-level", "thumb": "/static/images/articles/cyber-risk/cyber-risks-responsibilities-at-every-business-level/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tCybercrime is now an ever-present element of society and cybersecurity is now a major concern for all business leaders. It\u2019s imperative a foundation be built for public-private cooperation for fighting cybercrime.\n\t</span>\n\t<p>\n\t\tThe World Economic Forum has worked together with experts from various sectors - including from Zurich Insurance Group - to prepare recommendations forming the foundation on which public-private cooperation for fighting cybercrime can be built. They represent the first step in a process whereby alliances can be created, giving rise to common initiatives and measures that enable better detection, prevention and more efficient combating of all forms of cybercrime on a national, regional and global level. They aim to provide the much-needed platform for future cooperation in this space.\n\t</p>\n\t<p>\n\t\tIn recognition of the importance of cybercrime and its impacts on both public security and business, Zurich Insurance Group confirms its support of the World Economic Forum\u2019s efforts in this field and commends the Forum\u2019s \u201cRecommendations for Public-Private Partnership against Cybercrime\u201d as a positive step in garnering attention and creating the impetus for global public-private collaboration in the fight against cybercrime.\n\t</p>\n\t<p>\n\t\t<a href=\"https://www.zurich.com/_/media/dbe/corporate/docs/whitepapers/wef-cybercrime-recommendations.pdf?la=en\" target=\"_blank4\">Download WEF Cybercrime Recommendations</a>\n\t</p>", "description": "Cybercrime is now an ever-present element of society and cybersecurity is now a major concern for all business leaders. It\u2019s imperative a foundation be built for public-private cooperation for fighting cybercrime.", "title": "Recommendations for public private partnership against cyber crime", "image": "/static/images/articles/cyber-risk/recommendations-for-public-private-partnership/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "conversations-that-help-boards"}, {"tag": "cyber-risk", "slug": "the-ins-and-outs-of-cyber-risks"}, {"tag": "cyber-risk", "slug": "cyber-risks-spill-over-into-the-physical-world"}], "header": "FT - Recommendations for public private partnership against cyber crime", "tag": "cyber-risk", "content_type": "article", "slug": "recommendations-for-public-private-partnership", "thumb": "/static/images/articles/cyber-risk/recommendations-for-public-private-partnership/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tThe consequences of cyber risks can disrupt critical business infrastructure and derail productivity at the operational level. Here\u2019s a complete look at where they originate, what they target and their consequences.\n\t</span>\n\t<p>Cyber Risk Sources bullets</p>\n\t<ul>\n\t\t<li>Human error accounts for 52 percent of cyber breaches, according to a study by CompTIA.</li>\n\t\t<li>Creating resilience to cyber risks requires focus on educating and training employees.</li>\n\t</ul>\n\t\n\t<img src=\"/static/images/articles/cyber-risk/the-ins-and-outs-of-cyber-risks/kh-image1-the-ins-and-outs-of-cyber-risks.jpg\"/>\n\t<p>Cyber Risk Targets bullets</p>\n\t<ul>\n\t\t<li>Indirect targets of cyber encroachments are as significant as direct targets.</li>\n\t\t<li>Access to financial information, for example, could put at risk the financial information of a private company that is a customer.</li>\n\t\t<li>This underscores the need for a holistic view of cumulative cyber risks.</li>\n\t</ul>\n\t\n\t<img src=\"/static/images/articles/cyber-risk/the-ins-and-outs-of-cyber-risks/kh-image2-the-ins-and-outs-of-cyber-risks.jpg\"/>\n\t<p>Cyber Risk Consequences bullets</p>\n\t<ul>\n\t\t<li>The consequences of cyber risks are not limited to lost data.</li>\n\t\t<li>Transactions can fail; supplies or products can be misdirected.</li>\n\t\t<li>Manufacturing can be halted or output faulty goods; safety issues can cause injuries.</li>\n\t\t<li>Dissatisfied customers can turn elsewhere.</li>\n\t</ul>\n\t\n\t<img src=\"/static/images/articles/cyber-risk/the-ins-and-outs-of-cyber-risks/kh-image3-the-ins-and-outs-of-cyber-risks.jpg\"/>", "description": "The consequences of cyber risks can disrupt critical business infrastructure and derail productivity at the operational level. Here\u2019s a complete look at where they originate, what they target and their consequences.", "title": "The ins and outs of cyber risks", "image": null, "related_items": [{"tag": "cyber-risk", "slug": "cyber-risks-spill-over-into-the-physical-world"}, {"tag": "cyber-risk", "slug": "conversations-that-help-boards"}, {"tag": "cyber-risk", "slug": "cyber-house-rules"}], "header": "FT - The ins and outs of cyber risks", "tag": "cyber-risk", "content_type": "infographic", "slug": "the-ins-and-outs-of-cyber-risks", "thumb": "/static/images/articles/cyber-risk/the-ins-and-outs-of-cyber-risks/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tAs cyber risks accumulate, so does the likelihood of disruptions to critical business infrastructure and operations. Gain more insights.\n\t</span>\n\t<p>\n\t\tWhen a scheduled flight of a wide-body airliner is cancelled it can cost the airline up to $43,000. So you can imagine what kind of day executives at LOT, the Polish national airline, were having last year when 20 flights were cancelled after computers that issue its flight plans were breached.\n\t</p>\n\t<p>\n\t\t\u201cThe aviation industry\u2019s growing reliance on data networks, and onboard computer and navigation networks, is rendering it increasingly vulnerable to cyber risks,\u201d says Erlend Munthe-Kaas of Bloomberg Intelligence. \u201cAirlines rely on computers for almost every aspect of operations. As a result, cyber incidents can have devastating consequences, including business interruption and loss of reputation.\u201d\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cThere\u2019s beginning to be a shift beginning to educate businesses to see the wider, deeper cyber risks picture that in many cases has gone unacknowledged.\u201d\n\t</p>\n\t<p>\n\t\tThink of it as cyber creep. The risks aren\u2019t just about protecting your customer\u2019s data, although that remains important. They are insinuating themselves into every nook of your business, creating the possibility of mass disruption to operations and critical infrastructure. As the world becomes more connected, and businesses rely more on machine-to-machine communication and automated manufacturing, the cyber risks pile up. One day, production might grind to a halt. Critical transactions might not take place. Shipments could be steered to incorrect destinations. Planes might not take off.\n\t</p>\n\t<h2>Cumulative effects of cyber risks</h2>\n\t<p>\n\t\tBusinesses in eight countries\u2014including Japan, Germany and the U.S.\u2014consider cyber risks the top concern to doing business, according to the World Economic Forum\u2019s (WEF) Executive Opinion Survey of business leaders in 140 economies. The report also notes that cyber dependency is the third most important trend in shaping global development over the next 10 years. A bit of extrapolation supports a view that the cumulative effects of cyber risks are not being sufficiently taken into account.\n\t</p>\n\t<p>\n\t\t\u201cCyber security and information privacy have historically been looked at as separate risks by businesses\u2014in some cases, even isolated from other risks,\u201d says Lori Bailey, Global Head of Special Lines, Zurich Insurance Group. \u201cHowever, there\u2019s beginning to be a shift beginning to educate businesses to see the wider, deeper cyber risks picture that in many cases has gone unacknowledged. The goal should be to develop resilience and protection, because as cyber risks accumulate it becomes more difficult to anticipate them all.\u201d\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cThe main reason that boards of directors are interested in this challenge is that part of their responsibility is protecting the company\u2019s assets, and an increasing number of those assets have cyber connections.\u201d\n\t</p>\n\t<p>\n\t\tThe Internet of Everything (IoE), where the cyber and physical worlds collide, is fueling the accumulation of cyber risks. (The IoE, cloud computing and BYOD trends also contribute to serious systemic vulnerabilities that are difficult to quantify, and can only be managed and mitigated by public/private partnerships.) The automotive industry, for example, relies heavily on complex and highly interconnected technologies that are tightly coupled with design, assembly and distribution. Disruptions in one system puts all systems at risk, and a faulty vehicle\u2014heavy with potential liability\u2014might be the end result. \u201cUnless you start thinking about cyber risks at the very beginning of the development process and perform quality assurance along the way to make sure that security is working from the beginning of design all the way through production and release to market, the marketplace will be filled with vulnerable products,\u201d says Gerry Kane, Cybersecurity Segment Director, Zurich North America.\n\t</p>\n\t<h2>Who\u2019s in charge?</h2>\n\t<p>\n\t\tAs businesses transfer more and more of what they value onto digital networks, they should be thoroughly evaluating assets they are putting at risk and putting in measures to protect those. This extends beyond personally identifiable information, to areas such as intellectual property, confidential internal communication and, increasingly, physical objects and infrastructure. How are these assets guarded? How would the company respond if they were attacked? And where does the responsibility for these and all other cyber risks sit within the business?\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cWhat\u2019s important in the board room is having a translation between what\u2019s happening on the IT security side and what the board needs to do to understand the risks.\u201d\n\t</p>\n\t<p>\n\t\tBusinesses are becoming increasingly aware that cyber risks must be managed at the board room level. Gus Coldebella, former Acting General Counsel, U.S. Department of Homeland Security, and Principal, Fish &amp; Richardson, a global patent and intellectual property law firm, says: \u201cThis is partly due to the attention paid to cyber incidents in the media and greater scrutiny on companies that may have experienced cybersecurity incidents. The main reason that boards of directors are interested in this challenge is that part of their responsibility is protecting the company\u2019s assets, and an increasing number of those assets have cyber connections.\u201d\n\t</p>\n\t<p>\n\t\tIn Coldebella\u2019s view, it\u2019s a mistake to assume that boards don\u2019t have the interest or capability to take part in the management of cyber risks. \u201cWhat\u2019s important in the board room is having a translation between what\u2019s happening on the IT security side and what the board needs to do to understand the risks, to mitigate the risks, to assume the risks and to insure against the risks,\u201d he says. \u201cPart of that is making the circle bigger. If you just have the directors and IT security people in the room, you\u2019re going to end up talking about which box we just bought to solve this problem. If you have the legal department, HR and finance in the room at the same time, you can tilt that conversation to types of questions that boards have been effectively answering since time immemorial.\u201d\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cPublic company directors can grapple with these questions and should, whether or not there is someone with an IT background on the board.\u201d\n\t</p>\n\t<p>\n\t\tMany boards today are considering adding a director with an information security background, and some regulatory bodies are considering making such an appointment mandatory. Such a requirement, however, could unintentionally imply that boards should not or cannot oversee the management of cyber risks.\n\t</p>\n\t<p>\n\t\t\u201cPublic company directors can grapple with these questions and should, whether or not there is someone with an IT background on the board,\u201d says Coldebella. \u201cRequiring such a seat at the board table would almost send a message to all of the other public company directors that they should just let the tech guy worry about cyber risks. And that is not the right way to address this growing challenge.\u201d\n\t</p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>Cyber risks aren\u2019t isolated breaches. They accumulate with the potential to disrupt every aspect of business operations and infrastructure.</li>\n    <li>The cumulative effects of cyber risks are not being taken into account by most businesses.</li>\n    <li>The Internet of Everything fuels cyber risks accumulation to a level that requires consistent board-level attention.</li>\n    <li>As businesses transfer valuable assets onto digital networks, they should consider what they are trying to protect, and how to protect it.</li>\n    <li>\u201cTranslating\u201d technology risks appropriately will help boards take the lead in managing and mitigating cyber risks.</li>\n  </ul>", "description": "As cyber risks accumulate, so does the likelihood of disruptions to critical business infrastructure and operations. Gain more insights.", "title": "Cyber risks spill over into the physical world", "image": "/static/images/articles/cyber-risk/cyber-risks-spill-over-into-the-physical-world/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "the-ins-and-outs-of-cyber-risks"}, {"tag": "cyber-risk", "slug": "conversations-that-help-boards"}, {"tag": "cyber-risk", "slug": "cyber-house-rules"}], "header": "FT - Cyber risks spill over into the physical world", "tag": "cyber-risk", "content_type": "article", "slug": "cyber-risks-spill-over-into-the-physical-world", "thumb": "/static/images/articles/cyber-risk/cyber-risks-spill-over-into-the-physical-world/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tNew rules to strengthen data protection and cyber-security are a step in the right direction, but more needs to be done to protect businesses and society from global threats.\n\t</span>\n\t<p>\n\t\tOn December 18, 2015, U.S. President Obama signed into law the Cyber Security Act of 2015, which requires the Department of Homeland Security to develop rules to make it easier for private companies and U.S. government agencies to share information about cyber threats.\n\t</p>\n\t<p>\n\t\tThis law is just the latest in a host of new initiatives in recent years to ramp up data protection and encourage collaboration and transparency about cyber-security at a federal and local level.\n\t</p>\n\t<p>\n\t\tIn the past year alone, more than 20 bills have been introduced in Congress to protect privacy on-line, facilitate the sharing of information on cyber threats, require some entities to notify affected individual or government agencies if data has been compromised, and introduce a cyber-bill of rights for consumers.\n\t</p>\n\t<p>\n\t\tRegulators are expected to continue pushing for greater control of cyber-space in 2016. The New York State Department for Financial Services, for instance, is expected to propose new rules on cyber-security policies at financial institutions in the state, including a requirement for regular audits, the appointment of a Chief Information Security Officer and notification of any incidents.\n\t</p>\n\t<h2>EU harmonization</h2>\n\t<p>\n\t\tNor is the spate of regulation limited to the U.S. The European Union is expected to adopt the General Data Protection Regulation (GDPR) and the National Information Security Directive (NISD) in the coming months, with both coming into effect by the end of 2018.\n\t</p>\n\t<p>\n\t\tThe new rules are designed to harmonize the European Union\u2019s fractured regulatory landscape and improve consumer protection by introducing a minimum standard of cyber-security for essential services. They will also make it easier for businesses to transfer data within the EU.\n\t</p>\n\t<p>\n\t\tNISD requires the likes of European banks, internet service providers, utilities and medical facilities to manage cyber risks more effectively, and to automatically notify the authorities if their systems are breached.\n\t</p>\n\t<p>\n\t\tThe GPDR gives private individual easier access to their own data being held by third parties, makes it easier for them to move data between service providers, reinforces the right to have private removed from third party websites like customer databases and social media, and obliges service providers to notify their customers when their data has been compromised. It also mandates the establishment of a European Data Protection Board to help coordinate the activities of each member state and requires companies in some sectors to appoint data protection officers to ensure that the new rules are being followed.\n\t</p>\n\t<h2>Local rules, global challenge</h2>\n\t<p>\n\t\tThere are privacy concerns over some regulation, and the Cyber Security Act of 2015, for example, is already being challenged in Congress on the grounds that it does not go far enough in protecting the identities of victims of cyber-crime and give internet service providers too much latitude in monitoring external systems. Yet any development that provides greater protection for businesses and consumers, increases transparency into cyber-threats or fosters collaboration between governments, businesses and the public must be seen as positive.\n\t</p>\n\t<p>\n\t\tHowever, while most of the current regulatory and enforcement activity is happening at a local and regional level, bad actors are operating across borders. Cyber criminals are becoming increasingly sophisticated and are often located in lightly regulated jurisdictions allowing them to operate under the radar, so risks are borderless and systemic.\n\t</p>\n\t<h2>Intra-government cooperation</h2>\n\t<p>\n\t\tAs Zurich Insurance Group and ESADE Center for Global Economy argued in a report published in April, 2015, the global nature of cyber-risks requires closer cooperation between governments.\n\t</p>\n\t<p>\n\t\tThe report, Global Cyber Governance: Preparing for New Business Risks, proposed measures such as the creation of a Cyber Stability Board to strengthen global institutions and a cyber-alert system based on the World Health Organization (WHO) to enhance crisis management. It also called for \u201cmore comprehensive dialogue between business, politics and civil society to ensure the security of cyberspace.\u201d\n\t</p>\n\t<h2>An evolving challenge</h2>\n\t<p>\n\t\tA further risk is that the nature of the cyber threat is constantly evolving.\n\t</p>\n\t<p>\n\t\tIn December, hackers managed to close down several power stations in the Ukraine in what is believed to be the first successful attack of its kind. In July last year, Wired magazine reported on a proof-of-concept hack of a Chrysler Jeep in which researchers took control of the vehicles electronic systems including the radio, climate control, windscreen wipers, digital displays, steering, brakes, and transmission.\n\t</p>\n\t<p>\n\t\tThose incidents demonstrate that cyber-risks now extend beyond the digital environment directly into the physical world, an effect that is only become more pronounced as more devices around are connected with the emergence of the so-called Internet of Things.\n\t</p>\n\t<p>\n\t\tThe proliferation of monitoring devices, remotely controlled and automated systems, is creating fresh opportunities for attackers. It is an imperative for improved corporate resilience plans and global coordination of regulation and enforcement, to help reduce the weak links in cyber security. Breakthroughs in Big Data, while a boon for businesses and governments, are also making it easy to gather sensitive information without the ugly necessity of breaching protected systems. In the U.S., for example, law enforcement agencies are working with private companies to track vehicles and suspects using publicly available CCTV video feeds. While that could prove useful in preventing crime, in the absence of rules to protect privacy in public spaces it could also be used for sinister purposes.\n\t</p>\n\t<p>\n\t\tPart of the problem is that the real world implications of technological developments are so difficult to predict. That means that businesses and governments need to work more closely together to develop a fluid and holistic approach towards building resilience to cyber-attacks, with an emphasis on preventive continuity measures supported by post-event mitigation strategies and crisis recovery plans.\n\t</p>", "description": "New rules to strengthen data protection and cyber-security are a step in the right direction, but more needs to be done to protect businesses and society from global threats.", "title": "Cyber House Rules: Tougher local regulation is not enough", "image": "/static/images/articles/cyber-risk/cyber-house-rules/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "ukraine-attack-highlights-cyber-risk"}, {"tag": "cyber-risk", "slug": "companies-still-unprepared-for-mounting-cyber-risks"}, {"tag": "cyber-risk", "slug": "cyberattacks-threat-to-north-american-companies"}], "header": "FT - Cyber House Rules: Tougher local regulation is not enough", "tag": "cyber-risk", "content_type": "article", "slug": "cyber-house-rules", "thumb": "/static/images/articles/cyber-risk/cyber-house-rules/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tAttacks should be a warning to governments and businesses that greater cooperation and engagement is needed.\n\t</span>\n\t<p>\n\t\tOn December 23, 2015, approximately 225,000 homes in the Ivano-Frankivsk region of Ukraine were left without electricity for several hours after what is believed to be the first-known instance of power stations being disabled by a cyber-attack.\n\t</p>\n\t<p>\n\t\tThe as yet unknown attackers appear to have installed malware known as BlackEnergy on the systems of three regional power stations before launching a coordinated attack to cause maximum disruption. While the lights were back on within hours, the affected companies were still experiencing difficulties more than two months later. Three other organizations were also infiltrated in the same attack.\n\t</p>\n\t<p>\n\t\tA report published in February by the Industrial Control Systems Cyber Emergency Response Team, part of a division of the U.S. Department of Homeland Affairs which investigated the incident in Ukraine, notes that: \u201cThe cyber-attack was reportedly synchronized and coordinated, probably following extensive reconnaissance of the victim networks. According to company personnel, the cyber-attacks at each company occurred within 30 minutes of each other and impacted multiple central and regional facilities. The companies believe that the actors acquired legitimate credentials prior to the cyber-attack to facilitate remote access.\u201d\n\t</p>\n\t<h2>Growing challenge</h2>\n\t<p>\n\t\tThe attack echoed concerns first raised in 2014 by Admiral Michael Rogers, the then head of both U.S. Cyber Command and the U.S. National Security Agency, that hackers acting as \u201csurrogates\u201d for foreign powers were developing the ability to infiltrate and disrupt critical infrastructure in the U.S.\n\t</p>\n\t<p>\n\t\tIt is very difficult to put an exact number on the potential cost of such an attack, though it has been speculated that a total disruption of the country\u2019s utilities through other means, such as an electro-magnetic pulse from solar storms or nuclear attack, could cost nine-in-ten Americans their lives.\n\t</p>\n\t<p>\n\t\tSeparately, the World Economic Forum\u2019s Partnering for Cyber Resilience initiative has begun to develop a preliminary value-at-risk model for calculating the potential financial impact of digital disruption through a cyber-attack. Among the challenges of developing such a model is that it is difficult to predict how often hackers will succeed and to calculate the potential collateral damage from an attack.\n\t</p>\n\t<h2>A deficit of awareness</h2>\n\t<p>\n\t\tGiven the risks, it would be reasonable to expect that cyber-risks would consistently rank among the biggest challenges facing companies and governments today. These human attacks and natural impacts to the cyber infrastructure highlight the need to expand the focus of cyber resilience beyond data protection to minimizing the disruptions of a \u201cbusiness blackout\u201d Today, a majority of functions such as payroll, manufacturing lines, customer orders, and supplier procurement are all run electronically, magnifying the potential downtime for organizations.\n\t</p>\n\t<p>\n\t\tAnd yet, Global Risks 2016, a report published by the World Economic Forum (WEF) in collaboration with Zurich Insurance Group and other leading institutions, reveals that global leaders are more focused on other issues. The report draws on a survey of the WEF\u2019s membership, which asked leading executives from around the world to identify the five global risks which concerned them most from a list of 28 potential risks. While cyber-risks ranked highly in many countries including the United Stated, overall they were superseded by concerns over geopolitics and climate change. In fact, the risk of data theft or fraud ranked eighth in terms of likelihood, while there are surprisingly no technological risks in the top 10 risks measured by impact.\n\t</p>\n\t<p>\n\t\tResearch recently conducted by Advisen on behalf of Zurich also reveals that while there is growing awareness of the threats, businesses are still struggling to understand the risks associated with cyber security issues: the full scope of their exposures and how best to protect themselves and their customers.\n\t</p>\n\t<p>\n\t\tSeparately, John McAfee, the controversial software entrepreneur who developed the McAfee anti-virus program, recently observed that cyber-security is not ranked among the U.S. government\u2019s top-ten concerns listed on the White House website at <a href=\"https://www.whitehouse.gov/issues\" target=\"_blank\">https://www.whitehouse.gov/issues</a>\n\t</p>\n\t<h2>Dangerous times</h2>\n\t<p>\n\t\tTo some extent, this apparent short-sightedness reflects an increasingly complex and interconnected global risk landscape. With so much happening in the world today, it is perhaps natural that people will focus on the most visible challenges.\n\t</p>\n\t<p>\n\t\tNevertheless, the attack in Ukraine reveals that cyber risks now extend well beyond national borders and the effects can cascade beyond the assets and infrastructure of any single business. An attack may not affect your company or your country directly, but it could ripple and severely impair your ability to continue operating.\n\t</p>\n\t<p>\n\t\tMany observers believe that the Ukraine incident is not unrelated to growing political tensions. This reflects the increasing interconnectivity between cyber risks and other exposures, particularly geopolitical tensions and social risks which are highlighted in the Global Risks Report 2016. The Report highlights widening inequality and rising nationalism, that may contribute to the erosion of international cooperation to combat cybercrime.\n\t</p>\n\t<h2>Rising to the challenge</h2>\n\t<p>\n\t\tIn a joint report published in April 2015, the ESADE business school and Zurich argued that weak global governance is putting businesses at risk. The report, Risk Nexus: Global cyber governance: preparing for new business risks, calls for greater cooperation between governments and the creation of international institutions to mitigate global cyber risks. A key element of any such collaboration will be partnership between the public and private sectors to identify and respond to emerging cyber-risks and collateral effects, such as disruptions to business and infrastructure or social unrest.\n\t</p>\n\t<p>\n\t\tIn the absence of such cooperation, businesses need to develop a far more holistic understanding of the digital risks to their business and become far more proactive in addressing their resilience challenges.\n\t</p>", "description": "Attacks should be a warning to governments and businesses that greater cooperation and engagement is needed.", "title": "Ukraine attack highlights cyber-risk to critical infrastructure", "image": "/static/images/articles/cyber-risk/ukraine-attack-highlights-cyber-risk/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "cyber-house-rules"}, {"tag": "cyber-risk", "slug": "cyberattacks-threat-to-north-american-companies"}, {"tag": "cyber-risk", "slug": "companies-still-unprepared-for-mounting-cyber-risks"}], "header": "FT - Ukraine attack highlights cyber-risk to critical infrastructure", "tag": "cyber-risk", "content_type": "article", "slug": "ukraine-attack-highlights-cyber-risk", "thumb": "/static/images/articles/cyber-risk/ukraine-attack-highlights-cyber-risk/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tRecent surveys show that many companies are still not prepared to manage the fall-out from a cyber-attack on their own business or within their supply chain.\n\t</span>\n\t<p>\n\t\tA growing number of businesses are falling victim to cyber-crime, but new survey data shows that most companies are lagging behind when it comes to preparing for an attack.\n\t</p>\n\t<p>\n\t\tOver a quarter of respondents to The Global Economic Crime Survey 2016, an annual survey conducted by PwC, said that they had been affected by cyber-crime in the past year. Troublingly, a further 18 percent said they did not know whether or not they had been attacked, while 34 percent said they expected to be attacked within the next two years. About 50 of the 6,337 companies in 115 countries that completed the survey suffered losses in excess of USD 50 million, a third of which saw losses over USD 100 million.\n\t</p>\n\t<h2>Unprepared</h2>\n\t<p>\n\t\tMore than half of respondents, 53 percent, believed the risk of cyber-crime had increased, but only 37 percent had a cyber-incidence response plan in place. Only four-in-ten had properly trained personnel to respond to a cyber-emergency, three quarters of which were IT security staff.\n\t</p>\n\t<p>\n\t\tThose findings closely match data from Mitigating the Inevitable: How organizations manage data breach exposure, a report published by Advisen in March, 2016.\n\t</p>\n\t<p>\n\t\tAdvisen found that while 80 percent of surveyed organizations were worried about a potential data breach, and 17 percent had experienced one over the previous year, less than half of respondents thought that their company was adequately prepared to fend off an attack.\n\t</p>\n\t<p>\n\t\tWhile 75 percent of respondents to the Advisen survey, which polled companies in the U.S., said they had a data-breach response plan in place, only 42 percent of those had tested it. Six out of every ten believed that their IT teams were responsible for managing the response to a cyber-attack.\n\t</p>\n\t<h2>Walls are not enough</h2>\n\t<p>\n\t\tThat seems short-sighted as the costs of a data-breach include reputation damage, business interruption costs, supply chain disruption, mandatory notification of customers, and a host regulatory and legal issues that stretch beyond the networks and systems that may have been breached and could be existential for any company.\n\t</p>\n\t<p>\n\t\tSuch a complex combination of risks and effects requires a coordinated, multi-stakeholder response lead from the C-suite, rather a response focused on solving the technological challenges posted by the initial breach.\n\t</p>\n\t<p>\n\t\tBusinesses must adopt a mindset of resilience rather than just protection and those that identify all possible risks and have an action plan in place are those that will prove most resilient, and quickly get back to meeting the expectations of their customers and their shareholders.\n\t</p>\n\t<p>\n\t\tTo develop that resilience, Zurich Insurance Group advises its customers and partners to:\n\t</p>\n\t<ul>\n\t\t<li>Map critical data - know what is most important, where it is (including desktops, remote devices, backup storage, paper documents), how it is protected, who touches it, where it travels. This should include risks within your supply chain.</li>\n\t\t<li>Humans are the weakest link, so make sure all employees understand the importance of data security. A security awareness and training program is the lowest cost security measure with arguably the highest return on investment.</li>\n\t\t<li>Have a response plan in place and test it regularly, with practice drills involving internal and external teams so everybody knows what to do when an incident occurs.</li>\n\t\t<li>Extend beyond the four walls of the company: With an insurance carrier or broker\u2019s risk management team, review all business partner relationships, including how those vendors/partners approach their own exposures and controls and how the vendor\u2019s suppliers\u2019 approach fits into their overall resilience plan.</li>\n\t\t<li>Become part of the discussion and work with policy makers and regulators to build cyber-resilience globally.</li>\n\t</ul>", "description": "Recent surveys show that many companies are still not prepared to manage the fall-out from a cyber-attack on their own business or within their supply chain.", "title": "Companies still unprepared for mounting cyber risks", "image": "/static/images/articles/cyber-risk/companies-still-unprepared-for-mounting-cyber-risks/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "cyberattacks-threat-to-north-american-companies"}, {"tag": "cyber-risk", "slug": "cyber-house-rules"}, {"tag": "cyber-risk", "slug": "ukraine-attack-highlights-cyber-risk"}], "header": "FT - Companies still unprepared for mounting cyber risks", "tag": "cyber-risk", "content_type": "article", "slug": "companies-still-unprepared-for-mounting-cyber-risks", "thumb": "/static/images/articles/cyber-risk/companies-still-unprepared-for-mounting-cyber-risks/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tNorth American business leaders elevated cyber risks to their number one risk, according to the Global Risks Report 2016\n\t</span>\n\t<p>\n\t\tThe internet plays a critical business function in North America, and the United States in particular. Consider these facts from the <a href=\"http://www.zurichna.com/en/knowledge/articles/2016/01/global-risks-report-2016\" target=\"_blank\">Global Risks Report 2016</a>, which was produced by the World Economic Forum in strategic partnership with Zurich:\n\t</p>\n\t<ul>\n\t\t<li>87% of the U.S. population uses the internet, making it one of the best-connected countries in the world.</li>\n\t\t<li>The U.S. ranks 2nd globally for online business-to-consumer transactions.</li>\n\t\t<li>In 2014, cybercrime costs reached $100 billion in the U.S.\u2014nearly one-quarter of the $445 billion in global losses.</li>\n\t</ul>\n\t<p>\n\t\tNorth American business leaders are well aware of these costs, as well as the increasing frequency and business interruption of breaches. In fact, they elevated <a href=\"https://www.zurichna.com/en/knowledge/topics/cyber\" target=\"_blank\">cyber</a> to their number one risk, according to the Global Risks Report. Other regions of the world placed geopolitical and societal risks higher, but cyber remained in the top three risks for 18 countries, primarily in Northern Europe and Japan.\n\t</p>\n\t<p>\n\t\tThe Report outlines key <a href=\"http://www.zurichna.com/sitecore/content/ZNA/Knowledge/Articles/2016/01/Global%20risks%20interconnections%20map%202016\" target=\"_blank\">interconnections</a> with cyberattacks\u2014such as adverse consequences of technical advances and a critical information infrastructure breakdown\u2014whether it\u2019s destroying a profitable e-commerce site or the ability to manage a global supply chain network. In addition, the \u201crisk velocity\u201d of a cyberattack\u2014i.e., the high speed of onset and impact\u2014requires an organization to be prepared with an equally high speed of response to help protect its competitive advantage.\n\t</p>\n\t<p>\n\t\tThe <a href=\"http://www.ponemon.org/library/2015-cost-of-cyber-crime-united-states\" target=\"_blank\">Ponemon Institute</a> reports that while malicious criminals are responsible for 41% of cyberattacks, human error is responsible for 33% of them. This human factor is what can make cyberattacks more difficult to control and why decreasing the impact through a well-planned business continuity response management approach is of paramount importance.\n\t</p>\n\t<p>\n\t\tThese three steps can help your organization determine the right and rapid response to a cyberattack:\n\t</p>\n\t<ol>\n\t\t<li><strong>Make it a board-level priority to examine the interconnections between advanced technology and cyber vulnerability.</strong> As organizations depend more on innovations such as cloud computing and 3D printing, it\u2019s important to identify the new risk scenarios these technologies bring with them.</li>\n\t\t<li><strong>Establish 360 degree risk assessments and scenario-based analysis.</strong> Determine where risk mitigation improvements should be made company-wide, and proactively adjust your digital infrastructure\u2014whether it\u2019s changing your backup locations or third-party vendor relationships.</li>\n\t\t<li><strong>Build cyber resilience through stress testing.</strong> Once you\u2019ve made improvements, test what happens if your systems go down\u2014how will your e-functions, such as payroll, ordering or production recover? Can you continue to serve clients during a cyberattack? Are your suppliers equally resilient?</li>\n\t</ol>\n\t<p>\n\t\tYour business peers in other regions of the world are facing not only cyber threats, but also more macro forces such as failure of national governance, large-scale involuntary migration and energy price shock, as shown in the <a href=\"http://www.zurichna.com/en/knowledge/articles/2016/01/highest-concern-for-doing-business-by-country-2016\" target=\"_blank\">global risk of highest concern map</a>. North America is fortunate to have relatively stable governments and economies, yet all these international exposures may impact global trade and necessitate adjustments to strategy and execution plans. Continuing to grow your business both in the short-term and long-term will require the ongoing adoption of new, advanced technologies. And it will require building organizational resilience through an enterprise-wide approach to managing cyber risks.\n\t</p>", "description": "North American business leaders elevated cyber risks to their number one risk, according to the Global Risks Report 2016", "title": "Cyberattacks: the #1 threat to North American companies", "image": "/static/images/articles/cyber-risk/cyberattacks-threat-to-north-american-companies/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "cyberattacks-threat-to-north-american-companies"}, {"tag": "cyber-risk", "slug": "ukraine-attack-highlights-cyber-risk"}, {"tag": "cyber-risk", "slug": "cyber-house-rules"}], "header": "FT - Cyberattacks: the #1 threat to North American companies", "tag": "cyber-risk", "content_type": "article", "slug": "cyberattacks-threat-to-north-american-companies", "thumb": "/static/images/articles/cyber-risk/cyberattacks-threat-to-north-american-companies/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Will the future Internet be so overwhelmed by risks that businesses don\u2019t live up to their potential? And what can you do about it today?\n  </span>", "thumb": null, "description": "Will the future Internet be so overwhelmed by risks that businesses don\u2019t live up to their potential? And what can you do about it today?", "title": "What will the future of cyber risks look like?", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/future_of_cyber_risks.mp4", "image": "/static/images/articles/cyber-risk/future-of-cyber-risks/video.jpg", "related_items": [{"tag": "cyber-risk", "slug": "startling-economic-truth-about-cyber-risks"}, {"tag": "cyber-risk", "slug": "risks-of-hacks-and-their-costs-vary-greatly"}, {"tag": "cyber-risk", "slug": "innovation-in-pursuit-of-resilience-in-the-age-of-cyber-risks"}], "header": "FT - What will the future of cyber risks look like?", "tag": "cyber-risk", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/future_of_cyber_risks.ogv", "slug": "what-will-the-future-of-cyber-risks-look-like", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/future_of_cyber_risks.webm"}, {"body": "<span class=\"intro-line\">\n    Do you know how much it costs your business for each bit of data that is compromised in a cyber breach? Find out here.\n  </span>\n  <p>\n    The rise in the number and costs of data breaches to businesses shows that with the vast potential of interconnectivity comes an equal amount of globally interconnected cyber risks. The data suggests that cyber security, while important, isn\u2019t enough to combat the risks. Businesses need to think in terms of creating resilience, as well, so they can bounce back after a cyber risk event.\n  </p>\n  <img height=\"2375\" src=\"/static/images/articles/cyber-risk/risks-of-hacks/infographic.jpg\" width=\"617\"/>", "description": "Do you know how much it costs your business for each bit of data that is compromised in a cyber breach? Find out here.", "title": "Risks of hacks and their costs vary greatly", "image": null, "related_items": [{"tag": "cyber-risk", "slug": "innovation-in-pursuit-of-resilience-in-the-age-of-cyber-risks"}, {"tag": "cyber-risk", "slug": "whats-your-cyber-breach-price-tag"}, {"tag": "cyber-risk", "slug": "managing-cyber-risks-is-a-team-game"}], "header": "FT - Risks of hacks and their costs vary greatly", "tag": "cyber-risk", "content_type": "infographic", "slug": "risks-of-hacks-and-their-costs-vary-greatly", "thumb": "/static/images/articles/cyber-risk/risks-of-hacks/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    A new report indicates that we\u2019re reaching the tipping point when the annual costs of cyber disruptions begin to reduce the incentive for doing business in a connected world. At stake is more than $100 trillion in global growth through 2030.\n  </span>\n  <p>\n    As cyber hackers continue to add more and bigger notches to their belts and the losses for global businesses pile up, balance sheets are starting to reveal a shocking story. According to a new report, you needn\u2019t look very far into the future to see a time when the annual costs of cyber security and responding to disruptions could reduce the desire to conduct business in a connected world. That potential lack of incentive accounts for a difference between the best and worst-case scenarios of $120 trillion in global growth through 2030.\n  </p>\n  <p>\n    The report from the Atlantic Council and Zurich Insurance Group, \u201cRisk Nexus: Overcome by Cyber Risks? Economic Benefits and Costs of Alternate Cyber Futures,\u201d isn\u2019t all doom and gloom, however. While there are higher costs associated with cyber security on an annual basis, the benefits of cyber investment compound over time. In the report\u2019s base case, the accumulated global benefits of being connected more than counterbalance the costs through the year 2030 by nearly $160 trillion\u2014an 8 percent gain in global GDP between 2010 and 2030.\n  </p>\n  <p class=\"quote\">\n    In Cyber Shangri-La, the full potential of technology on global GDP is realized as cyber security one-ups the bad guys for a net global gain of $190 trillion. The worst-case scenario, where the bad guys win\u2014Clockwork Orange Internet\u2014drains $90 trillion of potential net economic benefit from global GDP.\n  </p>\n  <p>\n    It\u2019s a classic good news/bad news situation for the time being, and how it plays out over time will be determined in large part by how effectively the cyber world can be governed on a global basis\u2014if it can be governed at all. The true danger of missed opportunity and lost growth is that it cascades down to businesses just the same as it does for the global economy. Those who can harness cyber technology and manage the risks will see significant growth, while those who don\u2019t will fall behind. \n  </p>\n  <p>\n    As the picture unfolds, the responsibility for answering this challenge doesn\u2019t fall solely to the private sector, but to governments and society as well. This is particularly relevant in light of another report from Zurich earlier this year, \u201cGlobal Cyber Governance: Preparing For New Risks,\u201d created in collaboration with ESADEgeo. That report targeted the need for increased and improved global governance of the Internet, noting that as the Internet of Everything (IoE) evolves, many aspects of human life will become dependent on digital technology, and billions of physical objects with ICT systems will become interconnected. \n  </p>\n  <p>\n    \u201cWith this Atlantic Council report we\u2019ve learned that the future could be fantastic, or it could develop with tremendous risks if the Internet becomes infested with attacks,\u201d says John Scott, Chief Risk Officer, Global Corporate, Zurich Insurance Group. \u201cDoes that mean we should stop developing technologies? Absolutely not. These are the things that are transformative to businesses and global growth. At the same time, we should take a precautionary approach, with our eyes wide open to the risks that could lead to a worst-case scenario.\u201d \n  </p>\n  <h2>Four scenarios for the future</h2>\n  <p>\n    To create its base case, the research team adopted the relatively conservative view that information technology will soon hit a saturation point and that the main benefits of connectivity have already been realized. \u201cBut there are a lot of people who believe there is a lot more to come that could be truly transformative,\u201d says Jason Healey, Senior Fellow for Cyber Statecraft at the Atlantic Council\u2019s Brent Scowcroft Center on International Relations, which teamed with the Pardee Center for International Futures at the University of Denver and Zurich Insurance Group to conduct the quantitative analysis behind the report.\n  </p>\n  <p class=\"quote\">\n    \u201cWhen looking at resilience, the most important thing a company can do is ask the question: What is the worst-case scenario? How quickly can you minimize the disruption and get back online as quickly as possible?\u201d\n  </p>\n  <p>\n    That\u2019s why the report outlines four alternative scenarios beyond the base case. In Cyber Shangri-La, the full potential of technology on global GDP is realized as cyber security one-ups the bad guys for a net global gain of $190 trillion. The worst-case scenario, where the bad guys win\u2014Clockwork Orange Internet\u2014only delivers $70 trillion of potential net economic benefit to global GDP, $90 trillion less than the base case scenario. Not quite as devastating but still bad enough is the Leviathan Internet, where governments impose strong restrictions in an attempt to solve governance issues, and watch as $20 trillion in potential global GDP vanishes. The fourth scenario, Independent Internet, is driven by global businesses, and nets out in the same neighborhood as the base case. \n  </p>\n  <p>\n    \u201cGovernance, both within nations, as well as between nations, is one of the really important factors in determining whether we get these better futures\u2014the ones where the technology really is fascinating and unlocks economic value,\u201d says Healey. \n  </p>\n  <h2>So what do we do now?</h2>\n  <p>\n    Trends in the seriousness and scale of cyber attacks\u2014more data breaches, more disclosures of critical vulnerabilities, and more nations building and employing offensive cyber capabilities\u2014make one of the two darker scenarios seem more readily believable. However, as any risk management expert will attest, you can\u2019t know the future with any certainty, and what has happened and is happening now isn\u2019t necessarily an indicator of what will happen. \n  </p>\n  <p>\n    While recognizing this, the report recommends that businesses and policymakers assume the worst-case scenario and take steps to increase resilience\u2014the ability to bounce back\u2014should that scenario unfold.\n  </p>\n  <p>\n    \u201cWhen looking at resilience, the most important thing a company can do is ask the question: What is the worst-case scenario?\u201d says Lori Bailey, Global Head of Special Lines, Zurich Insurance Group. \u201cHow quickly can you minimize the disruption and get back online as quickly as possible? How companies do this will vary by industry. The worst-case scenario is going to look a lot different in retail than it\u2019s going to look in the manufacturing sector, for example. But the steps to creating resilience are similar\u2014formulating a robust incident response plan in conjunction with a business continuity plan, and then simulating mock catastrophic events in real time to assess how your business\u2019 continuity and incident response plans will work.\u201d\n  </p>\n  <p>\n    The report encourages business leaders to engage with policymakers, and to be more proactive on cyber security while pushing for greater accountability regarding cyber risks within the business. \n  </p>\n  <p>\n    \u201cHistorically, there was a tendency to manage cyber risks by using a checkbox approach. For example: \u2018Do I have a firewall? Do I conduct vulnerability scans?\u2019 and so on. And once you\u2019ve checked all the boxes you could sit back and think you\u2019re fully protected,\u201d says Bailey. \u201cThat isn\u2019t good enough anymore. Those are the minimum standards, and constant monitoring and management of how those risks are changing are increasingly vital. Just because you have a firewall doesn\u2019t mean that someone\u2019s not going to get through it, and just because you run vulnerability scans doesn\u2019t mean you\u2019ll detect every threat. It\u2019s important that companies be vigilant about making sure that they have the best processes and protections in place.\u201d\n  </p>\n  <h2>Pushing accountability from the top down</h2>\n  <p>\n    Active participation in managing cyber risks by the board of directors at any company is also deemed key in creating resilience, according to the report. The effectiveness of board involvement can vary widely, however.\n  </p>\n  <p>\n    \u201cYes, boards do need to be involved, but it can\u2019t be assumed that individual directors have an understanding of the risks,\u201d says Ken Olisa, Chairman, Restoration Partners, a merchant bank that focuses on accelerating success in the technology sector, and a board member of the Institute of Directors. \n  </p>\n  <p>\n    \u201cI have spent all of my working life in or around the IT industry, and one of the things that I\u2019m most surprised about in boards of companies of all sizes, is that the level of ignorance around technology is so great that it\u2019s actually more like fear,\u201d he says. \u201cI was recently talking with directors from one board and one person said, \u2018When the guys from IT come in I just freeze. I have no idea what they are talking about. They talk a foreign language. How do you deal with them?\u2019\u201d\n  </p>\n  <p class=\"quote\">\n    \u201cI have spent all of my working life in or around the IT industry, and one of the things that I\u2019m most surprised about in boards of companies of all sizes, is that the level of ignorance around technology is so great that it\u2019s actually more like fear.\u201d\n  </p>\n  <p>\n    Olisa emphasizes that cyber is \u201cnot a special area that can only be understood by Martians and Internet experts. For example, when a board is considering the drivers of reputational threats, it should examine everything that feeds into that\u2014physical harm to a customer, scandalous behavior by management, and so forth. But instead of saying there\u2019s a thing called \u2018cyber,\u2019 you should ask where does it feed into all the other aspects of risk that we\u2019re already managing? The boards that are doing this well are saying that cyber is a driver of each of the risks we\u2019ve already identified, rather than a separate area.\u201d\n  </p>\n  <p>\n    The big retail breaches of recent years have led companies to realize that the cyber threat is on the catastrophic end of the risk spectrum. The key to boards pushing for action is to view cyber risks as part of the overall risk management strategy necessary for solid corporate governance.\n  </p>\n  <p>\n    \u201cCyber is a crosscutting risk\u2014it shouldn\u2019t be perceived as an area unto itself,\u201d says Olisa. \u201cIt can cause all of the other risks you can think of to happen. As big retail hacks have shown\u2014and those are fairly simple on the scale of the cyber threat\u2014you can take huge financial hits, people can lose their jobs and the company could even go out of business. The risk is enormous, and it\u2019s not compartmentalized.\u201d\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>The world is fast reaching a point where rising cyber risks will act to reduce the incentive to invest in cyber technology. </li>\n    <li>If rising cyber risk continues unabated, the resulting missed opportunities could lead to more than $100 trillion in unrealized global growth.</li>\n    <li>Despite the higher costs associated with connectivity on an annual basis, the benefits are the result of long-term investments that accumulate over time.</li>\n    <li>In the report\u2019s base case, the global benefits of being connected more than counterbalance the costs through the year 2030 by nearly $160 trillion.</li>\n    <li>Businesses and policymakers should assume the worst-case scenario and take steps to increase resilience.</li>\n    <li>Steps to creating resilience start with formulating a robust incident response plan in conjunction with a business continuity plan.</li>\n    <li>Active participation in managing cyber risks by the board of directors at any company is deemed key in creating resilience.</li>\n    <li>Cyber is a crosscutting risk\u2014it can cause all of the other risks you can think of to happen. The risk is enormous, but it\u2019s not compartmentalized.</li>\n  </ul>", "description": "A new report indicates that we\u2019re reaching the tipping point when the annual costs of cyber disruptions begin to reduce the incentive for doing business in a connected world. At stake is more than $100 trillion in global growth through 2030.", "title": "The startling economic truth about cyber risks", "image": "/static/images/articles/cyber-risk/startling-truth/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "what-will-the-future-of-cyber-risks-look-like"}, {"tag": "cyber-risk", "slug": "cyber-costs-threaten-to-exceed-benefits"}, {"tag": "cyber-risk", "slug": "innovation-in-pursuit-of-resilience-in-the-age-of-cyber-risks"}], "header": "FT - The startling economic truth about cyber risks", "tag": "cyber-risk", "content_type": "article", "slug": "startling-economic-truth-about-cyber-risks", "thumb": null}, {"body": "<span class=\"intro-line\">\n    The costs of living in a connected world are beginning to outweigh the benefits. What will be in store for the future of cyber? Find out more about the costs of cyber risks here.\n  </span>\n  <img height=\"4446\" src=\"/static/images/articles/cyber-risk/cyber-costs-threaten-to-exceed-benefits/infographic.jpg\" width=\"595\"/>", "description": "The costs of living in a connected world are beginning to outweigh the benefits. What will be in store for the future of cyber? Find out more about the costs of cyber risks here.", "title": "Cyber costs threaten to exceed benefits", "image": null, "related_items": [{"tag": "cyber-risk", "slug": "parallel-risk-universe"}, {"tag": "cyber-risk", "slug": "collective-intelligence-a-source-of-resilience"}, {"tag": "cyber-risk", "slug": "what-will-the-future-of-cyber-risks-look-like"}], "header": "FT - Cyber costs threaten to exceed benefits", "tag": "cyber-risk", "content_type": "infographic", "slug": "cyber-costs-threaten-to-exceed-benefits", "thumb": "/static/images/articles/cyber-risk/cyber-costs-threaten-to-exceed-benefits/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    The collective power of individuals to protect an organization can drive a culture shift in cyber resilience.\n  </span>\n  <p>\n    When it comes to managing the risks that come with reliance on technology, the conversation often focuses on tech-based solutions while overlooking the role that people play in creating cyber risks\u2014and, on the flip side, protecting against cyber risk. It\u2019s recognizing the collective power of individuals to protect an organization that can drive a culture shift in cyber resilience.\n  </p>\n  <p>\n    \u201cThere is a lot of focus on data security, and rightly so, but the risks around cyber go far beyond that,\u201d says the chief risk officer of a global energy company. \u201cCyber disruptions aren\u2019t caused solely by hackers. People who often mean no harm\u2014and it\u2019s not just employees, it can be contractors and even customers\u2014are part of what makes up cyber risk. But if they are committed to the success of the business and we arm them with the right knowledge and processes, we\u2019re starting to see that they can play a big part in creating a culture of cyber risk awareness by encouraging others.\u201d\n  </p>\n  <p class=\"quote\">\n    \u201cYou should never assume that things that don't fall under your normal remit are someone else's responsibility, because maybe everyone else thinks the same thing. And in those cases, it often falls to someone who isn't qualified to deal with all of the issues surrounding data privacy.\"\n  </p>\n  <p>\n    Business leaders have to up their game as well. According to the Ernst &amp; Young 2014 Global Information Security Survey, fewer than 20 percent of organizations have real-time insight on cyber risks readily available, and 53 percent indicate that cyber security tasks are generally not adequately resourced or performed by skilled people.\n  </p>\n  <p>\n    \u201cLack of executive buy-in and board oversight could cause a company to miss the necessary focus and fail to make the required investment,\u201d says Ruby Sharma, a Principal at Ernst &amp; Young LLP and with the EY Center for Board Matters. \u201cIt is the board\u2019s responsibility to challenge management so that management is appropriately allocating resources to address cyber risks that are commensurate with the risk levels. Given that technology transcends and impacts all departments and corporate structures, boards should address whether management\u2019s cyber security plan has a cross-functional team involving business leaders of all key departments.\u201d\n  </p>\n  <h2>Thinking beyond defined responsibilities</h2>\n  <p>\n    A tenet of managing all interconnected risks is that business units should work together, not in silos. Encouraging the same type of initiative on an individual level can help people see first-hand the role they can play in managing cyber risks. Zurich\u2019s J\u00e9r\u00f4me Goss\u00e9, Head of Security &amp; Privacy Global Corporate in EMEA, says there are ample opportunities for people to have aha! moments regarding cyber risks</p>\n  <p>\n    \u201cAt a recent meeting with a manufacturer that supplies major energy infrastructure entities, we were discussing and assessing their risks around data privacy, trade secrets and intellectual property,\u201d says Goss\u00e9. \u201cAt the table was the data privacy officer, whose duties include managing the confidentiality of employee data. When I asked how they managed confidential customer data\u2014some of it extremely sensitive\u2014he responded: \u2018That is not part of my responsibility.\u2019 That\u2019s a moment when someone should realize they could make a difference. If you know it\u2019s not your responsibility, then whose is it? You should never assume that things that don\u2019t fall under your normal remit are someone else\u2019s responsibility, because maybe everyone else thinks the same thing. And in those cases, it often falls to someone who isn\u2019t qualified to deal with all of the issues surrounding data privacy. On the other hand, if you follow up to see whose responsibility it is, and you discover no one is covering it, then you\u2019ve identified a cyber risk and can alert the right people.\u201d\n  </p>\n  <p class=\"quote\">\n    Right now, the emerging nature of cyber risk is that it\u2019s becoming systemic\u2014as were the risks that led to the credit crisis.\"\n  </p>\n  <p>\n    In his work, Goss\u00e9 has noted that you can\u2019t judge how well a company manages cyber risks based on its size, sector or location. But there are telltale signs of the level of engagement among employees, and thus the likelihood that they\u2019ll be proactive in managing cyber risks. \u201cThe culture within an organization becomes apparent very quickly,\u201d he says. \u201cThe first thing we look at in our underwriting process is whether or not management really gets cyber risk. Are they genuinely involved? Are they aware of incidents on short notice? Or do they just let the IT department handle it alone? If you can tell management isn\u2019t engaged, you can expect that employees won\u2019t be either\u2014and that\u2019s where most cyber risk negligence occurs.\u201d\n  </p>\n  <h2>Influencers who make a difference</h2>\n  <p>\n    An enterprise approach to managing cyber risks spreads the net of inclusion to embrace new ideas that might otherwise not be in the picture, says Tim Stapleton, Global Underwriting Manager, Professional &amp; Management Liability, Zurich, and that helps reinforce the priority throughout the company. \u201cYou need a number of functions involved in the process, and when that happens different talent starts to take notice, from the CEO all the way down to the front line employee,\u201d says Stapleton. \u201cIt is a combination of large and small taking an active role in working on behalf of corporate information security, not just the IT portion. It takes a broader approach to help reinforce the priority throughout a company.\u201d\n  </p>\n  <p>\n    A recent Ponemon Institute study indicated that board level involvement in cyber risk management helps reduce the costs of cyber breaches. The reason? Cyber security is not just an IT issue\u2014it is also a management issue. The weakest link is often people and awareness of cyber risk. Creating that awareness starts with basic data privacy and security; identifying data owners, classifying data with the appropriate security classification and then treating that data with the appropriate level of security. All employees must be aware of the different approaches cyber attackers deploy such as phishing attacks, which dupe employees to download malware, and know what do to avoid systems being compromised.\n  </p>\n  <h2>A fresh perspective</h2>\n  <p>\n    The all-for-one, one-for-all approach to cyber risk management also helps protect against another risk: placing the burden of cyber risk management on technical experts, which is \u201ca pitfall,\u201d says John Scott, Chief Risk Officer, Global Corporate, Zurich. \u201cIt\u2019s important to understand that this is about people and behaviors, not just technology.\u201d\n  </p>\n  <p>\n    \u201cIn the years after the 2008 financial crisis it was popular to say that it was due to a failure in risk management. But there were more than enough risk managers in the key financial institutions involved, and they were all doing a very careful job and looking at the specific risk position of financial products and portfolios. What they weren\u2019t looking at was the bigger picture, and realizing that an unsustainable level of credit risk was building up across the financial system. Right now, the emerging nature of cyber risk is that it\u2019s becoming systemic\u2014as were the risks that led to the credit crisis. That is being driven by a number of trends including the Internet of Everything and BYOD [bring your own device], which create more entry points that are vulnerable to attack; and cloud computing, where server farms are often co-located or connected in a way that creates systemic risk. A successful cyber attack on a key cloud provider could take down many businesses in many locations using that service. All of that together changes the nature of risk, and is as good a reason as you need to realize that the cyber risk management discussion needs to start at the board level.\u201d\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>The collective power of individuals to protect an organization can drive a culture shift in cyber resilience.</li>\n    <li>It\u2019s the board\u2019s responsibility to challenge management to understand the strategic and systemic nature of an organization\u2019s cyber risk vulnerability and properly allocate resources for cyber risk management.</li>\n    <li>Everyone in an organization should understand and assume responsibility for cyber risk management.</li>\n    <li>Cyber security is not just an IT issue\u2014it is a management issue. Having different business functions involved in cyber risk management brings to light the important role that people play in protecting against cyber risks. It\u2019s not all about technology.</li>\n  </ul>", "description": "The collective power of individuals to protect an organization can drive a culture shift in cyber resilience.", "title": "Collective intelligence: a source of resilience", "image": "/static/images/articles/cyber-risk/source-of-resilience/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "parallel-risk-universe"}, {"tag": "cyber-risk", "slug": "cyber-risks-in-the-palm-of-your-hand"}, {"tag": "cyber-risk", "slug": "global-cyber-governance"}], "header": "FT - Collective intelligence: a source of resilience", "tag": "cyber-risk", "content_type": "article", "slug": "collective-intelligence-a-source-of-resilience", "thumb": "/static/images/articles/cyber-risk/source-of-resilience/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Do you know how much it costs your business for each bit of data that is compromised in a cyber breach? Find out here.\n  </span>", "thumb": null, "description": "Do you know how much it costs your business for each bit of data that is compromised in a cyber breach? Find out here.", "title": "Managing cyber risks is a team game", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/corporate_governance.mp4", "image": "/static/images/articles/cyber-risk/managing-cyber-risks/Video-2x.jpg", "related_items": [{"tag": "cyber-risk", "slug": "whats-your-cyber-breach-price-tag"}, {"tag": "cyber-risk", "slug": "risks-of-hacks-and-their-costs-vary-greatly"}, {"tag": "cyber-risk", "slug": "innovation-in-pursuit-of-resilience-in-the-age-of-cyber-risks"}], "header": "FT - Managing cyber risks is a team game", "tag": "cyber-risk", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/corporate_governance.ogv", "slug": "managing-cyber-risks-is-a-team-game", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/corporate_governance.webm"}, {"body": "<span class=\"intro-line\">\n    The cost of a cyber breach is rising and your business is in the firing line. Here\u2019s the good news.\n  </span>\n  <p>\n    Almost anywhere you look, the news on cyber risks and data disruptions is disheartening. Report after report indicates that the number and cost of cyber incidents are rising rapidly. (The latest such report, the 2015 Cost of Data Breach Study: Global Analysis, from the Ponemon Institute, claims that malicious attacks are the root cause of 47 percent of data breaches, up from 42 percent last year, and that the associated costs to businesses have increased 23 percent since 2013.) Cyber experts from every part of the world are joined in the now common refrain: If your business hasn\u2019t already been hacked, it\u2019s just a matter of time before it is compromised.\n  </p>\n\n  <p class=\"quote\">\n    \u201cA lot of these new capabilities are made possible by Big Data analysis, which allows you to take logs from the many and varied devices in your network, collect the data all in one place and churn through it to find indicators of compromise.\"\n  </p>\n  <h2>The best defense is a good offense</h2>\n  <p>\n    As unsettling as the cyber risk news is, businesses cannot simply close their eyes and hope for the best. On that front, there is a bit of good news. \u201cBusinesses now have more options than ever to help build resilience in the face of the threat. Security solutions are being used more proactively in the hunt for bad guys, and individuals are increasingly aware of their personal and corporate responsibility to protect cyber borders,\u201d says Linda Conrad, Head of Strategic Business Risk, Global Corporate in North America, Zurich Insurance Group (Zurich). On top of that, insurers are continually expanding their cyber risk management expertise and support, and reexamining how policies can be structured to address cyber risks that are specific to various industries.\n  </p>\n  <p>\n    Having cyber security in place has been a requirement for any business for some time now, but the trend is shifting away from protective security toward detective security. \u201cTraditional\u201d protective measures\u2014firewalls, antivirus software and the like\u2014remain part of the cyber security arsenal, and they are now being used in tandem with processes that help businesses detect the presence of hackers and send them packing. These technology tools are ideally coupled with guidance on how employees can support smart cyber risk management practices to better protect the enterprise.\n  </p>\n  <p class=\"quote\">\n    \u201cBoard level involvement in cyber risk management can reduce the cost of a data breach by $5.50 per record\u2014and insurance protection can further reduce the cost by $4.40 per record.\"\n  </p>\n  <p>\n    Elite information security teams are also proactively looking for bad guys, often employing people who know which rocks to look under for hackers. This tactic is still fairly new, but where it is done well it is having a positive effect, says Kane. \u201cThat approach also ties in nicely with another innovative trend\u2014information sharing among information security departments,\u201d he says. \u201cThe financial services industry, the energy sector and even some state and local governments, for example, have formed Information Sharing and Analysis Centers. Companies in those industries get together and share their experiences so others in the group can learn from them and use that insight to look for those types of behaviors, and hunt the threats. This is still very new, but it\u2019s gaining in momentum and acceptance.\u201d\n  </p>\n  <h2>How cyber fits into the holistic risk picture</h2>\n  <p>\n    Cyber risks can involve more intangibles and can feel a bit more hypothetical than other risks, despite mounting evidence to the contrary. \u201cA cyber disruption or data breach can have a very broad impact across the enterprise,\u201d says Conrad. \u201cOrganizations should not only protect against data loss, but also consider automated systems in their assembly line, supply procurement or logistics. Sales ordering and even payroll are also frequently automated. It is wise to assess these exposures and their potential business impact, and then institute both technology and personnel controls, and put cyber insurance protection in place.\u201d\n  </p>\n  <p>\n    The Ponemon report provides proof of a basic tenet of cyber risk management long championed by Zurich, namely that board-level involvement is critical. In fact, according to the report, such involvement can reportedly reduce the cost of a data breach by $5.50 per record. Insurance protection can further reduce the cost by $4.40 per record.\n  </p>\n  <p class=\"quote\">\n    \u201cThe question we are asked more these days isn\u2019t \u2018What can I get under my cyber policy that isn\u2019t covered elsewhere?\u2019 but rather questions about how cyber insurance links together with other polices and where those gaps may be.\"\n  </p>\n  <p>\n    Cyber insurance is vastly different from what are considered more traditional lines of insurance, for example, a property policy, where a business owner can more easily visualize risks and understand their impact. But cyber insurance can play a broad role in addressing cyber risks by reducing cost and downtime to businesses. Just as cyber risks have evolved, so has the business resilience approach and insurance coverage available to proactively managing those risks.\n    \u201cIt\u2019s fair to say that many businesses are still struggling to understand the insurance aspect of cyber risk management,\u201d says Lori Bailey, Global Head of Special Lines, Zurich. \u201cThe insurance piece of it has come a long way from the early 2000s when it focused mostly on network security and technology companies. Given progressive improvements, it\u2019s worth taking the time to understand not only the insurance coverage itself, but how it applies to your organization: How does it add value, and what does it really protect you from?\u201d\n  </p>\n  <p>\n    While all companies can be vulnerable, certain industries have very specific exposures and needs when it comes to protecting cyber liability or security and privacy. For financial institutions, for example, a number of insurance products already on the market address some aspects of cyber risks without being an actual cyber risk policy. In such industries there is \u201ccustomization going on to try to fit the existing insurance products with other products that may already be purchased, or to address specific requirements unique to that industry,\u201d says Bailey.\n  </p>\n  <h2>Interconnected risk management</h2>\n  <p>\n    The alignment of cyber insurance with existing policies is a natural next step in managing interconnected cyber risks. As businesses reassess cyber insurance\u2014what policies cover and how they\u2019re constructed\u2014there is a growing awareness of where their other insurance policies may pick up or drop off when it comes to cyber incidents, network security breaches or privacy incidents.\n  </p>\n  <p class=\"quote\">\n    \u201cOne of the benefits of having a cyber insurance policy is the proactive service that comes with it. Instead of just responding to claims, we can build and play out cyber risk scenarios in real time, helping businesses do effective risk assessments.\"\n  </p>\n  <p>\n    \u201cThe question we are asked more these days isn\u2019t \u2018What can I get under my cyber policy that isn\u2019t covered elsewhere?\u2019 but rather questions about how cyber insurance links with other polices and where those gaps may be,\u201d says Bailey. \u201cFor example, when a manufacturer purchases a cyber policy, they will generally have a property and a casualty program in place, and they may also have some supply chain and logistics coverage, particularly since over 50 percent of supplier disruptions were caused by cyber issues last year. So the original question becomes scenario-driven. If the manufacturer\u2019s network is hacked into and brought down, which policy is going to respond? Is it going to be an \u201call risk\u201d supply chain policy? The cyber policy? The property policy, if there is some physical damage as a result of the breach? In some cases it may trigger multiple policies, and I think that\u2019s one of the challenges that businesses face as cyber risks add to their exposure. That\u2019s why we at Zurich address the needs related to cyber risks from a holistic perspective.\u201d\n  </p>\n  <p>\n    Creating the comfort level with cyber insurance that businesses have with other areas of insurance is where risk engineering becomes vital. \u201cOne of the benefits of having a cyber insurance policy is the proactive service that comes with it,\u201d says Bailey. \u201cInstead of just responding to claims, we can build and play out cyber risk scenarios in real time, helping businesses do effective risk assessments.\u201d\n  </p>\n  <p>\n    Zurich has long used risk engineering on the property side, for example, to minimize the damage of potential incidents before they occur. It is now employing some of those same principles to the network security and privacy space as part of the underwriting process. \u201cAt Zurich we are deploying our own experts to help businesses assess cyber risks upfront and determine where they have gaps in their program. And then we work with them to try to mitigate those gaps as much as possible prior to a claim ever happening,\u201d says Bailey.\n  </p>", "description": "The cost of a cyber breach is rising and your business is in the firing line. Here\u2019s the good news.", "title": "Innovation in pursuit of resilience in the age of cyber risks", "image": "/static/images/articles/cyber-risk/innovation-in-pursuit/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "risks-of-hacks-and-their-costs-vary-greatly"}, {"tag": "cyber-risk", "slug": "managing-cyber-risks-is-a-team-game"}, {"tag": "cyber-risk", "slug": "whats-your-cyber-breach-price-tag"}], "header": "FT - Innovation in pursuit of resilience in the age of cyber risks", "tag": "cyber-risk", "content_type": "article", "slug": "innovation-in-pursuit-of-resilience-in-the-age-of-cyber-risks", "thumb": null}, {"body": "<span class=\"intro-line\">\n    Managing cyber risks might seem complicated, but it has a lot in common with risks that may be more familiar to you.\n  </span>\n  <p>\n    On the face of it, an earthquake measuring 7.8 on the Richter scale may seem to inhabit a wholly different universe than the shadowy 0s and 1s of a cyber attack. When nature creates a risk event, you\u2019re almost instantly aware of it\u2014but weeks or even months can pass before you realize hackers are inside your company\u2019s IT system or that an employee has lost a laptop with sensitive information on it. (The latest numbers from the Ponemon Institute\u2019s 2015 Cost of Data Breach Study: 256 days, on average, to discover a security breach by a hacker; 158 days to identify human error.)\n  </p>\n  <p class=\"quote\">\n    \u201cWhen we are doing a site assessment, if the site management hasn\u2019t physically experienced a natural-hazard event, then the perception of the risk is quite low. It\u2019s likely the same for cyber risk: If everything is running in the morning, you think it\u2019s just another day of business as usual.\u201d\n  </p>\n  <p>\n    It stands to reason, however, that if all risks are interconnected to some degree, then the management, mitigation and best practices of them probably share some similarities. Identifying such commonalities can be particularly useful in relation to cyber risk management, which is a relatively new pursuit with limited history to draw upon.\n  </p>\n  <p>\n    \u201cWe\u2019re starting to see the risk management world expand by applying learning across disciplines,\u201d says John Scott, Chief Risk Officer, Global Corporate, Zurich Insurance Group (Zurich). \u201cTechnology is so prevalent today that it really overlays everything across the rest of the organization, so the risks do, too. You can\u2019t just look at cyber risk in its own little box. You can learn a lot by considering cyber risks in parallel with other areas of risk.\u201d\n  </p>\n  <h2>Lens of tangibility</h2>\n  <p>\n    In a paper discussing the taxonomy of operational cyber security risks, James Cebula and Lisa Young of the Software Engineering Institute at Carnegie Mellon University describe four classes: Actions of people; systems and technology failures; failed internal processes; and external events. Each of these is divided into additional sub-classes\u2014for example, external events that include fires or natural hazards; regulatory compliance; supplier failure; energy supply, etc. These are not necessarily the first things that come to mind when considering cyber risks.</p>\n  <p>\n    Amar Rahman, Principal Risk Engineer at Zurich, who conducts natural-hazards site assessments, has found that this gap in perception can be a key hurdle in helping protect and prepare clients.</p>\n  <p class=\"quote\">\n    \u201cThe physical nature of how the information is recorded has changed, but the risk management premises around protecting digital data and access to it are familiar.\u201d\n  </p>\n  <p>\n    \u201cWhen we are doing a site assessment, if the site management hasn\u2019t physically experienced a natural-hazard event, then the perception of the risk is quite low,\u201d Rahman says. \u201cIt\u2019s likely the same for cyber risk: If everything is running in the morning, you think it\u2019s just another day of business as usual. In both cases, it\u2019s important to think about the tangibility. On a site assessment, for example, the primary focus is usually on the risk of fire, because fire loads and triggers on the one hand, and the pertinent protection systems on the other, are tangible. With natural hazards and cyber risks, it\u2019s important to visualize the consequences. A storm could cause real damage to your ability to do business, and maybe result in the loss of customers if you can\u2019t provide them with what they need in a reasonable amount of time. If you think about cyber risks in terms of the impact on your operations and consequent loss of customers, you get a more tangible sense of how serious they are.\u201d\n  </p>\n  <h2>Underlying fundamentals</h2>\n  <p>\n    Protecting data and other sensitive information is a major aspect of cyber risk management, and in that regard there is something to be learned from other risks that might seem like ancient history. As the chief risk officer (CRO) of a global data company notes: \u201cIf you think back to the days when we were worried about protecting papers containing sensitive information, the physical nature of how the information is recorded has changed, but the risk management premises around protecting digital data and access to it are familiar.\u201d\n  </p>\n  <p>It helps then, he says, to frame cyber data risks in that context. If a document was worthy of being locked in a safe, today it should be encrypted. If a document needed to be shredded after the proper eyes had seen it, today it can be digitally wiped.</p>\n  <p class=\"quote\">\n    \u201cHow systems are put in place to identify and mitigate other risks might be the thing that can teach you the most about doing the same for cyber risks.\u201d\n  </p>\n  <p>\n    \u201cThe way in which we assess risks as an enterprise in terms of understanding what the downstream effects are\u2014that applies to cyber risk, too,\u201d says the CRO. \u201cCyber is maturing faster and quicker than other risk management disciplines did, but the correlations between many of them are very much the same.\u201d\n  </p>\n  <p>\n    Cyber risk management is aiming at a constantly moving target, and that creates serious challenges for businesses that shouldn\u2019t be oversimplified. But when considering cyber risks, you needn\u2019t reinvent the wheel entirely. The fundamental principle of risk management, says Scott, is to prioritize. Implicit in prioritization is that you understand your appetite for risk.\n  </p>\n  <p>\n    \u201cWhen you prioritize you\u2019re thinking: \u2018What level of risk am I prepared to tolerate?\u2019\u201d says Scott. \u201cYou might have a very low-impact issue\u2014the sort of little thing that goes wrong every day that doesn\u2019t disrupt the organization. It might even be moderately impactful and happening consistently. Depending on your appetite, which may be expressed as a desire for a quality approach such as Six Sigma, maybe you will want to control that low-impact/high-likelihood event, but if not, then maybe you won\u2019t. Likewise, you may or may not have an appetite for higher-impact risks. Either way, there\u2019s always context and a cost/benefit analysis to consider.\u201d\n  </p>\n  <p>\n    When you prioritize cyber risks, another common thread with other risks reveals itself: Cyber risks differ from company to company. Any company that has sensitive consumer information is an attractive target for hackers looking to access bank accounts. You\u2019d rightly assume such a business has a low risk appetite and should proactively address it, but there are examples of near-zero risk appetite. A defense contractor that works on projects that have national security implications, for example, \u201cmight take very extreme approaches to managing cyber risks,\u201d says Scott. \u201cFor example, you might create what are referred to in the IT industry as air gaps, which means you isolate computers with high-value data, so that they are only connected to each other\u2014and nothing else, including the Internet\u2014in a physically secure building. There are different approaches that you can take depending on the type of your organization, and the type of risk and threat. How systems are put in place to identify and mitigate other risks might be the thing that can teach you the most about doing the same for cyber risks.\u201d\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>If you\u2019re responsible for any aspect of cyber risk management, you should look to other areas of risk management for parallels and ideas.</li>\n    <li>Making the consequences of cyber risks seem tangible helps to underscore their seriousness.</li>\n    <li>Surprisingly, you can learn a few things about data security by looking back to the days of paper documents.</li>\n    <li>Risk prioritization and appetite are the basis for holistic cyber risk management\u2014and all risk management.</li>\n  </ul>", "description": "Managing cyber risks might seem complicated, but it has a lot in common with risks that may be more familiar to you.", "title": "Parallel risk universe", "image": "/static/images/articles/cyber-risk/parallel-risk-universe/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "cyber-risks-in-the-palm-of-your-hand"}, {"tag": "cyber-risk", "slug": "collective-intelligence-a-source-of-resilience"}, {"tag": "cyber-risk", "slug": "managing-cyber-risks-is-a-team-game"}], "header": "FT - Parallel risk universe", "tag": "cyber-risk", "content_type": "article", "slug": "parallel-risk-universe", "thumb": "/static/images/articles/cyber-risk/parallel-risk-universe/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Many employees don\u2019t appreciate that their own mobile devices used for work could be the gateway for a major security breach, according to a new survey. \u201cThe human behavioral element is equally important to creating best practices around cyber risk management,\u201d says Linda Conrad, Head of Strategic Business Risk, Global Corporate in North America, Zurich Insurance Group.\n  </span>\n  <img height=\"1676\" src=\"/static/images/articles/cyber-risk/cyber-risks-in-palm-of-hand/infographic.jpg\" width=\"595\"/>", "description": "Many employees don\u2019t appreciate that their own mobile devices used for work could be the gateway for a major security breach, according to a new survey. \u201cThe human behavioral element is equally important to creating best practices around cyber risk management,\u201d says Linda Conrad, Head of Strategic Business Risk, Global Corporate in North America, Zurich Insurance Group.", "title": "Cyber risks in the palm of your hand", "image": null, "related_items": [{"tag": "cyber-risk", "slug": "parallel-risk-universe"}, {"tag": "cyber-risk", "slug": "collective-intelligence-a-source-of-resilience"}, {"tag": "cyber-risk", "slug": "global-cyber-governance"}], "header": "FT - Cyber risks in the palm of your hand", "tag": "cyber-risk", "content_type": "infographic", "slug": "cyber-risks-in-the-palm-of-your-hand", "thumb": null}, {"body": "<span class=\"intro-line\">\n    The development of powerful, ultra-low cost computing will accelerate the development of the Internet of Everything and the risks associated with it.\n  </span>\n  <p>\n    A <a href=\"https://www.kickstarter.com/projects/1598272670/chip-the-worlds-first-9-computer\" target=\"_blank\">kickstarter</a> campaign to launch a computer costing just USD9 is another important milestone on the road to hyper-connectivity, creating risks and opportunities for insurers.\n  </p>\n  <p>\n    The C.H.I.P. is a tiny computer equipped with a 1 GHz ARM processor, 512 MB of DDR3 RAM, 4 GB of storage, and Bluetooth connectivity, all in a package smaller than a box of cigarettes. It runs on a Debian Linux operating system, is designed to work with most monitors and keyboards, and comes pre-loaded with a number of apps and a web browser.\n  </p>\n  <p>\n    The device is entering a market that already includes the Raspberry Pi, BeagleBone Black and Arduino, small computers which are increasingly being used by hobbyists and businesses to connect sensors, switches and relays across what is becoming known as the Internet of Everything. What is remarkable about the C.H.I.P., however, is its price point, roughly a quarter of its competitors, marking a major step in the mass production of these tools.\n  </p>\n  <p>\n    That has investors scrambling to jump on the bandwagon, with nearly 18,000 people contributing over USD 900,000 within just a few days of the launch of the initial kickstarter campaign, which had a target of just USD 50,000.\n  </p>\n  <p>\n    Regardless of the projects success, it also has enormous implications for the insurance industry. The dwindling cost of connectivity is likely to accelerate the rate at which new devices connect to the internet.\n  </p>\n  <h2>One with everything</h2>\n  <p>\n    This hyper-connectivity will generate enormous volumes of data, which will allow businesses and insurers to generate far more granular insights into their business requirements and the risks that they face.\n  </p>\n  <p>\n    At the same time, a rapid increase in the number of devices connected to the internet will create new vectors for cyber-attack, generating significant volumes of highly sensitive data while also potentially creating new hazards as hackers will be able to directly interact with a range of new devices, from fridges to shipping manifests and safety sensors.\n  </p>\n  <p>\n    As a <a href=\"http://knowledge.zurich.com/wp-content/uploads/2015/04/risk-nexus-april-2015-global-cyber-governance.pdf\" target=\"_blank\">recent report</a> by the ESADE Center for Global Economy and Geopolitics and Zurich Insurance Group illustrates, the global governance framework in place to manage these risks is woefully inadequate, so businesses will need to develop their own robust risk management frameworks to build resilience against attacks.\n  </p>\n  <h2>Access for everybody</h2>\n  <p>\n    Another benefit of this cheap technology is that it makes internet access more affordable for people on a low income. The C.H.I.P., for example, is being offered in a USD 35 mobile handset.\n  </p>\n  <p>\n    This kind of connectivity is a vital tool for delivering financial services and the protection of micro-insurance to a greater number people on low incomes around the world.\n  </p>", "description": "The development of powerful, ultra-low cost computing will accelerate the development of the Internet of Everything and the risks associated with it.", "title": "Cheap C.H.I.P. reduces the barrier to global connectivity", "image": "/static/images/articles/cyber-risk/cheap-chip/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "global-cyber-governance"}, {"tag": "cyber-risk", "slug": "managing-cyber-risks-is-a-team-game"}, {"tag": "cyber-risk", "slug": "risks-of-hacks-and-their-costs-vary-greatly"}], "header": "FT - Cheap C.H.I.P. reduces the barrier to global connectivity", "tag": "cyber-risk", "content_type": "article", "slug": "cheap-c-h-i-p-reduces-the-barrier-to-global-connectivity", "thumb": null}, {"body": "<span class=\"intro-line\">\n\t\tOne in four people will lose income due to disability. How can you plan for and protect against that?\n\t</span>", "thumb": null, "description": "One in four people will lose income due to disability. How can you plan for and protect against that?", "title": "The gap in our thinking", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/gap_in_our_thinking.mp4", "image": "/static/images/articles/protection-gap/gap-in-our-thinking/Video-2x.jpg", "related_items": [{"tag": "protection-gap", "slug": "how-employers-can-help-bridge-gap"}, {"tag": "protection-gap", "slug": "financing-our-futures"}, {"tag": "protection-gap", "slug": "why-dont-we-mind-the-gap"}], "header": "FT - The gap in our thinking", "tag": "protection-gap", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/gap_in_our_thinking.ogv", "slug": "the-gap-in-our-thinking", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/gap_in_our_thinking.webm"}, {"body": "<span class=\"intro-line\">\n\t Improving financial literacy drives better financial decisions\u2014crucial when facing global challenges like growing income protection gaps.\n\t</span>\n\t<p>\n\t\tThe effects of underinsurance in some areas of provision are felt from India, where only 17 per cent of people are estimated to have health insurance, despite the fact that the government has identified the cost of healthcare as a major cause of poverty<sup>1</sup>, to Australia, where only four per cent of those with dependent children are believed to have adequate levels of life insurance cover.<sup>2</sup>\n\t</p>\n\t<p>\n\t\tFeelings about the price of insurance are often cited as the main reason. However, there are behavioral factors too. No one likes thinking about the bad things that might occur in their lives, and that could prevent them making provision for such eventualities. Research shows that many people in Europe underestimate the likelihood of something going wrong, and therefore fail to do enough to protect themselves and their families financially.<sup>3</sup>\n\t</p>\n\t<h2>Degrees of financial literacy</h2>\n\t<p>\n\t\tSome countries have more of a problem with underinsurance than others, an issue that appears to be grounded in differing levels of national financial literacy and comfort with risk, rather than the ability to afford protection.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cEfforts to strengthen financial literacy will help consumers play an active role in identifying areas where they are not well protected.\u201d\n\t</p>\n\t<p>\n\t\tThe Organisation for Economic Co-operation and Development (OECD) believes that increased financial education will make consumers more likely to realistically assess risk levels and take appropriate steps. Rintaro Tamaki, Deputy Secretary-General of the OECD, opened a financial well-being symposium in September 2015 by stating: \u201cEfforts to strengthen financial literacy will help consumers play an active role in identifying areas where they are not well protected.\u201d<sup>4</sup> Its working definition of financial literacy is \u201ca combination of awareness, knowledge, skill, attitude and behavior necessary to make sound financial decisions and ultimately achieve individual financial wellbeing\u201d.\n\t</p>\n\t<h2>Protecting income</h2>\n\t<p>\n\t\tA new study from Zurich Insurance Group, in conjunction with Oxford University's Smith School of Enterprise and the Environment, identifies one of these areas as income protection. It says there is a \"serious, growing gap between supply of and demand for income protection\" around the world. It defines this \"Income Protection Gap\" as the reduction in household income as a consequence of the death or incapacitation of an adult wage earner on whom the household relies, taking all public and private sources of replacement income into account.\n\t</p>\n\t<p>\n\t\tLooking at Continental Europe, the Anglo-Saxon world, Latin America and South-East Asia including India, the report found that governments have \"shifted some protection responsibilities onto private schemes but in general their uptake has been insufficient to fill the gap owing to misperceptions of risk and the legacy of mostly generous government provisions\".\n\t</p>\n\t<h2>National differences</h2>\n\t<p>\n\t\tIn addition to this analytical report, Zurich conducted a survey of 6,000 people in Germany, Ireland, Italy, Spain, Switzerland and the UK to find out people\u2019s perceptions and awareness of income protection. The survey found that Germans are most aware of the possibility of insuring their income, with 47 per cent knowing about income protection. They also have the highest savings buffers to protect them if something goes wrong. In Spain, where only 17 per cent of people are aware of income protection possibilities, the average savings buffer will last less than half as long (3.3 years against 6.8 years).\n\t</p>\n\t<p>\n\t\tDespite this imbalance, the Zurich study showed that Germans are the least likely to believe that they are doing enough to protect themselves, should they become unable to work. Three-quarters of those surveyed believe their protection and savings are adequate, compared with just two-thirds of Germans.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cOECD research shows a wide variance between countries in both financial literacy and attitude.\u201d\n\t</p>\n\t<p>\n\t\tThe OECD\u2019s own research backs up Zurich\u2019s findings that Germans are particularly risk averse in their approach to personal finance, and shows a wide variance between countries in both financial literacy and attitude. An OECD pilot study into adult financial literacy in 14 countries indicated that Germans were the least likely to borrow to make ends meet, the most likely to save, and the most likely to pay bills on time.\n\t</p>\n\t<p>\n\t\tPeruvians were also revealed as financially cautious, with 71 per cent setting financial goals and striving to achieve them, and 91 per cent carefully considering purchases \u2013 suggesting that financial risk-aversion is not limited to nations with a high level of GDP.<sup>5</sup> Malaysians were revealed to be active savers who carefully thought about their purchases, yet only 3 per cent of those surveyed said they had chosen a financial product after shopping around and taking independent guidance.\n\t</p>\n\t<p>\n\t\tPerhaps unsurprisingly, the OECD concluded that there is a positive association between financial knowledge and good financial behavior in each country \u2013 the more we know about our finances, the more likely we are to make good financial decisions.\n\t</p>\n\t<h2>Age is a factor in financial behavior</h2>\n\t<p>\n\t\tThe OECD research also revealed that middle-aged people are more likely to exhibit good financial behavior in conjunction with good financial knowledge. The young, it concluded, did not yet know enough to make good decisions, while the old \u201cmay find it difficult to keep up with the fast pace of change in the financial market place, including the introduction of new technologies.\u201d The respondents with the highest scores for sound financial behavior, attitude and literacy are most likely to be aged between 30 and 60.\n\t</p>\n\t<p>\n\t\tHowever a recent US survey suggested that financial confidence increases with age. Seventy per cent of those aged over 65 graded themselves A or B for financial knowledge compared with 54 per cent of millennials.<sup>6</sup>\n\t</p>\n\t<h2>A long road</h2>\n\t<p>\n\t\tIn short, there is no single reason why we don\u2019t move to protect our income. A variety of factors, like cost, financial literacy, risk appetite and good financial attitude, mean that the people in some countries are more likely to prioritize protection and savings than others. Age matters too.\n\t</p>\n\t<p>\n\t\tFinancial education, as championed by the OECD, may be the best way to ensure that customers understand the financial risks they face, and balance the wide discrepancy in financial literacy and protection between countries.\n\t</p>\n\t<h2>Key takeaways</h2>\n\t<ul>\n\t\t<li>Underinsurance is a global issue, with some countries more affected than others.</li>\n\t\t<li>A new report from Zurich Insurance Group, in conjunction with Oxford University's Smith School of Enterprise and the Environment, says there is a \"serious, growing gap between supply of and demand for income protection\" around the world.</li>\n\t\t<li>Financial literacy and attitudes to risk vary by country.</li>\n\t\t<li>Better financial education can help people make better decisions.</li>\n\t\t<li>Those aged between 30 and 60 are most likely to have a more sophisticated approach to their financial behavior.</li>\n\t\t<li>The OECD is keen for financial literacy to expand in all countries and across all age groups.</li>\n\t</ul>\n\t<h2>Sources</h2>\n\t<ul class=\"source-list\">\n\t\t<li><sup>1</sup><span><a href=\"http://www.thehindu.com/news/national/only-17-have-health-insurance-cover/article6713952.ece\" target=\"_blank\">http://www.thehindu.com/news/national/only-17-have-health-insurance-cover/article6713952.ece</a></span></li>\n\t\t<li><sup>2</sup><span><a href=\"http://www.lifewise.org.au/about/underinsurance-a-problem-in-australia/\" target=\"_blank\">http://www.lifewise.org.au/about/underinsurance-a-problem-in-australia/</a></span></li>\n\t\t<li><sup>3</sup><span><a href=\"https://www.zurich.com/en/media/news-releases/2015/2015-0824-01\" target=\"_blank\">https://www.zurich.com/en/media/news-releases/2015/2015-0824-01</a></span></li>\n\t\t<li><sup>4</sup><span><a href=\"http://www.oecd.org/daf/fin/financial-education/FE-Malaysia-2015-Opening-Remarks.pdf\" target=\"_blank\">http://www.oecd.org/daf/fin/financial-education/FE-Malaysia-2015-Opening-Remarks.pdf</a></span></li>\n\t\t<li><sup>5</sup><span><a href=\"http://www.oecd-ilibrary.org/docserver/download/5k9csfs90fr4.pdf?expires=1444917361&amp;id=id&amp;accname=guest&amp;checksum=CB621CBA1FB0EBF6BF6FF6B984C907C4\" target=\"_blank\">http://www.oecd-ilibrary.org/docserver/download/5k9csfs90fr4.pdf?expires=1444917361&amp;id=id&amp;accname=guest&amp;checksum=CB621CBA1FB0EBF6BF6FF6B984C907C4</a></span></li>\n\t\t<li><sup>6</sup><span><a href=\"https://www.nerdwallet.com/blog/cities/lifestyle/financial-literacy-survey-2015/\" target=\"_blank\">https://www.nerdwallet.com/blog/cities/lifestyle/financial-literacy-survey-2015/</a></span></li>\n\t</ul>", "description": "Improving financial literacy drives better financial decisions\u2014crucial when facing global challenges like growing income protection gaps.", "title": "The financial behaviors that leave us underinsured", "image": "/static/images/articles/protection-gap/financial-behaviors-that-leave-us-underinsured/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "the-way-we-work"}, {"tag": "protection-gap", "slug": "income-protection-gaps-are-widening"}, {"tag": "protection-gap", "slug": "risk-vs-reality"}], "header": "FT - The financial behaviors that leave us underinsured", "tag": "protection-gap", "content_type": "article", "slug": "financial-behaviors-that-leave-us-underinsured", "thumb": "/static/images/articles/protection-gap/financial-behaviors-that-leave-us-underinsured/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t How effectively people save for an unexpected loss of income may relate to their expectations of the state stepping in if trouble struck.\n\t</span>\n\t<p>\n\t\tHow effectively people save for an unexpected loss of income may relate to their expectations of the state stepping in if trouble struck. A new Zurich / Smith School - University of Oxford report, Income protection gaps: challenge and opportunity, 2016 Global Survey Findings, reveals that without some form of external support, many people would face serious financial difficulties if they lost their income.\n\t</p>\n\t<p>\n\t\tSix in ten of those surveyed said their savings would last less than six months. More than a quarter of people in Australia, Brazil, Switzerland and the US said their savings could run out in less than a month.\n\t</p>\n\t<h2>Benefits and budget pressures</h2>\n\t<p>\n\t\tUnrealistic expectations of benefits from the state or employers could make difficult situations worse and in some circumstances the limitations on state support may be misunderstood.\n\t</p>\n\t<p>\n\t\tBenefits may be time limited and sometimes exclude young survivors, for example. Disability benefits are relatively low and capped in some nations, including OECD English-speaking countries.\n\t</p>\n\t<p>\n\t\tFurthermore, demographic shifts and economic uncertainty mean state social security funds are facing budgetary pressures.\n\t</p>\n\t<p>\n\t\tHalf of those surveyed expect state support for those unable to work to fall in the next five years and another 36 percent of the more than 11,000 respondents think it will stay unchanged.\n\t</p>\n\t<p>\n\t\tTwo thirds said they would prefer not to rely on their employer or government, favouring insurance coverage as a way to replace lost income.\n\t</p>\n\t<h2>The Asian example</h2>\n\t<p>\n\t\tThe survey revealed interesting regional differences and showed some wealthy countries have strikingly low take-up of private income protection.\n\t</p>\n\t<p>\n\t\tLife insurance cover in the US has declined significantly since the 1980s, while Germany (17 percent) and the UK (20 percent) have the lowest levels of cover for disability or illness in the study.\n\t</p>\n\t<p>\n\t\tBy contrast, almost two thirds of people in Hong Kong and Malaysia - where\u00a0the state requires residents to contribute to \u2018provident funds\u2019\u00a0- have additional private cover. Residents in these countries are more realistic about personal risk and also know more about income protection than people outside of Asia.\n\t</p>\n\t<p>\n\t\tSix in ten Malaysians \u2013 double the international average \u2013 said they had a\u00a0better than fair understanding of serious illness and disability insurance, which may explain why they are more likely to take out private cover than people in countries without mandatory schemes. Their attitude perhaps mirrors John F. Kennedy\u2019s thinking when he said: \u201cThe time to repair the roof is when the sun is shining.\u201d\n\t</p>\n\t<p>\n\t\tWhile needs differ across countries and between individuals, there is a common need for greater understanding of income protection gaps (IPGs).\n\t</p>\n\t<p>\n\t\tState support is under pressure but Asian nations show that, even with strong state schemes, it makes sense to investigate other options.\n\t</p>", "thumb": "/static/images/articles/protection-gap/acting-while-the-sun-shines/thumb.jpg", "description": "How effectively people save for an unexpected loss of income may relate to their expectations of the state stepping in if trouble struck.", "title": "Video: Income protection gaps: acting while the sun shines", "image": "/static/images/articles/protection-gap/acting-while-the-sun-shines/video.jpg", "related_items": [{"tag": "protection-gap", "slug": "income-protection-gaps-challenge-and-opportunity"}, {"tag": "protection-gap", "slug": "income-protection-tackling-the-knowledge-gap"}, {"tag": "protection-gap", "slug": "income-protection-gaps-executive-summary"}], "header": "FT - Video: Income protection gaps: acting while the sun shines", "tag": "protection-gap", "content_type": "video", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/acting-while-the-sun-shines.mp4", "slug": "acting-while-the-sun-shines", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/acting-while-the-sun-shines.webm"}, {"body": "<span class=\"intro-line\">\n    As income protection gaps grow, even developed countries need to act to prevent households falling into poverty after an unexpected loss of income.\n  </span>\n  <p>\n  \tEven if the illness or injury is only temporary, it can impair earnings well beyond the time needed for recovery.\n  </p>\n  <p>\n  \tEconomic hardship can set in when a disabled wage-earner and his or her family must get by on less money. This shortfall is often called the \u2018income protection gap.\u2019\n  </p>\n  <p>\n  \tZurich and the Smith School at Oxford University examine the risks associated with this gap and the factors contributing to it. In their study, \u2018Income protection gaps: a rising challenge,\u2019 they look at the challenges that arise not just for individuals, but for employers, and society as a whole.\n  </p>\n  <p>\n    Even in countries where governments provide public disability plans, illness, injury or another severe reason can put people and their loved ones in at risk of poverty. The study points out, for example, that one out of five UK households may fall into poverty if an adult wage-earner dies. Yet fewer than one in 20 in the UK\u2019s working population have insurance to protect themselves against such risk. And such trends are not only evident in the UK.\n  </p>\n  <p>\n  \tThe income protection gap is widening in both developed countries and emerging countries. In established economies, a growing number of workers are employed part-time, or as independent contractors, while in emerging countries, \u2018casual\u2019 workers make up a large portion of the job force; part-time, independent and informal workers are typically excluded from most public income protection plans.\n  </p>\n  <p>\n  \tDemographic trends also play a role: As more people work into old age, health challenges are increasing. Governments, meanwhile, are seeking ways to reduce spending, which may include curtailing access to state-funded provisions. If disabled workers tap retirement savings (assuming they have savings), this could also cause income distress later on and increase the burden on public welfare systems.\n  </p>\n  <p>\n  \tEmployers must also shoulder the burden of reduced productivity when employees with minor disabilities, lacking income protection, continue in their jobs \u2013  even though companies and workers would be better served if disabled employees first regained their health before returning to work.\n  </p>\n  <p>\n  \tAnalyzing the risks presented by these issues will make it easier to understand the issues and challenges that affect us all. Zurich encourages dialogue with governments and employees. By gaining understanding, we may be one step closer to helping individuals and their families to better protect themselves from the risks posed by the income protection gap.\n  </p>\n  <p>\n  \t<a href=\"/static/pdf/Zurich_Income_protection_gap_report_risk-nexus-income-protection-gaps-november-2015.pdf\" target=\"_blank\">Download the full report</a>\n  </p>", "description": "As income protection gaps grow, even developed countries need to act to prevent households falling into poverty after an unexpected loss of income.", "title": "Report: Income protection gaps: a rising global challenge", "image": "/static/images/reports/protection-gap/risk-vs-reality/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "income-protection-gaps-are-widening"}, {"tag": "protection-gap", "slug": "the-way-we-work"}, {"tag": "protection-gap", "slug": "financial-behaviors-that-leave-us-underinsured"}], "header": "FT - Report: Income protection gaps: a rising global challenge", "tag": "protection-gap", "content_type": "report", "slug": "risk-vs-reality", "thumb": "/static/images/reports/protection-gap/risk-vs-reality/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tBNP Paribas\u2019 Head of Pensions and Benefits, UK, Ian Mackenzie, on why he values insurance solutions that help employees protect their income when they are unable to work.\n\t</span>", "thumb": "/static/images/articles/protection-gap/employee-benefits-that-work/thumb.jpg", "description": "BNP Paribas\u2019 Head of Pensions and Benefits, UK, Ian Mackenzie, on why he values insurance solutions that help employees protect their income when they are unable to work.", "title": "Video: Employee benefits that work for BNP Paribas", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/employee_benefits_that_work.mp4", "image": "/static/images/articles/protection-gap/employee-benefits-that-work/video.jpg", "related_items": [{"tag": "protection-gap", "slug": "why-income-protection-matters"}, {"tag": "protection-gap", "slug": "what-employees-want"}, {"tag": "protection-gap", "slug": "can-governments-afford-their-social-safety-nets"}], "header": "FT - Video: Employee benefits that work for BNP Paribas", "tag": "protection-gap", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/employee_benefits_that_work.ogv", "slug": "employee-benefits-that-work", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/employee_benefits_that_work.webm"}, {"body": "<span class=\"intro-line\">\n\t\tThe Income Protection Gap is at the heart of some of the major social issues facing national policymakers, and is moving to the front and centre of employers\u2019 minds too. Here\u2019s why\n\t</span>\n\t<p>\n\t\tDecent jobs and decent incomes are at the top of the international agenda. Among the recently adopted United Nations Sustainable Development Goals for 2030 there is a call for decent work for all. Meanwhile the World Bank has recently urged countries to protect workers while promoting better and more inclusive jobs.\n\t</p>\n\t<h2>Poverty risk</h2>\n\t<p>\n\t\tThis is tough enough when half of the global workforce is estimated to be in the informal economy. And climbing far higher up the agenda as a central issue in this debate is how to provide when things go wrong. A high and growing number of people have little or no income protection in the event of disability, illness or the death of a breadwinner, <a href=\"https://www.zurich.com/en/knowledge/articles/2015/11/risk-vs-reality\" target=\"_blank\">according to a report from Zurich Insurance Group and the Oxford University Smith School of Enterprise and the Environment</a>. That means millions are at risk of sliding into poverty.\n\t</p>\n\t<p>\n\t\tZurich says these \u201cIncome Protection Gaps\u201d are a challenge that governments, employers and individuals need to address; the company will be spearheading efforts to get the issue discussed. Zurich\u2019s 8,000-plus staff in the Global Life division have started to take the message around the 22 countries in which they operate. And more research is planned to develop a better understanding of the behaviour that drives Income Protection Gaps and the implications of this for employers and policy makers.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cThe Income Protection Gap is a different lens through which to see some of the major issues of our day.\u201d\n\t</p>\n\t<h2>Interconnected risks</h2>\n\t<p>\n\t\t\u201cWhat we\u2019re seeing is that the Income Protection Gap is a different lens through which to see some of the major issues of our day,\u201d says David Swaden, Senior Research Manager in Group Public Affairs for Zurich. \u201cIt hooks into a lot of interconnected risks around aging populations.\n\t</p>\n\t<p>\n\t\t\u201cFor example, rising longevity creates fiscal pressures which mean governments have less money to look after people in their old age and through times of disability and illness. Income Protection Gaps are also connected to rising state pension ages. The fact is that as the workforce ages, disability rises, so simply asking people to work longer isn\u2019t going to be a straightforward solution.\u201d\n\t</p>\n\t<p>\n\t\tOne conversation that is gathering pace is around the future of government social security systems. Many European countries are struggling with their existing commitments. \u201cThere is a growing sense that the European social model is unsustainable and in need of reform,\u201d writes <a href=\"https://www.chathamhouse.org/about-us/directory/70596\" target=\"_blank\">Professor Iain Begg</a>, Associate Fellow, Europe Programme, at the London-based think tank Chatham House, in a paper supported by Zurich.\n\t</p>\n\t<p>\n\t\tHe adds: \u201cAs the German chancellor, Angela Merkel, is fond of claiming, the European Union accounts for roughly 7 per cent of the world\u2019s population and 25 per cent of its GDP, but over 50 per cent of its welfare spending. The implication is that Europe\u2019s welfare states are not only generous in comparison with provisions elsewhere, but will become unaffordable without major recasting.\u201d\n\t</p>\n\t<h2>Policy choices</h2>\n\t<p>\n\t\tProfessor Begg points to the idea of social investment as a preferred approach for governments in the future, rather than simply paying out to people when problems arise. Public policy would focus on improving training to make sure people have the skills they need to secure good jobs in economies transformed by technological change. And by making better use of the workforce\u2019s potential, the payback should be higher rates of economic growth.\n\t</p>\n\t<p>\n\t\tThe Finnish government has been looking seriously at the idea of paying people a basic income whether they work or not, as a way of simplifying the social security system and coping with unemployment. And although it was defeated at the polls, Switzerland recently put the topic on the map with a referendum on whether the state should provide an unconditional basic income.\n\t</p>\n\t<h2>Employer solutions</h2>\n\t<p>\n\t\tPerhaps the most immediate response to these challenges is being seen at the employer level where the focus is on preventive strategies and in particular keeping workers healthy. Hundreds of academic articles were published on the subject of employee wellbeing in 2015 alone.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cI\u2019ll ask customers what they are doing and is it on their agenda? And almost everyone says: \u201cYes\u201d.\n\t</p>\n\t<p>\n\t\tPaolo Marini, Global Head of Customer Management, Corporate Life &amp; Pensions at Zurich, says he sees a wide recognition of the importance of improving employee wellbeing from the global employers he meets: \u201cI\u2019ll ask customers what they are doing and is it on their agenda? And almost everyone says: \u201cYes\u201d. Companies are tackling the subject from several different angles but all with the common denominator of the safety and wellbeing of employees.\u201d\n\t</p>\n\t<p>\n\t\tIt\u2019s a sign of the huge variations around the world that safety and wellbeing means different things for employees in different locations. For a company operating in the world\u2019s emerging markets, employee wellbeing might mean raising awareness of road safety issues \u2013 road accidents are one of the leading causes of death in the world, particularly in rapidly urbanizing countries. While in more developed countries such as the US employers are focusing on wellness programs in the workplace, including health screening, and lifestyle suggestions for healthy living, along with rehabilitation programs and back to work policies.\n\t</p>\n\t<p>\n\t\tThe word on the Income Protection Gap is spreading. Dr Stefan Kr\u00f6pfl, Head of Strategy Global Life, for Zurich, says he\u2019s seen growing interest in the ideas from brokers, think tanks and rehabilitation providers among others, and he is optimistic more can be done. \u201cThe feedback suggests that we are addressing a topic that is to some degree uncovered and undefined,\u201d he says. \u201cWe have scoped and framed the issue and put it out for discussion in the public arena. Now it\u2019s very much up to us to make sure the traction continues and increases.\u201d\n\t</p>\n\n\t<h2>Key takeaways</h2>\n\t<ul>\n\t\t<li>The Income Protection Gap is a lens through which to see some of the major issues societies are facing.</li>\n\t\t<li>It connects with social issues such as aging populations, pension reforms and public spending, as well as workplace issues around jobs and employee wellbeing.</li>\n\t\t<li>Zurich has pledged to raise awareness, improve understanding and explore potential solutions for the IP Gap.</li>\n\t</ul>\n\n\t<h2>How can companies start to address the Income Protection Gap?</h2>\n\n\t<h2>Start a wellness program</h2>\n\t<p>\n\t\tOf course it is good to have healthy workers and having a wellness program can also translate into a lower insurance premium \u2013 covering disability risks for a healthy workforce will be cheaper.\n\t</p>\n\t<h2>Think about employee loyalty</h2>\n\t<p>\n\t\tIn some industries such as technology, employees tend to be highly mobile, so attracting and retaining talent is really important. Offering a good safety net against the income gap in the form of income protection coverage can convey a message that this is a company that cares about its employees; making talented people want to join you, and stay with you.\n\t</p>\n\t<h2>Fit your offer to your market</h2>\n\t<p>\n\t\tCompanies need to make sure their income protection offer is in line with the prevailing market practice, because regional differences are so extreme that otherwise there could be cultural or tax implications.\n\t</p>\n\n\n\t<h2>Areas for action to start bridging the Income Protection Gap</h2>\n\n\t<h2>Encourage collaboration</h2>\n\t<p>\n\t\tThe Income Protection Gap is an issue that is too big for either the public or private sector to handle in isolation. Employees, households and governments all need to play a part in a solution.\n\t</p>\n\t<h2>Raise awareness</h2>\n\t<p>\n\t\tIt is important that people understand the dynamics of the issue, how it relates to the big challenges we all face in societies today and how it will affect them personally in years to come.\n\t</p>\n\t<h2>Forge local partnerships</h2>\n\t<p>\n\t\tThis is a global issue but each country is very different so we need to form partnerships at a local level to create solutions that are right for each location.\n\t</p>", "description": "The Income Protection Gap is at the heart of some of the major social issues facing national policymakers, and is moving to the front and centre of employers\u2019 minds too. Here\u2019s why", "title": "How income protection gaps are a lens for key social issues", "image": "/static/images/articles/protection-gap/how-income-protection-gaps-are-lens/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "risk-vs-reality"}, {"tag": "protection-gap", "slug": "income-protection-gaps-are-widening"}, {"tag": "protection-gap", "slug": "financial-behaviors-that-leave-us-underinsured"}], "header": "FT - How income protection gaps are a lens for key social issues", "tag": "protection-gap", "content_type": "article", "slug": "how-income-protection-gaps-are-a-lens-for-key-social-issues", "thumb": "/static/images/articles/protection-gap/how-income-protection-gaps-are-lens/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tCompanies today offer a wide range of exciting benefits from free food to massages and sports facilities. But what should they be offering to attract and retain staff?\n\t</span>\n\t<p>\n\t\tCompanies are offering increasingly inventive perks to attract and keep employees. Tiens Group, a pharmaceutical company in China, recently treated 6,400 employees to a <a href=\"http://www.entrepreneur.com/article/246115\" target=\"_blank\">four-day trip to France</a> at an estimated cost of up to $22m. That makes the <a href=\"http://www.marketing-interactive.com/features/yahoo-unveils-path-mobile-future/\" target=\"_blank\">beach volleyball court</a> provided by search engine giant Yahoo seem positively tame by comparison.\n\t</p>\n\t<p>\n\t\tWhile such benefits sound exciting, are they really what motivates employees to take a job and \u2013 more importantly \u2013 keep it?\n\t</p>\n\t<p>\n\t\tA new <a href=\"http://www.glassdoor.com/blog/ecs-q3-2015/\" target=\"_blank\">survey</a> from job search company Glassdoor indicates that less flashy benefits pertaining to personal finance and family security are more likely to impress potential and existing staff. The survey of workers in the US revealed that, while 79 per cent of employees would prefer additional perks to a pay rise, the most-valued benefits were healthcare insurance, pensions and paid sick days.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cEmployers should be communicating clearly about non-traditional compensation.\u201d\n\t</p>\n\t<p>\n\t\tWhile 40 per cent of respondents said they would value insurance more than a pay rise, and 31 per cent would prefer a pension, just 19 per cent were more attracted to perks such as a casual dress code or a free lunch.\n\t</p>\n\t<p>\n\t\t\u201cIn order to compete in today\u2019s labor market, it\u2019s not just about salary and compensation, employers should be communicating clearly about non-traditional compensation,\u201d says Rusty Rueff,\u00a0a career and workplace expert with Glassdoor.\n\t</p>\n\t<h2>A corporate image as a caring employer</h2>\n\t<p>\n\t\tBNP Paribas, the global banking and financial services company, is another business that recognizes the value of protecting its employees. \u201cAll people used to care about when we were recruiting them was cash,\u201d says Ian Mackenzie, head of the company\u2019s pensions and benefits in the UK. \u201cNow they look for core benefits like pensions, medical schemes, life insurance, and increasingly income protection as well.\n\t</p>\n\t<p>\n\t\t\u201cIf we are going to look after people and project that image genuinely as a caring employer and a good employer, to not have that protection, that safety net for people who go off sick for the long term, would be a huge hole in our offering. So we have to offer it, we promote it as a very good benefit.\u201d\n\t</p>\n\t<h2>Key takeaways</h2>\n\t<ul>\n\t\t<li>More companies are offering a range of benefits in addition to salary.</li>\n\t\t<li>But not all \u201cflashy\u201d benefits are valued by potential recruits.</li>\n\t\t<li>More workers would prefer pension or insurance benefits than free food.</li>\n\t\t<li>Offering financial protection is an increasingly effective tool for recruiting and retaining employees.</li>\n\t\t<li>Income protection insurance forms an important part of what a \u201ccaring employer\u201d should offer.</li>\n\t</ul>", "description": "Companies today offer a wide range of exciting benefits from free food to massages and sports facilities. But what should they be offering to attract and retain staff?", "title": "What employees want", "image": "/static/images/articles/protection-gap/what-employees-want/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "why-it-pays-to-be-a-company-that-cares"}, {"tag": "protection-gap", "slug": "employee-benefits-that-work"}, {"tag": "protection-gap", "slug": "the-global-gap"}], "header": "FT - What employees want", "tag": "protection-gap", "content_type": "article", "slug": "what-employees-want", "thumb": "/static/images/articles/protection-gap/what-employees-want/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tNearly every large company is talking about caring for its employees. What does it really mean?\n\t</span>\n\t<p>\n\t\tWhile companies have long had a duty of care to their employees, often enshrined in law \u2013 to protect them from accidents at work, for example \u2013 many large companies are keen to emphasize that they are caring organizations. One global mining company talks about the productivity and engagement benefits of being a caring employer, while the leader of another international group says that taking care of employees will take care of your business.\n\t</p>\n\t<h2>The caring employer</h2>\n\t<p>\n\t\tSo what is the definition of a caring employer? Traditionally employees would look for provisions around health care, insurance and retirement. And today many large employers also have wellness or health promotion programs aimed at improving their employees\u2019 health.\n\t</p>\n\t<p>\n\t\tA US survey, for example, found 81 per cent of large employers with 200 or more workers offer employees programs to help them stop smoking, lose weight or make other lifestyle or behavioral changes. It also found that a majority of larger employers offer health screening programs including health risk assessments which ask employees about their lifestyle, stress levels or physical health and individual examinations such as biometric screening.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cEmployee welfare \u2026 is a bottom line issue.\u201d\n\t</p>\n\t<h2>Looking after employees</h2>\n\t<p>\n\t\tBusiness experts such as Cary Cooper, Professor of Organizational Psychology and Health at Lancaster University Management School, say it makes sense for employers to care about their workers\u2019 welfare. \u201cEmployee welfare isn\u2019t just a \u2018nice idea\u2019 any more,\u201d he says. \u201cIt\u2019s a bottom-line issue. There are fewer people doing more work, and longer hours, and the only way they can work productively is if employers look after their health.\u201d\n\t</p>\n\t<p>\n\t\tSome workplace initiatives look at physical health by providing on-site gyms or massage treatments, for example, but increasingly the focus is on avoiding and managing stress. Many companies include courses on how to deal with stress as part of management training. Others, like one global sports company, offer emotional and mental health clinics to all staff.\n\t</p>\n\t<p>\n\t\tBNP Paribas, the global banking and financial services company, is another business that recognizes the value of protecting its employees. \u201cAll people used to care about when we were recruiting them was cash,\u201d says Ian Mackenzie, head of the company\u2019s pensions and benefits in the UK. \u201cNow they look for core benefits like pensions, medical schemes, life insurance, and increasingly income protection as well.\n\t</p>\n\t<p>\n\t\tBut stress also comes from pressures outside the workplace, such as money worries, which in turn can lead to absenteeism and a drop in productivity.  And that is where a more holistic approach to employees\u2019 wellbeing is needed.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cThe role of the employer is definitely changing.\u201d\n\t</p>\n\t<h2>Multi-faceted approach</h2>\n\t<p>\n\t\t\u201cOffering a holistic set of benefits is one way that a company can show it cares,\u201d says David Swaden, Senior Research Manager in Group Public Affairs for Zurich Insurance Group. \u201cI think people are increasingly starting to think about the companies that they\u2019re working for \u2013 what they stand for, what their value to society is and whether they will look after them and their family. And the role of the employer is definitely changing.\u201d\n\t</p>\n\t<p>\n\t\tThe global banking and financial services company, BNP Paribas, believes that providing income protection insurance to employees is a key part of demonstrating that they are a caring employer. Ian Mackenzie, BNP Paribas\u2019 Head of Pensions and Benefits, UK, says: \u201cMost employers want to be a good employer; BNP Paribas wants to be a good employer. We genuinely care for our people. So to do that we need to make sure we look after them, not just when they are well at work, but when they are unwell as well, and income protection provides that support.\u201d\n\t</p>\n\t<h2>A caring culture</h2>\n\t<p>\n\t\tAlongside all these approaches many companies are also looking to foster a more caring culture within their businesses. The meaning of this is also open to interpretation but could cover everything from the behavior of leaders to the way feedback is given. Professor Sigal Barsade of the Wharton School and Assistant Professor Olivia O\u2019Neill of the George Mason University School of Management are concerned with the \u201cemotional culture\u201d of organizations. They focus on something they call \u201ccompanionate love\u201d, when colleagues show an interest in each other\u2019s work and non-work issues, are careful of each other\u2019s feelings and show compassion when things do not go well.\n\t</p>\n\t<p>\n\t\tIn research published in <a href=\"http://mgmt.wharton.upenn.edu/?LinkServID=1CCA2143-EBC7-4D12-A47F360C2FF68CBC\" target=\"_blank\">Administrative Science Quarterly</a>, they found that a culture of companionate love helped feelings of job satisfaction, commitment to the company and accountability for performance, across a broad range of industries including real estate, finance and public utilities.\n\t</p>\n\t<p>\n\t\tHere are some suggestions for building a more caring culture based on their work:\n\t</p>\n\t<ul>\n\t\t<li>\n\t\t\t<h4>Cultivate emotional culture</h4>\n\t\t\t<p>Employees are usually rewarded for achievements such as results and innovation, but rewarding employees for caring endeavors \u2013 such as giving time off for volunteering work \u2013 shifts that focus.</p>\n\t\t</li>\n\t\t<li>\n\t\t\t<h4>Consider the emotions that leaders express to employees every day</h4>\n\t\t\t<p>Research shows that the way a leader behaves guides the culture within a company.</p>\n\t\t</li>\n\t\t<li>\n\t\t\t<h4>Develop company policies that focus on care and compassion</h4>\n\t\t\t<p>The CEO of one international technology firm asked to be notified within 48 hours if a close member of an employee's family dies. Approaches like this have an impact on employees and make them feel cared for.</p>\n\t\t</li>\n\t</ul>\n\t<h2>Key takeaways</h2>\n\t<ul>\n\t\t<li>The role of the employer is changing and many large companies are emphasizing a more caring approach to employees.</li>\n\t\t<li>Benefits companies offer range from tangible healthcare benefits, such as gym membership, to benefits that offer peace of mind, such as income protection insurance.</li>\n\t\t<li>Companies are also thinking about how to build a caring culture within their organizations</li>\n\t</ul>", "description": "Nearly every large company is talking about caring for its employees. What does it really mean?", "title": "Why it pays to be a company that cares", "image": "/static/images/articles/protection-gap/why-it-pays-to-be-a-company-that-cares/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "what-employees-want"}, {"tag": "protection-gap", "slug": "risk-vs-reality"}, {"tag": "protection-gap", "slug": "why-income-protection-matters"}], "header": "FT - Why it pays to be a company that cares", "tag": "protection-gap", "content_type": "article", "slug": "why-it-pays-to-be-a-company-that-cares", "thumb": "/static/images/articles/protection-gap/why-it-pays-to-be-a-company-that-cares/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tPeople underestimate their personal risk and overestimate the cost of cover, finds international Zurich survey.\n\t</span>\n\t<p>\n\t\tIncome Protection Gaps (IPGs) are a growing global issue and research suggests a knowledge deficit may be exacerbating the problem. In short, people are underestimating the risk of income loss and overestimating the cost of protecting themselves against it \u2013 an unfortunate combination.\n\t</p>\n\t<p>\n\t\tThe term IPGs refers to a reduction in household income due to the death or incapacitation of an adult wage earner. Rising disability, ageing populations, declining state support and the rise of part-time and temporary workers all contribute to the scale of the challenge.\n\t</p>\n\t<p>\n\t\tIncome protection insurance provides a regular income \u2013 usually a percentage of your earnings - if you are left unable to work by serious illness or disability. But only a third of people have private insurance of this kind and the same proportion are insured against premature death.\n\t</p>\n\t<p>\n\t\tThese figures come from Income protection gaps: challenge and opportunity, 2016 Global Survey Findings, a new Zurich / Smith School - University of Oxford report based on a survey of more than 11,000 people in 11 countries. It found that many people simply do not know enough about their options to put in place adequate protections.\n\t</p>\n\t<h2>\n\t\tPutting risks and costs in perspective\n\t</h2>\n\t<p>\n\t\tSeven in ten respondents surveyed by Zurich admitted knowing little or nothing about income protection against disability or illness, with people from Germany, Spain and Switzerland knowing the least.\n\t</p>\n\t<p>\n\t\tThere were also misconceptions around likelihood. Nearly four in ten people felt their personal risk of losing income due to serious illness or disability was less than 10%, with Australians, Spanish and Swiss being especially optimistic.\n\t</p>\n\t<p>\n\t\tStatistically the risk is actually closer to one in four and 44 percent of respondents had already experienced some income loss while unable to work.\n\t</p>\n\t<p>\n\t\tIn terms of cost, nearly six in ten people said they would spend more than five percent of their salary for income protection - yet it is typically available for significantly less.\n\t</p>\n\t<p>\n\t\tEmployers will be interested to see that most people in nearly all countries would prefer employment benefits, including income protection, to higher pay. With only 13 percent having been offered this by their employer, it seems there is an opportunity for companies to step in and help address IPGs while at the same time helping themselves to attract and retain talent.\n\t</p>\n\t<h2>\n\t\tAdvice and awareness\n\t</h2>\n\t<p>\n\t\tIPGs matter not only to individuals and their families but also to businesses, policymakers and wider society.\n\t</p>\n\t<p>\n\t\tThe survey suggests education is key to tackling IPGs around the world; asked what would encourage them to buy insurance, almost half said more information.\n\t</p>\n\t<p>\n\t\tInsurance companies have a key role to play, as they were more trusted than financial advisers or consumer organizations to provide income protection advice.\n\t</p>\n\t<p>\n\t\tHelping people to become more aware of the risks associated with IPGs and the true cost of mitigating them could enable both individuals and governments to look forward to a more secure future.\n\t</p>", "thumb": "/static/images/articles/protection-gap/tackling-the-knowledge-gap/thumb.jpg", "description": "People underestimate their personal risk and overestimate the cost of cover, finds international Zurich survey.", "title": "Video: Income protection: tackling the knowledge gap", "image": "/static/images/articles/protection-gap/tackling-the-knowledge-gap/video.jpg", "related_items": [{"tag": "protection-gap", "slug": "income-protection-gaps-challenge-and-opportunity"}, {"tag": "protection-gap", "slug": "income-protection-gaps-executive-summary"}, {"tag": "protection-gap", "slug": "acting-while-the-sun-shines"}], "header": "FT - Video: Income protection: tackling the knowledge gap", "tag": "protection-gap", "content_type": "video", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/tackling-the-knowledge-gap.mp4", "slug": "income-protection-tackling-the-knowledge-gap", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/tackling-the-knowledge-gap.webm"}, {"body": "<span class=\"intro-line\">\n\t\tMental health issues are on the rise globally, and can create a vicious circle of risks involving income-related fears and productivity for businesses.\n\t</span>\n\t<p>\n\t\tAmong the causes of disabilities that prevent people from working, mental health issues are appearing more frequently on the radar. In fact, according to the World Health Organization, mental health disorders are expected to surpass physical illness as the major cause of disability globally by 2020.\n\t</p>\n\t<p>\n\t\tA recent report by Zurich Insurance Group, Income Protection Gaps: A rising global challenge, helps sharpen the context of this trend. The report (http://knowledge.zurich.com/protection-gap/risk-vs-reality) addresses the overall global rise in disabilities, in particular the stress this places on dated social welfare systems (reducing available public funds), and a household\u2019s ability to cover the gap between current and expected income (public, employer and private combined) in instances of short- and long-term work interruptions.\n\t</p>\n\t<p>\n\t\tAccording to the Zurich report, employers are exposed to the negative impacts of income protection gaps, too. Growing gaps mean employees are increasingly vulnerable. For workers employed outside their home countries, public support is often highly problematic. But perhaps the main concern for employers is how such gaps hit productivity. Without adequate protection, and with job prospects much reduced for the disabled, many workers will choose to work through minor disabilities at reduced capacity. Left unchecked, income protection gaps are likely to have a greater impact on productivity as workforces age.\n\t</p>\n\t<p>\n\t\tIncome protection gaps created by mental health issues loom especially large, according to research by the Organisation for Economic Co-operation and Development (OECD). Among the OECD\u2019s 34 member nations, mental health problems are now the biggest cause for disability benefit claims in most countries, and they account for almost half of new claims in Denmark, the Netherlands, Sweden and Switzerland.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cIn OECD nations, mental health issues are the leading cause of disability in 20 to 34 year olds.\u201d\n\t</p>\n\t<h2>Impact on costs and productivity</h2>\n\t<p>\n\t\tIn the U.S., behavioral health issues result in an estimated $94 billion in lost productivity each year, according to the U.S. Substance Abuse and Mental Health Services Administration. In addition to affecting productivity in the workplace, depression and other mental health conditions affect medical costs.\n\t</p>\n\t<p>\n\t\t\u201cWe know that sometimes a mental health component is really the underlying reason for medical treatment, but it has been masked by a more acceptable medical condition. If it is not being treated correctly, those medical expenses really aren\u2019t treating the right condition,\u201d says Terri Rhodes, CEO of the California-based Disability Management Employer Coalition.\n\t</p>\n\t<p>\n\t\tAs stress, anxiety and other mental health issues become more prevalent in the workplace, employers are taking note. \u201cWhat I\u2019m seeing and hearing today is that this issue is becoming more and more prevalent in business. And there\u2019s increasing interest on how to address workplace mental health issues,\u201d says Rhodes.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cWhat I\u2019m seeing and hearing today is that this issue is becoming more and more prevalent in business. And there\u2019s increasing interest on how to address workplace mental health issues.\u201d -Terri Rhodes, CEO, Disability Management Employer Coalition.\n\t</p>\n\t<p>\n\t\tBias is a primary factor for employees who are reluctant to seek treatment or continue to work despite having a mental health issue, says Rhodes. The stigma and misunderstanding that surround mental health issues can delay treatment and prolong the financial impact to an employee and the business\u2014and many mental conditions are treatable. According to the U.S. non-profit National Alliance on Mental Illness, after receiving treatment, between 70 and 90 percent of people with a mental health condition report a major reduction in symptoms, as well as improved quality of life.\n\t</p>\n\t<p>\n\t\tWith one in four people expected to experience a mental health issue in his or her lifetime, employers are utilizing a number of strategies to help identify and treat affected employees. Early screenings help to detect depression and other mental health issues, especially after family or medical leave events. Some employers are also educating managers and supervisors on the most common symptoms related to mental health disorders.\n\t</p>\n\t<p>\n\t\t\u201cAs a disability, mental health can become something of a vicious circle,\u201d says David Swaden, Senior Research Manager, Group Public Affairs, Zurich Insurance Group. According to the Zurich report, the fear or actuality of becoming unemployed can exacerbate a mental health issue, as job insecurity imposes further psychological burdens. If the issue does eventually necessitate short- or long-term disability, the gap between a person\u2019s accustomed income and what they actually need could force drastic quality of life changes upon them.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cAs a disability, mental health can become something of a vicious circle. With innovative health benefits strategies, employers can help halt that circle.\u201d -David Swaden, Senior Research Manager, Group Public Affairs, Zurich Insurance Group\n\t</p>\n\t<p>\n\t\t\u201cWith innovative health benefits strategies, such as encouraging well-being, early intervention or rehabilitation, employers can help halt the circle,\u201d says Swaden. In doing so, they can also address a major cause of lost productivity.\n\t</p>\n\t<h2>Key takeaways</h2>\n\t<ul>\n\t\t<li>Mental health disorders are projected to surpass physical illness as the major cause of disability globally by 2020, and they are already the biggest cause for disability benefit claims in most OECD member nations.</li>\n\t\t<li>Because of the stigma surrounding mental health issues and concerns about the financial impact on their families, many workers will choose to delay treatment and work through disabilities at reduced capacity. This has a major negative impact on productivity.</li>\n\t\t<li>Employers can address this by utilizing a number of strategies to help identify and treat affected employees, including early screenings to detect depression and educating supervisors to recognize the most common symptoms related to mental health disorders.</li>\n\t</ul>", "description": "Mental health issues are on the rise globally, and can create a vicious circle of risks involving income-related fears and productivity for businesses.", "title": "The Mind at Work", "image": "/static/images/articles/protection-gap/the-mind-at-work/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "the-global-gap"}, {"tag": "protection-gap", "slug": "why-it-pays-to-be-a-company-that-cares"}, {"tag": "protection-gap", "slug": "employee-benefits-that-work"}], "header": "FT - The Mind at Work", "tag": "protection-gap", "content_type": "article", "slug": "the-mind-at-work", "thumb": "/static/images/articles/protection-gap/the-mind-at-work/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t As life expectancy climbs ever higher, people will need to make sure their income covers longer life, whatever may happen, and rethink the way in which they work\n\t</span>\n\t<p>\n\t\tIn Japan in 1900 life expectancy was 38<sup>1</sup>; today it is 84<sup>2</sup>. Similar leaps have been made around the world as societies have industrialized and modernized. Global life expectancy has more than doubled since 1900 and the World Health Organization now puts it at 71<sup>3</sup>. Many people born today have a good chance of living to 100.\n\t</p>\n\t<p>\n\t\tWhat this means is that traditional life models are out of date \u2013 covering everything from career planning to savings to attitudes to health \u2013 as people face the prospect of working into their late 70s and early 80s.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cPeople\u2019s lives are going to change very radically and this three-stage life of education, then work, then retirement, can\u2019t be sustained.\u201d\n\t</p>\n\t<h2>Outdated practices</h2>\n\t<p>\n\t\t\u201cThe way we currently run our lives and work is based on what came out of the Industrial Revolution and it\u2019s just not working,\u201d says Lynda Gratton, a professor of management practice at London Business School who specializes in identifying societal trends and how they influence the world of work. \u201cPeople\u2019s lives are going to change very radically and this three-stage life of education, then work, then retirement, can\u2019t be sustained.\n\t</p>\n\t<p>\n\t\t\u201cAs lives restructure people will have to take time to re-energize and recreate their skills and that\u2019s a real problem in terms of income. We talk about tangible assets like finance and intangible assets like productivity and vitality. And nobody can work until the age of 75 without depleting their intangible assets.\u201d\n\t</p>\n\t<p>\n\t\tIndividuals and families are experimenting with what all this means, says Gratton, whether that is taking time out from their careers to re-skill and re-energize, or housing multiple generations under one roof to help with finances and responsibilities for care.\n\t</p>\n\t<p>\n\t\tCorporations and governments have been slower to respond to these societal shifts, she believes. \u201cA lot of people want to work longer but corporate policy can be very ageist and companies haven\u2019t quite worked it out yet.\u201d Gratton has a ready source of research and insights in her Future of Work consortium, which has worked with some 85 companies over the past five years. \u201cHighly-skilled people in places like law firms, pharmaceutical companies and engineering companies are often encouraged to leave between the age of 55 and 60, but people who are going to live to 100 can\u2019t afford to do that.\u201d\n\t</p>\n\t<p>\n\t\tFunding longer lives will require more saving and better planning, but there will also be times when things do not go as expected. A gap in earnings through illness or disability could have serious knock on effects and people might be forced to dip into their savings or pension pot, threatening their income in their final years.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cPerhaps the main consequence of the IP Gap for employers will be a hit to productivity.\u201d\n\t</p>\n\t<h2>Productivity hits</h2>\n\t<p>\n\t\tA new report from Zurich Insurance Group, in conjunction with Oxford University\u2019s Smith School of Enterprise and the Environment<sup>4</sup>, suggests employers need to adapt to changing times and be aware of these growing issues. It warns about the negative effects for employers of the Income Protection Gap (IP Gap) \u2013 the reduction in household income as a consequence of the death or incapacitation of an adult wage earner on whom that household relies, when all public and private sources of replacement income have been taken into account.\n\t</p>\n\t<p>\n\t\t\u201cPerhaps the main consequence of the IP Gap for employers will be a hit to productivity,\u201d says the report. \u201cWithout adequate protection, and with job prospects much reduced for the disabled, many workers will choose to work through minor disabilities at reduced capacity. This \u201cpresenteeism\u201d will cost US businesses more than $150bn per year. Left unchecked, IP Gaps are likely to result in rising productivity hits as workforces age.\u201d\n\t</p>\n\t<h2>Thinking about wellbeing</h2>\n\t<p>\n\t\tGratton reports encouraging signs that employers are putting more emphasis on vitality and wellbeing at work. Some banks, for example, have been experimenting with stress monitoring \u2013 giving people wristbands that monitor their blood pressure and analyzing the work they find most stressful.\n\t</p>\n\t<p>\n\t\tBut although the global workforce is aging there are only a handful of examples of companies that are noticeably embracing older workers. The car manufacturer BMW is piloting production line changes to help its aging workforce \u2013 45 per cent of whom will be aged over 50 by 2020. It is testing ergonomic back supports, better lighting and mobile tool trolleys to bring tools within easier reach. British retailers like B&amp;Q and John Lewis, meanwhile, have been praised for employing older people on their shop floors.\n\t</p>\n\t<p>\n\t\tAn additional problem for global companies is the cadre of international employees who, employed outside their home countries, lack a government entity to support them when things go wrong. The pressure is on the global employer to help with any resulting income protection issues.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cPeople just don\u2019t think about: \u2018What will I do when I\u2019m 80?\u2019\u201d\n\t</p>\n\t<h2>Finding solutions</h2>\n\t<p>\n\t\t\u201cWe think the Income Protection Gap is a global challenge and it\u2019s too large for either the public or the private sector to tackle alone; a collaborative approach is needed and individuals should also take some responsibility,\u201d says David Swaden, Senior Research Manager in Group Public Affairs for Zurich Insurance Group. \u201cWe want to improve the general understanding of the challenge, understand what drives it, and come up with some possible solutions as well.\u201d\n\t</p>\n\t<p>\n\t\tMeanwhile Professor Gratton is aware of the financial pressures people are facing: \u201cPeople just don\u2019t think about: \u2018What will I do when I\u2019m 80?\u2019 With government finances under pressure we think the state will increasingly focus on the poor, leaving wealthier people to pay for themselves, so anything that encourages people to plan and save has to be good.\u201d\n\t</p>\n\t<h2>Key takeaways</h2>\n\t<ul>\n\t\t<li>As life expectancy increases, the traditional three-stage life of education, then work, then retirement, is out of date, according to Professor Lynda Gratton.</li>\n\t\t<li>Individuals and families are leading the way in experimenting with what this means.</li>\n\t\t<li>A new report from Zurich and Oxford University\u2019s Smith School of Enterprise and the Environment, suggests employers need to adapt to changing times and be aware of the growing issues.</li>\n\t\t<li>Some employers are putting more emphasis on vitality and wellbeing at work.</li>\n\t\t<li>Zurich believes the Income Protection Gap is a global challenge and is too large for either the public or the private sector to tackle alone; a collaborative approach is needed and individuals should also take some responsibility.</li>\n\n\t</ul>\n\t<h2>Sources</h2>\n\t<ul class=\"source-list\">\n\t\t<li><sup>1</sup><span><a href=\"http://ourworldindata.org/data/population-growth-vital-statistics/life-expectancy/\" target=\"_blank\">http://ourworldindata.org/data/population-growth-vital-statistics/life-expectancy/</a></span></li>\n\t\t<li><sup>2</sup><span><a href=\"http://www.who.int/gho/publications/world_health_statistics/2015/en/\" target=\"_blank\">http://www.who.int/gho/publications/world_health_statistics/2015/en/</a></span></li>\n\t\t<li><sup>3</sup><span><a href=\"http://www.who.int/gho/publications/world_health_statistics/2015/en/\" target=\"_blank\">http://www.who.int/gho/publications/world_health_statistics/2015/en/</a></span></li>\n\t\t<li><sup>4</sup><span><a href=\"http://knowledge.zurich.com/protection-gap/#filtered\" target=\"_blank\">http://knowledge.zurich.com/protection-gap/#filtered</a></span></li>\n\t</ul>", "description": "As life expectancy climbs ever higher, people will need to make sure their income covers longer life, whatever may happen, and rethink the way in which they work", "title": "The way we work", "image": "/static/images/articles/protection-gap/the-way-we-work/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "financial-behaviors-that-leave-us-underinsured"}, {"tag": "protection-gap", "slug": "risk-vs-reality"}, {"tag": "protection-gap", "slug": "income-protection-gaps-are-widening"}], "header": "FT - The way we work", "tag": "protection-gap", "content_type": "article", "slug": "the-way-we-work", "thumb": "/static/images/articles/protection-gap/the-way-we-work/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tWith the risk of employment incapacity higher than most people imagine, it\u2019s smart to secure your family\u2019s financial future.\n\t</span>\n\t<p>Zurich Insurance Group and the Smith School of Enterprise and Environment at Oxford University (SSEE) have come together to study this issue. The evidence suggests that the protection provided for household income against premature death or disability is too often inadequate. We define Income Protection Gaps (IP Gaps) income protection gaps as the reduction in household income as a consequence of the death or incapacitation of an adult wage earner on whom that household relies, taking all public and private sources of replacement income into account.</p>\n\t<p>IP Gaps can have devastating consequences for households and far-reaching social and economic impacts for governments and employers. These are of concern at the global scale, but occur at a local level, and have different consequences depending on the nature of partnerships between governments, employers and individuals. While IP Gaps are a significant challenge in themselves, they are also closely linked to other pressing issues of our time, such as how to deal with an aging population, the global retirement savings gap, and the continuing challenges posed by the global financial crisis. For these reasons, as a global insurer and academic authority respectively, Zurich and SSEE have committed to a long-term project on the issue and have published a report entitled, Income protection gaps: a rising global challenge.</p>\n\t<p class=\"quote\">\n\t\t\u201cWe aim to stimulate the development of new ways of thinking about IP Gaps and new insights about how solutions to income protection gaps will influence individual decision-making, public policy initiatives, and organizational risk management.\u201d\n\t</p>\n\t<p>Along with the report, this video seeks to raise awareness and develop an understanding of the global challenge IP Gaps pose. In time, we aim to stimulate the development of new ways of thinking about IPGs and new insights about how solutions to income protection gaps will influence individual decision-making, public policy initiatives, and organizational risk management. We cannot succeed alone; collaboration and dialogue will be needed across a broad range of stakeholders.</p>\n\t<p>This video is designed to help stimulate much-needed discussions and collaboration. We invite you to join us in considering this important global challenge.</p>", "thumb": "/static/images/articles/protection-gap/income-protection-gaps-are-widening/thumb.jpg", "description": "With the risk of employment incapacity higher than most people imagine, it\u2019s smart to secure your family\u2019s financial future.", "title": "Video: Income protection gaps are widening", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/GI_CEO_KT.mp4", "image": "/static/images/articles/protection-gap/income-protection-gaps-are-widening/video.jpg", "related_items": [{"tag": "protection-gap", "slug": "risk-vs-reality"}, {"tag": "protection-gap", "slug": "financial-behaviors-that-leave-us-underinsured"}, {"tag": "protection-gap", "slug": "the-way-we-work"}], "header": "FT - Video: Income protection gaps are widening", "tag": "protection-gap", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/GI_CEO_KT.ogv", "slug": "income-protection-gaps-are-widening", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/GI_CEO_KT.webm"}, {"body": "<span class=\"intro-line\">\n    Social safety nets are being steadily eroded, leaving families and individuals exposed to falling living standards or even poverty in the event of retirement, ill health or the loss of the family's main breadwinner. The race is on to bridge this widening protection gap, but the solution will need to involve stakeholders from the public and private sectors.\n  </span>\n\n  <h2>How aware are Europeans of the risk of becoming unable to work?</h2>\n  <p>Kristof Terryn, CEO Global Life, on the income protection gap, the difference between income in case of disability and earned income. Are people aware that up to 25% may face the inability to work at some point in their career?</p>\n\n  <p>A number of demographic, social and economic trends are pushing up the cost of social protections like public health services, pensions, out-of-work benefits and welfare programs at a time when the ability of governments to pay for such services is diminishing.</p>\n  <p>Public social expenditure among member-states of the Organisation for Economic Co-operation and Development, for example, has risen from 15.4 percent of GDP in 1980 to 21.6 percent at the end of 2014.<sup>1</sup></p>\n  <h2>Population pressure</h2>\n  <p>This trend reflects demographic developments such as population aging, rapid population growth and falling birth rates, which are driving demand for social protection even as the total number of people paying for it is in decline in almost every country in the world.</p>\n  <p>In the 2015 update of its report on World Population Prospects, the United Nations projects that the number of workers per retirees (the potential support ratio, or PSR), calculated by dividing the number of 20 to 64-year olds by the number of people over the age of 65, will fall dramatically. The report states that, \"By 2050, seven Asian countries, 24 European countries, and four countries of Latin America and the Caribbean are expected to have PSRs below 2, underscoring the fiscal and political pressures that the health care systems as well as the old-age and social protection systems of many countries are likely to face in the not-too-distant future.\"<sup>2</sup></p>\n  <h2>Squeezed income</h2>\n  <p>At the same time, slower economic growth is making it harder for members of the public in many developed countries to protect themselves.</p>\n  <p>The International Labour Organization reports that real wages have been largely flat in developed economies over the past decade, and have fallen in some countries, notably the UK.<sup>3</sup></p>\n  <p>As a result, private provisions against lost income and pensions are stagnant or falling in many countries at a time when governments are also cutting back on such protections, creating a widening gap.</p>\n  <p>In a recent report,<sup>4</sup> the Geneva Association notes that despite a strong rise in global GDP, insurance penetration has fallen significantly over the past decade, with notable declines in the U.S. and UK, leading to widening underinsurance. In the U.S., for example, the number of households holding individual life insurance has fallen from 62 percent to 44 percent over the past decade, creating a notional life protection gap of USD 20 trillion, equivalent to 135 percent of the country's GDP.</p>\n  <h2>Vicious circle</h2>\n  <p>The reduction in private provisions for personal protection needs is creating greater reliance on government social spending at a time when many developed states are trying to cut back on future welfare commitments. In Europe, for example, figures from Eurostat show that one-in-four people in the 28 EU member states are at risk of poverty or social exclusion.<sup>5</sup> As a result, these systems are becoming increasingly unsustainable.</p>\n  <p>In the coming months, Zurich will be taking a closer look at some of the issues surrounding the protection gaps, starting with a multi-country survey of public attitudes towards income protection. Our aim is to identify potential solutions and begin a discussion around an issue which threatens the long-term sustainability of public social systems.</p>\n  <h2>Sources</h2>\n  <ul class=\"source-list\">\n    <li><sup>1</sup><span><a href=\"https://stats.oecd.org/Index.aspx?DataSetCode=SOCX_AGG\" target=\"_blank\">OECD</a></span></li>\n    <li><sup>2</sup><span><a href=\"http://esa.un.org/unpd/wpp/Publications/Files/Key_Findings_WPP_2015.pdf\" target=\"_blank\">United Nations Department of Economic and Social Affairs/Population Division 7 World Population Prospects: The 2015 Revision, Key Findings and Advance Tables</a></span></li>\n    <li><sup>3</sup><span><a href=\"http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_324678.pdf\" target=\"_blank\">ILO, Global Wage Report 2014/15</a></span></li>\n    <li><sup>4</sup><span><a href=\"https://www.genevaassociation.org/media/909569/ga2014-the_global_insurance_protection_gap.pdf\" target=\"_blank\">Geneva Association, The Global Insurance Protection Gap</a></span></li>\n    <li><sup>5</sup><span><a href=\"http://ec.europa.eu/eurostat/web/income-and-living-conditions/data/database#\" target=\"_blank\">Eurostat</a></span></li>\n  </ul>", "thumb": "/static/images/articles/protection-gap/finding-solutions-to-income-protection/thumb.jpg", "description": "Social safety nets are being steadily eroded, leaving families and individuals exposed to falling living standards or even poverty in the event of retirement, ill health or the loss of the family's main breadwinner. The race is on to bridge this widening protection gap, but the solution will need to involve stakeholders from the public and private sectors.", "title": "Finding solutions to income protection", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/income_protection_gap.mp4", "image": "/static/images/articles/protection-gap/finding-solutions-to-income-protection/video.jpg", "related_items": [{"tag": "protection-gap", "slug": "fit-for-work"}, {"tag": "protection-gap", "slug": "healthy-approaches-to-sickness-at-work"}, {"tag": "protection-gap", "slug": "can-governments-afford-their-social-safety-nets"}], "header": "FT - Finding solutions to income protection", "tag": "protection-gap", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/income_protection_gap.ogv", "slug": "finding-solutions-to-income-protection", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/income_protection_gap.webm"}, {"body": "<span class=\"intro-line\">\n   As government finances come under pressure, who should pick up the tab for lost income due to illness or disability, pensions and other social needs?\n  </span>\n  <p>\n    Social safety nets \u2013 the government-funded fallbacks that support the sick, disabled and aging members of the world's population \u2013 are becoming a funding challenge for governments around the world. As populations age and require expensive medical treatment as well as care in retirement, administrations worldwide are wrestling with the problem of how to finance spiraling costs.\n  </p>\n  <p>\n    Pensions were the first area to be put in the spotlight. Many governments have been looking to raise the pension age; most famously in Greece which has sought to reduce a pensions bill of 17.5 per cent of GDP in 2012 - the most of any European country - and has raised the age of pension eligibility to 67<sup>1</sup>.\n  </p>\n  <p class=\"quote\">\n    \u201cThere are lots of reasons why this problem is growing. These risks are all connected.\u201d\n  </p>\n  <h2>Knock-on effects</h2>\n  <p>\n    But the risks to retirement income actually start much earlier \u2013 in working life. The Income Protection Gap refers to the knock-on effects of lost income when people become unable to work because of a serious illness or disability, or suffer the death of a breadwinner.\n  </p>\n  <p>\n   \u201cIf individuals have an income interruption which leaves a gap between what their income covers and what they actually need then they are going to need to dip into their savings, reduce their pension contributions, rely on the state for benefit, or a combination of all three,\u201d explains David Swaden, Senior Research Manager in Group Public Affairs for Zurich Insurance Group. \u201cThat\u2019s going to have an impact on their quality of life at the time of the event and also, because people are living longer, it is going to have an impact as they get older and as they age.\u201d\n  </p>\n  <p>\n    It is an issue that is getting increasing attention from governments that are finding their current welfare systems unsustainable. For example, such an income interruption for an individual could mean increased public health expenditure, extra benefits payments, reduced payments into the state pension pot and more funding into older age. \u201cThere are lots of reasons why this problem is growing,\u201d adds Swaden. \u201cThese risks are all connected.\u201d\n  </p>\n  <h2>Global variations</h2>\n  <p>\n    Government payouts for those who cannot work through disability vary country by country. A recent report on social spending by the Organisation for Economic Co-operation and Development (OECD)<sup>2</sup> concluded that the average amount of GDP spent on cash income support to the working age population was 4.4 per cent. The largest percentage of this \u2013 1.8 per cent \u2013 was spent on disability and sickness benefits, with the rest spent on family cash benefits, such as the UK\u2019s Child Benefit, unemployment benefits and other social policy cash supports.\n  </p>\n  <p class=\"quote\">\n    \u201cIt\u2019s increasingly important that people take personal responsibility to protect themselves and those they love in case something happens to them.\u201d\n  </p>\n  <p>\n    In OECD countries, social spending averages around 21.6 per cent of GDP, up 1.7 percentage points from 2005. It is highest - at over 30 percent of GDP - in France, Finland, Belgium and Denmark. In recent years Canada, Germany, Greece, Hungary, Iceland, Ireland, the United Kingdom and Estonia have all cut social spending by 1.5 to 3.5 percentage points of GDP.\n  </p>\n  <h2>Taking responsibility</h2>\n  <p>\n    The UK has tried to rein in its social spending. While it will spend \u00a3231 billion on social protection this tax year \u2013 more than it spends on health and more than twice as much as it spends on education<sup>3</sup> \u2013 many families will find that they are not covered if a main earner loses a job through disability or illness. Research from the UK\u2019s Centre for Economics and Social Inclusion for the Association of British Insurers found that 60 per cent of working families would see their income fall by more than one third if the main earner had to stop work due to ill health, and they have no insurance to give them a financial safety net if this happens.\n  </p>\n  <p>\n    A study from Zurich found that many families in Europe underestimate the risk of becoming unwell and unable to work, and overestimate the amount of support available to them.<sup>4</sup> The company polled 6,000 people from six countries in Western Europe and found that one in two respondents see their personal risk of becoming unable to work as less than 10 per cent, despite statistics showing that the risk for the workforce in general is up to 25 per cent.\n  </p>\n  <p>\n    Kristof Terryn, Chief Executive Officer of Global Life at Zurich, points out that only one in three Europeans knows about income protection policies. \u201cMany people see the state as a safety net if they hit problems,\u201d says Terryn, \u201cbut as they grow older and as government finances come under increasing pressure, it\u2019s increasingly important that people take personal responsibility to protect themselves and those they love in case something happens to them.\u201d\n  </p>\n  <p class=\"quote\">\n    Greater take-up of protection products, both through the employer and through private insurance, could help to fill the gap.\n  </p>\n  <h2>Costs of aging</h2>\n  <p>\n    Recent figures from the European Commission\u2019s Ageing Report<sup>5</sup> paint a bleak picture of the rising costs associated with aging in all 28 member states (plus Norway). The report concluded that total age-related public expenditures are projected to increase by 1.4 percentage points of GDP between 2013 and 2060, to reach 27 per cent in 2060.\n  </p>\n  <p>\n    It is likely that simply raising the pension age will not be enough to deal with this growing demographic problem. The World Bank pointed out recently that most countries in Europe and Central Asia fund social spending through social security payments \u2013 essentially taxes on the employed. However, as the population ages, the number of people who are employed will decline too.<sup>6</sup>\n  </p>\n  <p>\n    Faced with this human inability to think about the future, how do finance experts and governments convince people to mind the Income Protection Gap? In Australia, Lifewise, coordinated by the Financial Services Council and funded from insurers\u2019 contributions, attempts to show Australians the risks they face in everyday life. Initiatives have included a social media campaign called \u201crose-colored glasses\u201d, attempting to deal with one of the major reasons not to take out income protection insurance \u2013 the belief that bad things won\u2019t happen to us.\n  </p>\n  <h2>Who should close the Income Protection Gap?</h2>\n  <p>\n    One solution suggested by the World Bank is to fund pensions from general government revenue, rather than having a social security system. Another is to fund social security from sales taxes such as VAT. This has already happened in Japan, which announced earlier this year that it would increase VAT to fund an increase in welfare spending due to the aging population<sup>7</sup>. The Bank says this may also change the way social security nets work, meaning that pensioners receive basic income support, rather than less affordable earnings related benefits.\n  </p>\n  <p>\n    Max Wind-Cowie of the think-tank Demos suggests a hybrid approach. He argues that greater take-up of protection products, both through the employer and through private insurance, could help to fill the gap. He argues this could reduce the cost of welfare to the taxpayer and may help to reduce voter dissatisfaction with paying for welfare.<sup>8</sup>\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>Governments around the world are struggling with how to fund their social safety nets.</li>\n    <li>The Income Protection Gap is the imbalance between public and private coverage against the interruption of income through disability, or death in the case of families, and the need for these solutions.</li>\n    <li>Simply raising the pension age will not be enough to deal with the rising costs associated with aging.</li>\n    <li>The World Bank is among those looking at new ways of funding social spending.</li>\n\n  </ul>\n  <h2>Sources</h2>\n  <ul class=\"source-list\">\n    <li><sup>1</sup><span><a href=\"http://www.ibtimes.com/greek-debt-crisis-greeces-pension-system-was-once-bloated-mess-now-its-crucial-1998708\" target=\"_blank\">http://www.ibtimes.com/greek-debt-crisis-greeces-pension-system-was-once-bloated-mess-now-its-crucial-1998708</a></span></li>\n    <li><sup>2</sup><span><a href=\"http://www.oecd.org/els/soc/OECD2014-Social-Expenditure-Update-Nov2014-8pages.pdf\" target=\"_blank\">http://www.oecd.org/els/soc/OECD2014-Social-Expenditure-Update-Nov2014-8pages.pdf</a></span></li>\n    <li><sup>3</sup><span><a href=\"https://www.gov.uk/government/publications/summer-budget-2015/summer-budget-2015\" target=\"_blank\">https://www.gov.uk/government/publications/summer-budget-2015/summer-budget-2015</a></span></li>\n    <li><sup>4</sup><span>Mind the Gap, Income Protection Gap Study, Western Europe, Summer 2015, Zurich Insurance Group</span></li>\n    <li><sup>5</sup><span><a href=\"http://ec.europa.eu/economy_finance/publications/european_economy/2015/ee3_en.htm\" target=\"_blank\">http://ec.europa.eu/economy_finance/publications/european_economy/2015/ee3_en.htm</a></span></li>\n    <li><sup>6</sup><span><a href=\"http://blogs.worldbank.org/futuredevelopment/tax-reforms-ageing-societies\" target=\"_blank\">http://blogs.worldbank.org/futuredevelopment/tax-reforms-ageing-societies</a></span></li>\n    <li><sup>7</sup><span><a href=\"http://www.reuters.com/article/2015/01/13/japan-economy-welfare-idUSL3N0US1YR20150113\" target=\"_blank\">http://www.reuters.com/article/2015/01/13/japan-economy-welfare-idUSL3N0US1YR20150113</a></span></li>\n    <li><sup>8</sup><span><a href=\"http://www.demos.co.uk/files/DEMOS_Squaring_the_Circle.pdf?1358874388\" target=\"_blank\">http://www.demos.co.uk/files/DEMOS_Squaring_the_Circle.pdf?1358874388</a></span></li>\n  </ul>", "description": "As government finances come under pressure, who should pick up the tab for lost income due to illness or disability, pensions and other social needs?", "title": "Can governments afford their social safety nets?", "image": "/static/images/articles/protection-gap/can-governments-afford-social-safety-nets/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "healthy-approaches-to-sickness-at-work"}, {"tag": "protection-gap", "slug": "the-gap-in-our-thinking"}, {"tag": "protection-gap", "slug": "fit-for-work"}], "header": "FT - Can governments afford their social safety nets?", "tag": "protection-gap", "content_type": "article", "slug": "can-governments-afford-their-social-safety-nets", "thumb": null}, {"body": "<span class=\"intro-line\">\n\t\tIan Mackenzie, Head of Pensions and Benefits (UK) for global banking and financial services company BNP Paribas, talks about why he values insurance solutions that help employees protect their income when they are unable to work.\n\t</span>\n\t<p>\n\t\tSuch schemes help to alleviate the financial pressures caused by any interruption to income from illness, disability or, in the case of a family, the death of a breadwinner. As such, they are an important part of tackling the so-called Income Protection Gap \u2013 the growing gap between the resources available to help people out when their earnings are disrupted and the need for such support.\n\t</p>\n\t<p>\n\t\t\u201cThe most pleasing part of providing income protection is when someone who has been off sick for a long time, comes back to work. Statistically if they have been out for a couple of years the chances of getting them back to work are rather low, and clearly some people are unable to return. But when someone does come back, maybe after cancer or major surgery, then it\u2019s a real feel-good moment for them and for their colleagues.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cWhat I didn\u2019t expect was when she talked about how much support she\u2019d got from the bank.\u201d\n\t</p>\n\t<p>\n\t\t\u201cObviously it\u2019s up to the individual how they deal with their illness and not everyone wants to talk about it. But recently one woman who returned to work after a serious illness gave a talk at an evening event for staff. It was hugely powerful to hear her speaking about her experiences and what I didn\u2019t expect was when she talked about how much support she\u2019d got from the bank.\n\t</p>\n\t<h2>Looking after people</h2>\n\t<p>\n\t\t\u201cThat support is a major part of income protection provision. When someone is off sick long-term, we\u2019re able to tell their colleagues that this person is being looked after, the bank has these policies, we are continuing to pay them, we\u2019ll get them back to work if we can, and, if not, they are protected. So it helps the people at their desks to know their colleague is being looked after and it\u2019s a very visible benefit.\n\t</p>\n\t<p>\n\t\t\u201cWe want our employees to be well. If someone is off sick we want them back in the business. If we have that talent then we want to use it and we want them to be productive. We have a monthly chat with Zurich\u2019s claims management team about anyone who is off sick to see what can be done to support them such as therapy or other services even before they make a claim.\n\t</p>\n\t<p>\n\t\tDemographic trends also play a role: As more people work into old age, health challenges are increasing. Governments, meanwhile, are seeking ways to reduce spending, which may include curtailing access to state-funded provisions. If disabled workers tap retirement savings (assuming they have savings), this could also cause income distress later on and increase the burden on public welfare systems.\n\t</p>\n\t<p>\n\t\t\u201cUnfortunately sometimes people can\u2019t come back to work if their illness is too severe and in that situation we can protect them, give them an income through to retirement, and protect things like their life insurance and pension so they continue to get benefits.\n\t</p>\n\t<p class=\"quote\">\n\t\t\u201cWe need to make sure we look after our people not just when they\u2019re well at work but also when they are unwell.\u201d\n\t</p>\n\t<h2>Growing importance</h2>\n\t<p>\n\t\t\u201cOur industry has offered income protection for a long time. In some of our companies it\u2019s a requirement, in other parts of our business like outsourcing services, it\u2019s a competitive advantage for us to offer it as part of a package. But it is an area of growing importance. The state is cutting back on the benefits it provides for people who may be off sick, so the burden is more on employers now if they want to look after their staff.\n\t</p>\n\t<p>\n\t\t\u201cWe care for our people. To do that we need to make sure we look after them not just when they\u2019re well at work but also when they are unwell and income protection provides that support.\u201d\n\t</p>\n\t<p>\n\t\tBNP Paribas offers an income protection scheme from Zurich Insurance Group that covers 70 per cent of salary up to retirement, with inflation-linked increases.\n\t</p>", "description": "Ian Mackenzie, Head of Pensions and Benefits (UK) for global banking and financial services company BNP Paribas, talks about why he values insurance solutions that help employees protect their income when they are unable to work.", "title": "Why income protection matters", "image": "/static/images/reports/protection-gap/why-income-protection-matters/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "employee-benefits-that-work"}, {"tag": "protection-gap", "slug": "the-global-gap"}, {"tag": "protection-gap", "slug": "what-employees-want"}], "header": "FT - Why income protection matters", "tag": "protection-gap", "content_type": "article", "slug": "why-income-protection-matters", "thumb": "/static/images/reports/protection-gap/why-income-protection-matters/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Governments and employers are trying to help the longer term sick back to work.\n  </span>\n  <p>\n    Over the past few decades disability rates among working age populations have increased around the world in both richer and poorer countries.<sup>1</sup> While musculoskeletal conditions such as backache lead the list of causes of absence from work, the rising threat is depression.<sup>2</sup> The World Health Organisation says that more than 350 million people of all ages suffer from depression around the world and it is the leading cause of disability worldwide.<sup>3</sup>\n  </p>\n  <p>\n    But there are also debates about the definitions of disability and long-term sickness \u2013 particularly when it comes to being unable to work. And over recent decades definitions have moved away from purely medical ones based on the individual\u2019s symptoms, towards an assessment of the environment that people are in and how much that supports them \u2013 whether that\u2019s with a physical disability or a mental health problem.\n  </p>\n  <p>\n    Today there is pressure on employers, governments and service providers to do more to enable people with disabilities to work. Occupational health specialists as well as new service providers are increasingly looking to support employees at home, help them get back into work, and even try to prevent the conditions. New services such as health screening and telephone counseling services are leading the way. It is something governments welcome as they struggle to contain social spending but it could be harder for employers to embrace.\n  </p>\n  <p class=\"quote\">\n    \u201cIt\u2019s about how the nature of employment can and should change to enable people to be part of the labor force.\u201d\n  </p>\n  <h2>Fit for work</h2>\n  <p>\n    \u201cToday if someone has a minor impairment you need to look at what the employer or the state must do to enable them to do the job and that could include legal requirements,\u201d says Noel Whiteside, Professor of Comparative Public Policy at Warwick University. \u201cIt\u2019s about how the nature of employment can and should change to enable people to be part of the labor force, whether that\u2019s building wheelchair ramps or providing IT support to give people the possibility of working from home, for example.\u201d\n  </p>\n  <p>\n    Coping with physical disability is one thing. Mental illness can be harder. Medical practitioners often cite work pressures as the leading cause of stress-related conditions but this can come from a whole range of causes \u2013 from increased responsibility in a job to the rise in temporary and part-time work. \u201cCertainly job stress \u2013 both in terms of target setting and job insecurity \u2013 exacerbates mental pressure and may create anxiety or depression,\u201d adds Whiteside. \u201cWhile workers on short-term or part-time contracts can\u2019t get benefits such as maternity leave, sick pay and holiday pay.\u201d\n  </p>\n  <h2>Back to work</h2>\n  <p>\n    Some countries are doing better at helping people suffering from long-term sickness to get back into work than others. A report by the European Network for Workplace Health Promotion found that, with the exception of Denmark and the Netherlands, the public health sector in many countries was not especially involved in return to work and job retention issues when a chronic condition was involved. It recommends \u201ca re-orientation of public health services towards the maintenance of employment of patients in many if not all countries\u201d.\n  </p>\n  <p class=\"quote\">\n    Some companies are now using health screening for all employees as an early warning system.\n  </p>\n  <p>\n    The UK government has been making strides in this direction. A new Fit for Work scheme provides occupational health services to people who have been, or are likely to be, off work for four weeks or more. \u201cGovernment initiatives are about getting people back into work and changing the workplace slightly if necessary,\u201d says Sally Wilson, Senior Research Fellow at the UK\u2019s Institute for Employment Studies, an independent centre for research and evidence-based consultancy.\n  </p>\n  <h2>Mass screening</h2>\n  <p>\n    Some companies are now using health screening for all employees as an early warning system. There is an increasing interest in looking for conditions like coeliac disease, inflammatory bowel disease and pancreatitis, which can increase the risk of the early onset of certain types of cancer. This type of mass screen can even identify corporate divisions that may be more vulnerable to stress-related illness.</p>\n  <p>\n    New business-to business health service providers are offering innovative support such as access to clinicians and counselors on the telephone\n  </p>\n  <h2>New approaches</h2>\n  <p>\n    In Australia and New Zealand, employers are using the \u00d6rebro Musculoskeletal Pain Questionnaire (\u00d6MPQ), to help identify patients at risk of developing persistent back pain problems and related disability. Physiotherapy and cognitive behavior therapy are then used to prevent back pain becoming chronic.\n  </p>\n  <p>\n    Knee surgery can demand months off work and an increasingly popular alternative is Apos therapy. This method analyses walking pace and gait to see how the knee bears weight. The patient is fitted with a device that \u2013 with support from a physiotherapist - slowly realigns the knee and builds strength and resistance at the same time.\n  </p>\n  <p class=\"quote\">\n    The reality is that many people might not be able to return to full-time work after a long-term absence and, if they do, they might not earn as much as they did before.\n  </p>\n  <h2>Paying for it</h2>\n  <p>\n    All of these schemes are helping to get people back into work, which government policies see as the best safeguard against poverty and the means to restoring well being.  But the reality is that many people might not be able to return to full-time work after a long-term absence and, if they do, they might not earn as much as they did before. That leaves an income gap that they may not have allowed for.\n  </p>\n  <p>\n    \u201cIf you are unable to work your earnings will decline and depending on the country you live in, social security may come in with some replacement income but in all likelihood that will be lower,\u201d says Kristof Terryn, Chief Executive Officer of Global Life at Zurich. \u201cWhen we talk about this in the insurance industry we talk about the Income Protection Gap. To put that in simple terms, it\u2019s the difference between what households are covered for should their income be interrupted by disability or death and what they would actually need if this were to happen.\u201d\n  </p>\n  <p>\n    Many employers see the value of alleviating the stress of financial concerns by offering group protection schemes. \u201cLeading employers realize that they can play a role in providing employees and their families with the peace of mind that financial security often brings in the event of death, long-term illness or injury,\u201d says Hanno Mijer, Global Head of Corporate Life &amp; Pensions at Zurich. \u201cOther benefits an employer can offer through corporate insurance solutions include claims management, rehabilitation and income protection. While individual employees can also select additional coverage for their needs.\u201d\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>The leading cause of long-term absence is musculoskeletal conditions, particularly backache, but mental illness is rising.</li>\n    <li>Today there is pressure on employers, governments and service providers to do more to enable people with disabilities to work.</li>\n    <li>New services such as health screening and telephone counseling services are leading the way.</li>\n    <li>In reality many people might not be able to return to full-time work after a long-term absence and, if they do, they might not earn as much as they did before. </li>\n    <li>The Income Protection Gap is the difference between what households are covered for should their income be interrupted by disability or death and what they would actually need if this were to happen.</li>\n  </ul>\n  <h2>Sources</h2>\n  <ul class=\"source-list\">\n    <li><sup>1</sup><span>Overview, Income Protection Gap, Smith School of Enterprise and the Environment, August 2015</span></li>\n    <li><sup>2</sup><span>OECD, 2010, Sickness, Disability and Work: Breaking the Barriers</span></li>\n    <li><sup>3</sup><span><a href=\"http://www.who.int/mediacentre/factsheets/fs369/en/\" target=\"_blank\">http://www.who.int/mediacentre/factsheets/fs369/en/</a></span></li>\n  </ul>", "description": "Governments and employers are trying to help the longer term sick back to work.", "title": "Healthy approaches to sickness at work", "image": "/static/images/articles/protection-gap/healthy-approaches-to-sickness/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "can-governments-afford-their-social-safety-nets"}, {"tag": "protection-gap", "slug": "income-protection-gap"}, {"tag": "protection-gap", "slug": "fit-for-work"}], "header": "FT - Healthy approaches to sickness at work", "tag": "protection-gap", "content_type": "article", "slug": "healthy-approaches-to-sickness-at-work", "thumb": null}, {"body": "<span class=\"intro-line\">\n    Who is the main breadwinner in your home? Have you pictured what you\u2019d do without their income?\n  </span>\n  <p>\n    David Swaden remembers being at an insurance conference when someone spoke about the high number of widows in America living below the poverty line because their husbands had died without adequate insurance. As a Senior Research Manager in Group Public Affairs for Zurich Insurance Group, he is used to hearing tough stories of peoples\u2019 livelihoods, but he was shaken. \u201cIt is shocking and you could see the room react,\u201d he says, \u201cbecause it\u2019s all about loss of income for a household. Regardless of gender, if you\u2019re the primary home maker and that\u2019s the role you\u2019ve got, then it\u2019s not easy to make the shift to becoming the main breadwinner.\u201d\n  </p>\n  <h2>Lens of tangibility</h2>\n  <p>\n    Not many of us currently consider how we would handle the interruption of our income for a period of 20 or more years through disability and illness, or even the death of a partner, and the knock-on effect that has on our retirement income. For example, a recent Zurich survey of more than 6,000 people in Germany, Ireland, Italy, Spain, Switzerland and the UK, found that one in two respondents see their personal risk of becoming unable to work as less than 10 per cent. Yet in Western Europe, up to 25 per cent of the workforce could become unable to work during their lifetime.\n  </p>\n  <p class=\"quote\">\n    \u201cI\u2019d be very surprised if any government wasn\u2019t thinking about this right now.\u201d\n  </p>\n  <p>\n    This imbalance in public perception has led to what Zurich calls the Income Protection Gap: a widening chasm between the money being set aside in the event of disability and illness and what is actually needed. For a whole variety of reasons it is a growing challenge for people and countries around the world. As we live longer we face the prospect of financing ourselves and protecting our family income into our 80s and 90s, at a time when pension provisions are being cut back by employers and governments, and jobs themselves are becoming less secure.\n  </p>\n  <p>\n    Employers see workforces getting older and more prone to illness and the responsibilities of caring for elderly relatives. There\u2019s also wider recognition of the problems of mental health and stress. The financial crisis gave governments a wake up call (if they needed one) to confront their large future liabilities in areas such as pensions and rising public health spending to cover the needs of ageing populations and the more expensive cutting-edge medical treatments now available.\n  </p>\n  <p>\n    \u201cI\u2019d be very surprised if any government wasn\u2019t thinking about this right now,\u201d says Swaden. \u201cFor developed countries, current settlements are unsustainable. And growing countries need to think about how they\u2019re going to secure their economic development; it\u2019s an important part of locking in the growth they are seeing.\u201d</p>\n  <h2>Interconnected risks</h2>\n  <p>\n    There is still a low awareness of income protection, perhaps because it is such a complex issue, entwined with so many modern trends, risks and regional or cultural variations. The same recent survey by Zurich of six countries in Western Europe found that just one in three Europeans knows about income protection possibilities.\n  </p>\n  <p class=\"quote\">\n    \u201cWe have a responsibility and an important role to play in helping society mitigate the risks associated with the Income Protection Gap. Raising awareness is a vital first step.\u201d\n  </p>\n  <p>\n    There are also different interpretations of it \u2013 most insurers define income protection around disability while Zurich increasingly wants to look at the income protection of the whole household so that, in the case of families, it also covers death. Zurich hopes its new research project with Oxford University\u2019s Smith School of Enterprise and the Environment will help to highlight the challenges of the Income Protection Gap and lead discussion about it.\n  </p>\n  <p>\n    Kristof Terryn, Chief Executive Officer of Global Life at Zurich, says: \u201cWe believe that as a global insurer, we have a responsibility and an important role to play in helping society mitigate the risks associated with the Income Protection Gap.\n  </p>\n  <p>\n    \u201cRaising awareness is a vital first step. Only when people understand the risk can they take measures to protect themselves and their loved ones from the financial impacts of becoming unable to work.\u201d\n  </p>\n  <p>\n    For Noel Whiteside, Professor of Comparative Public Policy at Warwick University, who is conducting the research, it is a chance to take a global look at the challenge. She has divided the world into four groups based on the types of state support they provide and their emphasis on either collective or individual provision.\n  </p>\n  <p class=\"quote\">\n    \u201cI suspect what might happen is that a great deal of interest will be shown in the creation of public-private partnerships, some sort of state-sponsored scheme that says to employers you must insure your workers against disability.\u201d\n  </p>\n  <p>\n    One group is the English-speaking countries that have been influenced by British ideas, including the UK, US, Australia and Ireland. Another is continental Europe framed around Bismarckian welfare, including Italy, Germany, Sweden, Switzerland and Poland. Latin America is another group that has a tradition of state social welfare in countries such as Mexico, Chile, Argentina, Uruguay and Brazil. And then there are emerging Asian countries such as India, Singapore, Hong Kong and Malaysia, which differ widely but promote personal savings under national provident funds as a means to underwrite domestic security.\n  </p>\n  <h2>A worldwide Gap</h2>\n  <p>\n    \u201cThe Income Protection Gap is worse in English-speaking countries because they tend to means test benefits,\u201d says Whiteside. \u201cSo if you\u2019re wealthy, you won\u2019t get much, if anything. While in earnings-related systems like those in continental Europe, in the past the richer you were, the more you got. But the Gap varies around the world. In many developing countries, extended families offer the only resources available \u2013 which means the problem of lost income is less alleviated than spread should disability strike the wage-earner.\u201d\n  </p>\n  <p>\n    There\u2019s no doubt that the Income Protection Gap is a real problem and solutions are needed. Whiteside thinks that much of the burden will inevitably fall on the private sector: \u201cPersonally, I suspect what might happen is that a great deal of interest will be shown in the creation of public-private partnerships, some sort of state-sponsored scheme that says to employers you must insure your workers against disability. That will allow coverage to spread, making employers act, to relieve the national budget.\u201d\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>The Income Protection Gap is the imbalance between public and private coverage against the interruption of income through disability, or death in the case of families, and the need for these solutions.</li>\n    <li>As we live longer we face the prospect of financing ourselves and protecting family income as we age into our 80s and 90s.</li>\n    <li>Post-financial crisis, governments are thinking hard about their financial liabilities, particularly in terms of sustainability regarding pensions and benefits.</li>\n    <li>Employers are seeing a changing workforce as populations age, and more illnesses such as mental health problems are recognized, with corresponding increases in disability rates.</li>\n    <li>Zurich has responded to these challenges by commissioning research into the Income Protection Gap around the world; pledging to raise awareness, improve understanding and explore potential solutions.</li>\n  </ul>", "description": "Who is the main breadwinner in your home? Have you pictured what you\u2019d do without their income?", "title": "The Income Protection Gap and why it\u2019s growing", "image": "/static/images/articles/protection-gap/income-protection-gap/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "financing-our-futures"}, {"tag": "protection-gap", "slug": "how-employers-can-help-bridge-gap"}, {"tag": "protection-gap", "slug": "the-gap-in-our-thinking"}], "header": "FT - The Income Protection Gap and why it\u2019s growing", "tag": "protection-gap", "content_type": "article", "slug": "income-protection-gap", "thumb": "/static/images/articles/protection-gap/income-protection-gaps-risk-vs-reality/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Around the world, covering the loss of earned income, due to disability or death in the case of a breadwinner, is a major problem\u2026and it\u2019s growing\n  </span>\n  <img height=\"2491\" src=\"/static/images/articles/protection-gap/the-global-gap/infographic.jpg\" width=\"600\"/>", "description": "Around the world, covering the loss of earned income, due to disability or death in the case of a breadwinner, is a major problem\u2026and it\u2019s growing", "title": "The global gap", "image": null, "related_items": [{"tag": "protection-gap", "slug": "healthy-approaches-to-sickness-at-work"}, {"tag": "protection-gap", "slug": "why-income-protection-matters"}, {"tag": "protection-gap", "slug": "why-it-pays-to-be-a-company-that-cares"}], "header": "FT - The global gap", "tag": "protection-gap", "content_type": "infographic", "slug": "the-global-gap", "thumb": "/static/images/articles/protection-gap/the-global-gap/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Faced with a changing workforce, employers are increasingly differentiating themselves by helping their workers with financial protection against ill health.\n  </span>\n  <p>\n    The good news is that people are living longer. The problem is that no one seems to know what to do about it. How do we fund these longer lives, particularly as we\u2019re likely to encounter more illness and disability as we grow older and state coffers are running out of money? What is the proper age to retire when you might be living to 100? Does it really make sense to have 35 years or more of free time in your later years?\n  </p>\n  <p>\n    Individuals are looking for answers to these questions while employers around the world are meeting these issues head on as they see the composition of the workforce changing. In many developed countries, people will work longer and retire later \u2013 raising the prospect of a cohort of 80-year-old workers. In countries such as Japan and South Korea, the population is ageing as birth rates fall and the number of young workers is decreasing. In the UK, by 2037, the number of people over 75 is expected to double, according to a report by the UK Commission for Employment and Skills (UKCES)<sup>1</sup>. By 2020, companies could house four generations working alongside each other, says the report, by which time the largest age group of workers will be in their mid-50s rather than their 40s.\n  </p>\n  <p class=\"quote\">\n    \u201cWork pressures are often cited as the leading cause of stress-related conditions by medical practitioners.\u201d\n  </p>\n  <h2>In sickness and in health</h2>\n  <p>\n    And with longevity come health challenges. Older workers are more likely to suffer disabilities<sup>2</sup>, as well as acute medical conditions and back pain \u2013 some of the biggest causes of long-term sickness according to a recent survey by the Chartered Institute of Personnel and Development (CIPD)<sup>3</sup>, a professional body for human resources and people development with 140,000 members around the world.\n  </p>\n  <p>\n    Meanwhile the nature of work is becoming more stressful for staff of all ages. The same CIPD survey says two-fifths of organizations reported an increase in stress-related absence over the previous year, and a similar number reported more employees were suffering anxiety and depression. Just one-in-ten reported a decline in stress-related sick leave. Many survey respondents say they have substantially increased training for line managers to deal with long-term absence, and they\u2019re also offering more flexible ways of working so that employees can take time out to care for elderly or sick relatives, for example.\n  </p>\n  <p>\n    Figures are hard to gather internationally, as companies don\u2019t release medical data. But Robin Chater, Secretary General of the Federation of International Employers, thinks job intensity is growing in many companies. \u201cWork pressures are often cited as the leading cause of stress-related conditions by medical practitioners,\u201d he says. \u201cWhat we know from UK figures is that a high and sustained amount of absenteeism is arising due to stress and clinical depression.\u201d\n  </p>\n  <h2>Building security</h2>\n  <p>\n    It\u2019s a challenging picture for employers who just want their workers to be healthy and motivated \u2013 and it\u2019s equally challenging for individuals looking to finance and better protect their future and their families\u2019 future through their own illness or death. Companies are more likely to offer help in the form of employee assistance programs (EAPs) or medical insurance. Some offer critical illness cover, which pays a lump sum to an employee in the case of a potentially life-threatening disease. Others offer income protection, which pays regular income as a percentage of salary for a fixed period or until the claimant either returns to work or retires. Some might also offer both.\n  </p>\n  <p class=\"quote\">\n    \u201cSince the recession there\u2019s been greater emphasis on what\u2019s included in benefits packages; it\u2019s about being seen to be a good employer.\u201d\n  </p>\n  <p>\n    Chater says that many early retirement and state benefit schemes around the world provide a safety net in the event of a work-related disability, as long as the cause of the condition is covered by something such as employer liability insurance. But without adequate income protection plans those affected may well have to survive on lower incomes. Also if no one is \u201cat fault\u201d for an accident leading to disability or death there may be less compensation available than expected, or even none at all \u2013 a reality that can get lost in today\u2019s litigious societies. While people who aren\u2019t employed \u2013 such as parents looking after their children - also need coverage. All of these factors point to a growing Income Protection Gap: a widening chasm between the money being set aside in the event of disability and illness and what is actually needed.\n  </p>\n  <h2>Employers lead the way</h2>\n  <p>\n    Charles Cotton has been following trends in what major employers are offering their employees in his role as Research and Policy Advisor at the CIPD, most of whose members already offer income protection. He says he has seen a growing business case for leading employers to offer income protection as part of a suite of benefits. It could become a key advantage in the global battle for recruitment of talent.\n  </p>\n  <p>\n    \u201cSince the recession there\u2019s been greater emphasis on what\u2019s included in packages,\u201d he says. \u201cCompanies are looking at how to make benefits more appealing; it\u2019s about being seen to be a good employer.\u201d\n  </p>\n  <p>\n    Not all employers are so pro-active. In the US, for example, some employers affected by the global financial crisis have reduced employee benefits. While in Asia contracts offering income protection are rare. But David Swaden, Senior Research Manager in Group Public Affairs for Zurich Insurance Group, has been noticing similar trends to those cited by Cotton. \u201cThe role of the employer is changing,\u201d he says. \u201cI think increasingly people are starting to think: \u2018What is my company\u2019s value to society?\u2019 and \u2018Will it look after me and my family?\u2019 And by having this holistic set of benefits, that include life and disability, you start to build this story of looking after the employee and looking after their families.\u201d\n  </p>\n  <h2>Increasing take-up</h2>\n  <p>\n    Company-endorsed schemes are more likely to be welcomed by staff, says Professor Chris Rowley, a human resource management specialist at Cass Business School, City University London. He thinks people would have more faith in joining a group plan rather than researching and signing up to a policy by themselves. But even then they might need some prompting.\n  </p>\n  <p class=\"quote\">\n    \u201cLarger companies are beginning to join up various strands into a financial wellbeing strategy.\u201d\n  </p>\n  <p>\n    In Australia, for example, the government has made it mandatory for people to take out income protection insurance to protect their pension contributions in the face of illness. The next step is to protect their income as a whole. And Cotton thinks the best-case scenario is that companies, which are currently obliged to enroll staff in pension schemes, will also start to include income protection within benefits packages.\n  </p>\n  <p>\n    Meanwhile Peter Le Beau of the UK\u2019s Income Protection Task Force points out that while there is no legal obligation for an employer to offer group income protection cover, it could start to play an increasing role in employee protection. \u201cAs auto-enrolment policies gain momentum,\u201d he says, \u201cit\u2019s likely that many employers may provide the opportunity for employees to purchase risk benefits and may feel they would like to subsidize the purchase of them.\u201d\n  </p>\n  <p>\n    Hanno Mijer, Global Head of Corporate Life and Pensions at Zurich, says Zurich understands the complexities of modern-day workplaces and the challenges faced when it comes to safeguarding employees\u2019 futures. \u201cThrough our retirement savings solutions and death, disability and income protection, we enable employers to provide consistent coverage to their local, global and expat employees,\u201d he says. \u201cThese solutions are not only key to companies offering a well-rounded, attractive employee value proposition, they are also necessary to tackle the growing mid- to long-term income risk for individuals and their dependents from rapidly developing societal changes.\u201d\n  </p>\n  <h2>Strategic approach</h2>\n  <p>\n    Companies offering group income protection policies are clearly hoping that their investment will cut costs on occupational sick pay, improve staff retention and make them a more desirable employer. They recognize that money worries cause stress, which in turn can lead to absenteeism and a fall in productivity. \u201cLarger companies are beginning to join up various strands into a financial wellbeing strategy,\u201d says Cotton. \u201cInsurance companies can also offer services an employer wouldn\u2019t normally have access to, such as positive behavioral therapy which could help people back into work.\u201d\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>The global workforce is changing as people live longer, work longer and retire later.</li>\n    <li>Older workers are more likely to suffer disabilities, acute medical conditions or back pain \u2013 some of the causes of long-term sickness.</li>\n    <li>Companies report an increase in stress-related absence.</li>\n    <li>Leading employers are becoming more aware of the business case in offering income protection as part of a suite of benefits.</li>\n    <li>Company-endorsed schemes are more likely to be welcomed by staff.</li>\n    <li>By offering retirement savings solutions and death, disability and income protection, employers can benefit their employees and help tackle the risk to family incomes from rapidly developing societal changes.</li>\n  </ul>\n  <h2>Sources</h2>\n  <ul class=\"source-list\">\n    <li><sup>1</sup><span><a href=\"https://www.gov.uk/government/publications/jobs-and-skills-in-2030\" targe=\"_blank\">https://www.gov.uk/government/publications/jobs-and-skills-in-2030</a></span></li>\n    <li><sup>2</sup><span><a href=\"http://www.papworthtrust.org.uk/sites/default/files/UK%20Disability%20facts%20and%20figures%20report%202014.pdf\" targe=\"_blank\">http://www.papworthtrust.org.uk/sites/default/files/UK%20Disability%20facts%20and%20figures%20report%202014.pdf</a></span></li>\n    <li><sup>3</sup><span>CIPD Absence management survey <a href=\"http://www.cipd.co.uk/research/absence-management-survey.aspx\" targe=\"_blank\">http://www.cipd.co.uk/research/absence-management-survey.aspx</a></span></li>\n  </ul>", "description": "Faced with a changing workforce, employers are increasingly differentiating themselves by helping their workers with financial protection against ill health.", "title": "How employers can help bridge the Income Protection Gap", "image": "/static/images/articles/protection-gap/how-employers-can-help-bridge-gap/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "income-protection-gap"}, {"tag": "protection-gap", "slug": "why-dont-we-mind-the-gap"}, {"tag": "protection-gap", "slug": "the-gap-in-our-thinking"}], "header": "FT - How employers can help bridge the Income Protection Gap", "tag": "protection-gap", "content_type": "article", "slug": "how-employers-can-help-bridge-gap", "thumb": "/static/images/articles/protection-gap/how-employers-can-help-bridge-gap/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    We're living longer, working longer and facing greater job insecurity than ever, so what is it that stops us thinking about how we'd cope financially if things went wrong?\n  </span>\n  <p>\n    A 1970s study involving small children and sweets may give us valuable insights into why the take-up of income protection insurance around the world remains so stubbornly low, even as the need for such cover grows ever greater. The \u201cStanford marshmallow experiment\u201d involves giving a child one marshmallow and telling them they can choose to eat it straight away or hold on to it for an agreed length of time in order to be given more sweets later.<sup>1</sup>\n  </p>\n  <p>\n    Most children will choose immediate rewards over long-term satisfaction. And the evidence suggests that adults are not much better at long-term thinking. Neuroscience experts such as Professor Dean Buonomano of UCLA say the brain was not wired to make long-term decisions, whether they are about our finances or eating sweets<sup>2</sup>. But if we are to prosper in a world where we are living longer, working longer, and facing less stable working environments, we need to face up to the need to insure our future income in order to protect ourselves and our dependants.\n  </p>\n  <p class=\"quote\">\n    \u201cAcross 22 countries, the amount of sick pay available for 50 days worth of illness due to cancer varies from 50 full days pay in Luxembourg and Norway, to 10 days in the UK, five days in New Zealand and none at all in the US.\u201d\n  </p>\n  <h2>The diminishing role of government</h2>\n  <p>\n    While the need for income protection is growing, however, governments across the globe are struggling to fund the social safety nets that pay out for the death of a breadwinner in the family or when people become too ill to work, particularly when faced with greater life expectancy and increasingly expensive medical care. And that\u2019s creating an Income Protection Gap: a widening chasm between the money available in the event of disability and illness and what is actually needed.\n  </p>\n  <p>\n   In many countries, state sick pay is no longer enough to support average earners who have become unable to work due to health issues. Research from the UK\u2019s Centre for Economics and Social Inclusion (CESI) found that there are 10.8 million middle income households in the UK \u2013 more than 60 per cent of working families - that would be entitled to relatively little or no state support if the principal earner had to stop work, and would see their income drop substantially if they rely on state support alone as their income safety net.<sup>3</sup> In the US, the average monthly benefit paid by Social Security Disability Insurance (the state safety net) per month is US$1,256 for men and US$993 for women.<sup>4</sup>\n  </p>\n  <h2>Global variations</h2>\n  <p>\n    Rules surrounding government sickness and disability pay vary widely by country. Research from the Center for Economic &amp; Policy Research (CEPR) in the US, shows that across 22 countries, the amount of sick pay available for 50 days worth of illness due to cancer varies from 50 full days pay in Luxembourg and Norway, to 10 days in the UK, five days in New Zealand and none at all in the US.<sup>5</sup>\n  </p>\n  <p>\n    These variations do not match our tendency to insure our income, however. According to the US Council for Disability Awareness, 69 per cent of people in the US have no private long-term disability insurance<sup>6</sup>. In the UK, the Association of British Insurers says fewer than 1.2 million people \u2013 or 4 per cent of the 31 million people in work - have bought individual income protection insurance. Around 2 million more people \u2013 6.5 per cent - are covered by group income protection insurance through their employer.<sup>7</sup>\n  </p>\n  <p class=\"quote\">\n    \u201cIt\u2019s not a pleasant topic, and it\u2019s complex as well, so people need a trigger to push them into action.\u201d\n  </p>\n  <p>\n    Even in Australia, which has long been held up as a model for income protection insurance<sup>8</sup>, 45 per cent of employees are underinsured by US$728 a month in terms of income protection, and half are underinsured by more than US$72,000 for life insurance<sup>9</sup>. Some 83 per cent of Australians say they have insurance to cover their car (in addition to third party insurance), but only 31 per cent insure their ability to earn an income with income protection insurance.\n  </p>\n  <p>\n    In a recent study, Zurich found that Europeans significantly underestimate their own risks of being unable to work. A survey of more than 6,000 people in Germany, Ireland, Italy, Spain, Switzerland and the UK, found that less than 10 per cent thought they would be unable to work during their lifetime. In reality up to 25 per cent of the workforce in these countries faces that risk.\n  </p>\n  <p>\n    In addition, just one-third of Europeans are aware of income protection possibilities. Stefan Kr\u00f6pfl, Senior Strategist for Global Life, Zurich Insurance Group, thinks there are various factors why people don\u2019t think about income protection: \u201cOne reason is that it\u2019s not a pleasant topic, and it\u2019s complex as well, so people need a trigger to push them into action. Also, with insurance as with savings, the perceived time value of money comes into play - the feeling that having money today is worth more than providing for the future, paired with the view that bad things won't happen. And finally, many people still see the state as their safety net and may even overestimate the family support available to them.\u201d\n  </p>\n  <h2>Communicating the problem</h2>\n  <p>\n    Faced with this human inability to think about the future, how do finance experts and governments convince people to mind the Income Protection Gap? In Australia, Lifewise, coordinated by the Financial Services Council and funded from insurers\u2019 contributions, attempts to show Australians the risks they face in everyday life. Initiatives have included a social media campaign called \u201crose-colored glasses\u201d, attempting to deal with one of the major reasons not to take out income protection insurance \u2013 the belief that bad things won\u2019t happen to us.\n  </p>\n  <p class=\"quote\">\n    \u201cIt\u2019s clear that ensuring people understand the Income Protection Gap demands more than just the provision of disability statistics or advertising.\u201d\n  </p>\n  <p>\n    \u201cThe \u2018she\u2019ll be right\u2019 attitude adopted by the majority of Australians when it comes to life insurance explains why 95 per cent of Australian families do not have adequate levels of insurance,\u201d explains John Brogden, CEO of the Financial Services Council.\n  </p>\n  <p>\n    In the US, the Council for Disability Awareness is attempting to bridge what it says is a knowledge gap about income protection. \u201cAwareness is vital; our most recent research indicated many people would be more willing to purchase income protection if they simply knew more about it,\u201d the Council said in a report.<sup>10</sup>\n  </p>\n  <p>\n    In India, a chronically underinsured country, a recent survey carried out for the Insurance Regulatory and Development Authority of India, called for an awareness campaign and the offer of \u201cmicro insurance\u201d to help the poor and increase insurance penetration.<sup>11</sup>\n  </p>\n  <h2>Making the change</h2>\n  <p>\n    It\u2019s too early to judge the success of these campaigns, but it\u2019s clear that making sure that people understand the Income Protection Gap demands more than just the provision of disability statistics or advertising. More tailored products and awareness campaigns across the globe are needed to counter people\u2019s tendency to stick their heads in the sand when it comes to taking long-term decisions.\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>The human brain is poor at making long-term decisions; it\u2019s just not wired that way.</li>\n    <li>In many countries, state sick pay is no longer enough to support average earners who have become unable to work due to health issues.</li>\n    <li>Rules surrounding government sickness and disability pay vary widely by country.</li>\n    <li>The Income Protection Gap is the imbalance between public and private coverage against the interruption of income through disability, or death in the case of families, and the need for these solutions.</li>\n    <li>Finance experts and governments are exploring new ways of raising awareness of, and developing solutions for, the Income Protection Gap.</li>\n    <li>Zurich is carrying out research to help people understand the risks involved in income protection. It is also working to create awareness of the problem for governments, employers and individuals and help people protect themselves from risk.</li>\n  </ul>\n  <h2>Sources</h2>\n  <ul class=\"source-list\">\n    <li><sup>1</sup><span><a href=\"http://www.theguardian.com/books/2014/oct/08/the-marshmallow-test-understanding-self-control-and-how-to-master-it-walter-mischel-review\" target=\"_blank\">http://www.theguardian.com/books/2014/oct/08/the-marshmallow-test-understanding-self-control-and-how-to-master-it-walter-mischel-review</a></span></li>\n    <li><sup>2</sup><span><a href=\"https://www.psychologytoday.com/blog/brain-bugs/201209/temporal-myopia-making-bad-long-term-decisions\" target=\"_blank\">https://www.psychologytoday.com/blog/brain-bugs/201209/temporal-myopia-making-bad-long-term-decisions</a></span></li>\n    <li><sup>3</sup><span><a href=\"https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/2014/Protection/Welfare%20Reform%20for%20the%2021st%20Century.pdf\" target=\"_blank\">https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/2014/Protection/Welfare%20Reform%20for%20the%2021st%20Century.pdf</a></span></li>\n    <li><sup>4</sup><span><a href=\"http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp\" target=\"_blank\">http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp</a></span></li>\n    <li><sup>5</sup><span><a href=\"http://www.cepr.net/documents/publications/paid-sick-days-2009-05.pdf\" target=\"_blank\">http://www.cepr.net/documents/publications/paid-sick-days-2009-05.pdf</a></span></li>\n    <li><sup>6</sup><span><a href=\"http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp\" target=\"_blank\">http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp</a></span></li>\n    <li><sup>7</sup><span><a href=\"https://www.abi.org.uk/Insurance-and-savings/Topics-and-issues/Welfare-reform\" target=\"_blank\">https://www.abi.org.uk/Insurance-and-savings/Topics-and-issues/Welfare-reform</a></span></li>\n    <li><sup>8</sup><span><a href=\"http://iptf.co.uk/avoiding-a-flip-flop/\" target=\"_blank\">http://iptf.co.uk/avoiding-a-flip-flop/</a></span></li>\n    <li><sup>9</sup><span><a href=\"http://www.lifewise.org.au/facts-research\" target=\"_blank\">http://www.lifewise.org.au/facts-research</a></span></li>\n    <li><sup>10</sup><span><a href=\"http://www.disabilitycanhappen.org/research/pdfs/awareness2014.pdf\" target=\"_blank\">http://www.disabilitycanhappen.org/research/pdfs/awareness2014.pdf</a></span></li>\n    <li><sup>11</sup><span><a href=\"http://www.policyholder.gov.in/uploads/CEDocuments/Insurance%20Awareness%20Survey%20Report.pdf\" target=\"_blank\">http://www.policyholder.gov.in/uploads/CEDocuments/Insurance%20Awareness%20Survey%20Report.pdf</a></span></li>\n  </ul>", "description": "We're living longer, working longer and facing greater job insecurity than ever, so what is it that stops us thinking about how we'd cope financially if things went wrong?", "title": "Why don\u2019t we mind the Gap?", "image": "/static/images/articles/protection-gap/dont-mind-the-gap/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "the-gap-in-our-thinking"}, {"tag": "protection-gap", "slug": "financing-our-futures"}, {"tag": "protection-gap", "slug": "income-protection-gap"}], "header": "FT - Why don\u2019t we mind the Gap?", "tag": "protection-gap", "content_type": "article", "slug": "why-dont-we-mind-the-gap", "thumb": null}, {"body": "<span class=\"intro-line\">\n    \"Job strain\" is on the rise. How can we deal with the pressures of modern work?\n  </span>\n  <img height=\"2491\" src=\"/static/images/articles/protection-gap/fit-for-work/infographic.jpg\" width=\"600\"/>", "description": "\"Job strain\" is on the rise. How can we deal with the pressures of modern work?", "title": "Fit for Work", "image": null, "related_items": [{"tag": "protection-gap", "slug": "healthy-approaches-to-sickness-at-work"}, {"tag": "protection-gap", "slug": "can-governments-afford-their-social-safety-nets"}, {"tag": "protection-gap", "slug": "finding-solutions-to-income-protection"}], "header": "FT - Fit for Work", "tag": "protection-gap", "content_type": "infographic", "slug": "fit-for-work", "thumb": "/static/images/articles/protection-gap/fit-for-work/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    As populations age, how will we protect our families' incomes? Spending changes over our lifetime, peaking in middle age and declining into old age.\n  </span>\n  <img height=\"2636\" src=\"/static/images/articles/protection-gap/financing-our-futures/infographic.jpg\" width=\"600\"/>", "description": "As populations age, how will we protect our families' incomes? Spending changes over our lifetime, peaking in middle age and declining into old age.", "title": "Financing our futures", "image": null, "related_items": [{"tag": "protection-gap", "slug": "income-protection-gap"}, {"tag": "protection-gap", "slug": "the-gap-in-our-thinking"}, {"tag": "protection-gap", "slug": "how-employers-can-help-bridge-gap"}], "header": "FT - Financing our futures", "tag": "protection-gap", "content_type": "infographic", "slug": "financing-our-futures", "thumb": "/static/images/articles/protection-gap/financing-our-futures/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tResults from the World Economic Forum\u2019s annual Executive Opinion Survey were included in The Global Risks Report 2016, and a diverse picture has emerged of the concerns of business leaders in eight global regions. Below, you will find the various risks that regions include among the top five to doing business.\n\t</span>\n\n\t<h1>Risks of highest concern for business, by region</h1>\n\n\t<h2>Cyberattacks</h2>\n\n\t<h4>Regions of high concern: North America, Asia &amp; the Pacific</h4>\n\n\t<p>\n\t\tOnly two overall regions, North America and East Asia &amp; the Pacific, see cyberattacks as the top risk to doing business, but at the country level Germany, Switzerland, Netherlands, Japan, the U.S. and Malaysia see them as the No. 1 risk. Cyberattacks are among the top concerns in the U.K., too.\n\t</p>\n\n\t<h2>Unemployment or underemployment</h2>\n\n\t<h4>Regions of high concern: All, except North America</h4>\n\n\t<p>Un(der)employment is a widespread concern, potentially eroding skill sets that businesses will need in the future. This is the top risk to doing business in France, Italy and Spain, among others in Southern Europe.</p>\n\n\t<h2>Failure of financial mechanism or institution</h2>\n\n\t<h4>Regions of high concern: Europe, Central Asia &amp; Russia</h4>\n\n\t<p>Fiscal risks in key economies are considered among the most likely to occur, and most impactful if they materialize. At the country level, Russia and Turkey see this risk as the biggest threat to doing business.</p>\n\n\t<h2>Energy price shock</h2>\n\n\t<h4>Regions of high concern: All, except Central Asia &amp; Russia</h4>\n\n\t<p>It\u2019s estimated that key oil and gas producers have cut over $200 billion in capital expenditures on new projects. Canada, Mexico, Chile, Kazakhstan, Saudi Arabia and Egypt are among the countries where this is the top risk to doing business.</p>\n\n\t<h2>Asset bubble</h2>\n\n\t<h4>Regions of high concern: North America, Europe, Middle East &amp; North Africa, East Asia &amp; the Pacific</h4>\n\n\t<p>Continued low interest rates drive a determined search for higher yields by investors, creating an environment conducive to bubbles. This ranks as the top risk to doing business in China, Australia, Norway, Sweden, the U.K and Thailand, among others.</p>\n\n\t<h2>Fiscal crises</h2>\n\n\t<h4>Regions of high concern: All</h4>\n\n\t<p>Fiscal crises are a top five concern to doing business in every region, and with good reason: government debt in advanced economies is projected to aggregate at 102.4% of GDP in 2016. The pre-2008 global financial crisis level: 71.6%</p>\n\n\t<h2>Failure of critical infrastructure</h2>\n\n\t<h4>Regions of high concern: North America, Sub-Saharan Africa</h4>\n\n\t<p>Failure of either physical or virtual infrastructure can reduce productivity at some businesses by up to 40% in some areas, but it does not rank as the top risk to doing business in any individual country.</p>\n\n\t<h2>Failure of climate change adaption</h2>\n\n\t<h4>Regions of high concern: North America, South Asia</h4>\n\n\t<p>Failure to adapt to climate change is not considered the top risk to doing business in any region or country, perhaps because it\u2019s viewed as \u201clong term.\u201d</p>\n\n\t<h2>Terrorist attack</h2>\n\n\t<h4>Regions of high concern: North America, Middle East &amp; North Africa</h4>\n\n\t<p>The ability to inflict large-scale damage is no longer limited to military forces, as technology enables small groups and even individuals to be disruptive. Pakistan, Kenya and Tunisia consider this the top risk to businesses.</p>\n\n\t<h2>Data fraud or theft</h2>\n\n\t<h4>Region of high concern: North America</h4>\n\n\t<p>An inability to align necessary actions by the public and private sectors hinders advancements that could reduce this threat. While not specifically listed as a top threat to business in any country, it\u2019s a knock-on effect of and reflective of cyberattack concerns.</p>\n\n\t<h2>Unmanageable inflation</h2>\n\n\t<h4>Regions of high concern: Central Asia &amp; Russia, East Asia &amp; the Pacific</h4>\n\n\t<p>Volatility in foreign exchange markets and depreciation of currencies are leading reasons why this risk is on the radar. Brazil and Iran are two major countries where inflation is the top concern to doing business.</p>\n\n\t<h2>Interstate conflict</h2>\n\n\t<h4>Regions of high concern: Central Asia &amp; Russia, Middle East &amp; North Africa</h4>\n\n\t<p>Conflicts are a top concern in the expected regions, and the volatility shows no signs of lessening. At the country level, Poland, the Czech Republic, Latvia and Georgia consider interstate conflict the top risk to doing business.</p>\n\n\t<h2>Natural catastrophes</h2>\n\n\t<h4>Region of high concern: East Asia &amp; the Pacific</h4>\n\n\t<p>Extreme natural events remain a concern in the region that has been hardest hit by them in recent years. However, only the Philippines consider extreme weather events as the top risk to doing business.</p>\n\n\t<h2>Failure of national governance</h2>\n\n\t<h4>Regions of high concern: Latin America &amp; the Caribbean, Sub-Saharan Africa, South Asia</h4>\n\n\t<p>Many governments are in a precarious position as a result of the commodities downturn, which has created fiscal stress and social unrest. This risk is top concern to doing business in Brazil, Bolivia, Peru, Mauritania, Lithuania and Bangladesh, among others.</p>\n\n\t<h2>Profound social instability</h2>\n\n\t<h4>Region of high concern: Latin America &amp; the Caribbean</h4>\n\n\t<p>Runaway inflation and shortages of goods in export-dependent economies, combined with high public debt and low growth, create regional unease. At the country level, Ukraine, Venezuela and Colombia consider this the top risk to doing business.</p>", "description": "Results from the World Economic Forum\u2019s annual Executive Opinion Survey were included in The Global Risks Report 2016, and a diverse picture has emerged of the concerns of business leaders in eight global regions. Below, you will find the various risks that regions include among the top five to doing business.", "title": "Risk insomnia: Top regional concerns to doing business", "image": "/static/images/articles/risk-interconnectivity/risk-insomnia-top-regional-concerns/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "risk-and-opportunities-in-europe-2016"}, {"tag": "risk-interconnectivity", "slug": "creating-resilience-during-the-commodities-downturn"}, {"tag": "risk-interconnectivity", "slug": "complex-risks-without-boundaries"}], "header": "FT - Risk insomnia: Top regional concerns to doing business", "tag": "risk-interconnectivity", "content_type": "article", "slug": "risk-insomnia-top-regional-concerns", "thumb": "/static/images/articles/risk-interconnectivity/risk-insomnia-top-regional-concerns/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tHigh-risk regions can still be potential growth markets. An eyes-wide-open approach to resilience could open new revenue streams.\n\t</span>\n\n\t<h2>Limited regional view can obscure opportunities</h2>\n\n\t<p>\n\t\tYou might expect that businesses in countries at similar stages of development would share similar concerns. Companies in developed economies, for example, might be more concerned by technology-related risks simply because they have more access to technology, while businesses in developing countries are focused on a lack of employment and job opportunities.\n\t</p>\n\n\t<p>\n\t\tThat is true in part, but \u201cThe Global Risks Report 2016\u201d published by the World Economic Forum reveals that it also misses a larger point.\n\t</p>\n\n\t<p>\n\t\tThe report shows that business leaders in Germany, Switzerland and Netherlands, are more concerned about the effects of cyber attacks than any other risk to their companies. Companies in France, Italy, Spain and Portugal, however, have more in common with their peers in Sub-Saharan Africa, where the developing economies of Namibia and Botswana are among more than 10 tightly grouped countries where unemployment and underemployment are seen as the main risk to doing business\n\t</p>\n\n\t<p>\n\t\t\u201cUnemployment is a big concern in developing countries, and also the top concern in many European countries,\u201d says David Anderson, Director, Global Business Development, Zurich Credit &amp; Political Risk. \u201cOn the other hand, risks for emerging economies are strongly driven by economic considerations that are seemingly removed from a given region, such as the macroeconomic drivers of tightening monetary policy by the U.S. Federal Reserve, the strengthening of the U.S. dollar relative to emerging market currencies, the waning of the commodity super cycle and the China slowdown. In both Europe and emerging markets, the political consequences of unemployment can be severe and have a direct effect on investors, as we\u2019ve seen with the rise of nationalism in Europe and uprisings in the Middle East and North Africa.\u201d\n\t</p>\n\n\t<h2>Regional misperceptions</h2>\n\n\t<p>Assuming a region\u2019s risks correlate to the level of its economic development can create misperceptions that leave a business vulnerable to issues that seem distant. \u201cSometimes when you take a regional view, there\u2019s a lack of understanding about the potential effects of risk interconnections,\u201d says Linda Conrad, Head of Strategic Business Risk, Zurich Global Corporate in North America. \u201cFor example, you might hear a business leader say: \u2018What am I supposed to do about something like the price of oil?\u2019 People feel powerless in the face of risks that they can\u2019t control, but they still need to have a strategy to create resilience and lessen the effects of them.\u201d The danger for businesses in focusing on easily discernible regional risks is that they might overlook opportunities. When a business is looking at where its growth opportunities could be and considering owned assets or suppliers in emerging markets, there is often a higher reward.</p>\n\n\t<p>\n\t\t\u201cIn terms of return or lower costs that are involved, it\u2019s important to see the opportunity side from a growth perspective,\u201d says Conrad. \u201cI would never say to a business that they shouldn\u2019t consider a risky region as a source of growth. What I would say is go in with eyes wide open, which you can do through a deeper type of risk analysis. Understanding the countries and locations that you might target for growth, and where your dependencies might lie, can help you make better decisions with respect to cost of capital, expected return on your investments and risk mitigation.\u201d\n\t</p>", "description": "High-risk regions can still be potential growth markets. An eyes-wide-open approach to resilience could open new revenue streams.", "title": "Complex risks without boundaries", "image": "/static/images/articles/risk-interconnectivity/complex-risks-without-boundaries/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "creating-resilience-during-the-commodities-downturn"}, {"tag": "risk-interconnectivity", "slug": "risk-insomnia-top-regional-concerns"}, {"tag": "risk-interconnectivity", "slug": "risk-and-opportunities-in-europe-2016"}], "header": "FT - Complex risks without boundaries", "tag": "risk-interconnectivity", "content_type": "article", "slug": "complex-risks-without-boundaries", "thumb": "/static/images/articles/risk-interconnectivity/complex-risks-without-boundaries/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tLow commodity prices are increasingly interconnected to other risks to your business. Here\u2019s how to build resilience to them.\n\t</span>\n\n\t<p>\n\t\tWhen oil prices were riding high, OPEC member Venezuela let the good times roll. Between 2006 and the height of the boom in 2012, the country\u2019s foreign debt rose six-fold over six years and cash-rich consumers splurged on imported goods.\n\t</p>\n\n\t<p>\n\t\tWhen oil prices nosedived last year, things got ugly, and Venezuela\u2019s economy is now in critical condition. Controls on foreign currency transactions during the boom years reduced the non-oil economy to practically nothing, and oil now accounts for 98 percent of exports. According to Bloomberg sovereign credit risk data, only Ukraine and Greece have a higher one-year default probability. On any given day, citizens can wait for hours in line to buy a few groceries only to find there are none when their turn comes. If there are staples on the shelves, they aren\u2019t cheap, with inflation at over 200 percent.\n\t</p>\n\n\t<p class=\"quote\">\n\t\t\u201cOPEC output will likely remain elevated in 2016, and U.S. output will decline only slightly, even with large cuts in capital spending and on oil rigs.\u201d\n\t</p>\n\n\t<p>\n\t\tVenezuela is an extreme example, but life in nations that depend on commodity exports is growing more difficult by the day. In the World Economic Forum\u2019s (WEF) annual Executive Opinion Survey, some results of which are included in The Global Risks Report 2016 (also from the WEF), seven out of eight global regions identify energy price shock as a top five risk to doing business. The only region not to cite it specifically, oil exporting Central Asia and Russia, fears one of its knock-on effects, unmanageable inflation.\n\t</p>\n\n\t<p>\n\t\t\"Oil prices aren\u2019t likely to see relief in the near term,\u201d says Gurpal Dosanjh, a Bloomberg Intelligence Industry Analyst. \u201cOPEC output will likely remain elevated in 2016, and U.S. output will decline only slightly, even with large cuts in capital spending and on oil rigs.\u201d\n\t</p>\n\n\t<h2>Shock to businesses, too</h2>\n\n\t<p>\n\t\tThis cycle does not bode well for many nations and businesses that have not adjusted their operations and plans to beef up resilience. At the moment, businesses selling to other companies that depend on high commodity prices should be anticipating a decrease in sales and an increase in bad debts. This applies to sovereign debt as well. Countries that are dependent on commodities from oil to, in the case of Zambia, copper, are now finding their foreign exchange drying up, making it increasingly difficult to honor hard currency debts. In some cases, countries that took on a lot of currency debt when commodity prices were high have seen that debt multiply two or three times in U.S. dollar terms.\n\t</p>\n\n\t<p>\n\t\tWhen governments are facing such a liquidity crisis, they may institute capital controls. In such an event, business can only watch as earnings in local currency pile up and steadily lose value, with no way to transfer those earnings out and into a different currency.\n\t</p>\n\n\t<p>\n\t\t\u201cIn some cases, even state-owned energy entities are accumulating very substantial arrears to suppliers, and that\u2019s something out of the ordinary,\u201d says David Anderson, Global Business Development Director, Credit and Political Risk Insurance, Zurich Insurance Group. \u201cDefaults and supply chain disruptions are likely to increase in number if the commodities slump lasts as long as some believe it will. It\u2019s difficult to predict commodity prices, but there\u2019s a pretty strong consensus on this being a wide trough.\u201d\n\t</p>\n\n\t<h2>Commodity prices trigger other risks</h2>\n\n\t<p>\n\t\tLow commodity prices can also act as a source of other risks to doing business, such as countries being unable to spend sufficiently on social programs, and it\u2019s important for companies to address these interconnections head on. \u201cThe commodities drop-off is mixing with other very potent risk ingredients for countries that are commodity export-dependent,\u201d says Anderson. \u201cIn Saudi Arabia, for example, the population is likely going to face fiscal austerity, a first for many citizens who might have to pay for things that they\u2019ve never had to before. That\u2019s likely to increase political stress as well.\u201d\n\t</p>\n\n\t<p>\n\t\tAll of these factors could spell trouble for companies doing business or running their supply chains through at-risk regions. In addition, when commodity export-dependent countries are forced to cut social spending it puts stress on the political system. This manifests itself differently depending on the country, but in extreme cases it could lead to governments collapsing, which would trigger countless other risk scenarios. Not surprisingly, failure of national governance is seen as the top risk to doing business in Latin America and elsewhere.\n\t</p>\n\n\t<p class=\"quote\">\n\t\t\u201cIn Saudi Arabia, the population is likely going to face fiscal austerity, a first for many citizens who might have to pay for things that they\u2019ve never had to before. That\u2019s likely to increase political stress as well.\u201d\n\t</p>\n\n\t<p>\n\t\tA rise in unemployment and fiscal crisis can also be linked to low commodity prices, and when unemployment rises, an increased risk of large-scale migration could follow closely on its heels.\n\t</p>\n\n\t<h2>The end of \u201cquickly reactive\u201d</h2>\n\n\t<p>\n\t\tThere may be challenges in commodities cycles, but some countries and businesses are better positioned to weather this one, such as the U.S. and India, which as net importers see a drop in prices. Commodities are still changing hands, and that presents some opportunities for businesses in relation to their supply chains.\n\t</p>\n\n\t<p>\n\t\t\u201cThe current situation with commodities doesn\u2019t necessarily mean you want to make changes with strategic suppliers, but you might consider jointly shifting a bit of production from, say, the U.S. to the Asia-Pacific region, for example, while fuel costs for cargo shipments are down. However, you still must be very careful about the other risks you may take on,\u201d says Nick Wildgoose, Global Corporate Leader, Supply Chain Product, Zurich. \u201cYou could possibly leverage the price dip in some areas of indirect spending, too, such as business travel or office supplies, for which there are a lot of different suppliers.\u201d\n\t</p>\n\n\t<p class=\"quote\">\n\t\t\u201cCompany relationships are ultimately about individuals, and we know from personal experience, when somebody helps you through a difficult time you remember that for a long time.\u201d\n\t</p>\n\n\t<p>\n\t\tThe real opportunity for businesses, says Wildgoose, will come when they make the shift from being \u201cquickly reactive\u201d to proactive in managing supply chain risks. \u201cBeing reactive is no longer good enough,\u201d he says. \u201cIf you\u2019re proactive about identifying potential disruptions, be it through social media or strengthening your relationships with suppliers, you won\u2019t have to think as much about beating the competition when a disruption occurs.\u201d\n\t</p>\n\n\t<p>\n\t\tPart of proactively managing risks during the commodities downturn is close examination of suppliers who rely on oil or other commodities for most of their revenue. \u201cYou certainly need to look at the finances and make sure they are healthy,\u201d says Wildgoose. \u201cBut if they pass that test, there may be an opportunity to increase your standing in their eyes. If they come to you with suggestions for how to jointly improve efficiencies while they are experiencing challenging times, they\u2019ll remember if you\u2019re receptive to their ideas. That\u2019s part of how you become a customer of choice to them, along with paying them on time and treating them fairly. Company relationships are ultimately about individuals, and we know from personal experience, when somebody helps you through a difficult time you remember that for a long time.\u201d\n\t</p>\n\n\t<h2>Creating credit and supply chain resilience</h2>\n\n\t<p>\n\t\tMany businesses take for granted that their customers, especially governments, will pay them back. It often just doesn\u2019t occur to them that they might default on their receivables. There was a reduction of this mindset after the 2008 financial crisis, but in the years since some came to think of it as a bygone risk.\n\t</p>\n\n\t<p class=\"quote\">\n\t\t\u201cDon\u2019t ever believe that any customer, including a government, is incapable of default.\u201d\n\t</p>\n\n\t<p>\n\t\t\u201cNow that we\u2019re heading into a potentially prolonged difficult period of commodity prices, it requires companies to reexamine the strength of their credit procedures,\u201d says Anderson. \u201cThe obvious course to increasing resilience to credit risks is not to grow lax during boom times. In good times and bad, it\u2019s vital to have thorough and precise credit procedures, people qualified to implement them and credit models to evaluate the financial statements of your buyers and suppliers that are up-to-date and battle-tested. Other tools to look at are paring back credit limits, increasing the number of partners and negotiating stronger legal documentation for high risk buyers or suppliers.\u201d\n\t</p>\n\n\t<p>\n\t\tEven with good procedures and analysis, there are too many variables to accurately predict every potential bad debt or supply delays or default. To account for such scenarios, there are mitigation solutions offered by insurers and banks that can take some bad assets off of balance sheets, or at least keep bad debts at a manageable, predictable level. Businesses can even insure key suppliers against many types of disruptions, including insolvency, regulatory and transportation issues, and receive funds for the extra expenses incurred during recovery.\n\t</p>\n\n\t<p>\n\t\t\u201cDon\u2019t let good times fool you\u2014don\u2019t get sloppy when everything is coming up aces, because you won\u2019t be creating the resilience necessary when you reach an inflection point that marks the start of a downward trend,\u201d says Anderson. \u201cEqually important: don\u2019t ever believe that any customer or suppler, including a government, is incapable of delays and default.\u201d\n\t</p>\n\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>Businesses selling to other businesses that depend on high commodity prices for revenue should prepare for an increase in bad debts.</li>\n    <li>The downturn in commodity prices can trigger other risks, such as increases in unemployment and failure of national governance.</li>\n    <li>Supply chain risks should be managed proactively at all times, particularly during the downturn.</li>\n    <li>Thorough, precise procedures and qualified people can help build resilience to credit risks.</li>\n  </ul>", "description": "Low commodity prices are increasingly interconnected to other risks to your business. Here\u2019s how to build resilience to them.", "title": "Creating resilience during the commodities downturn", "image": "/static/images/articles/risk-interconnectivity/creating-resilience-during-the-commodities-downturn/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "complex-risks-without-boundaries"}, {"tag": "risk-interconnectivity", "slug": "risk-and-opportunities-in-europe-2016"}, {"tag": "risk-interconnectivity", "slug": "risk-insomnia-top-regional-concerns"}], "header": "FT - Creating resilience during the commodities downturn", "tag": "risk-interconnectivity", "content_type": "article", "slug": "creating-resilience-during-the-commodities-downturn", "thumb": "/static/images/articles/risk-interconnectivity/creating-resilience-during-the-commodities-downturn/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tCombining life and general insurance in a captive can create a smoother performing portfolio with an improved risk profile for your business.\n\t</span>\n\t<p>\n\t\tThe low commodity price phase that the world has entered into is not unprecedented, but it can have far-reaching effects for emerging markets and the U.S. firms that invest in, sell to, or are being supplied from developing countries. These effects range from the geopolitical to the financial, and one of the most immediate is the risk of capital controls, which are already appearing or being tightened in some countries. Simply put, when a commodity that a country depends upon declines in price, something has to give: governments can devalue the currency, increase interest rates or freeze capital flows to protect the foreign exchange reserves that help sustain a currency\u2019s value. In an effort to minimize the effect on their own population, many countries try capital controls, causing losses for foreign exporters, investors and lenders. While capital controls are economic policy tools, when many countries enact them at once they become part of the already difficult geopolitical risk picture that firms face today.\n\t</p>\n\t<p>\n\t\tOne worrisome risk issue with the current commodity price phase is that we may be in a very broad valley. The <a href=\"https://www.google.com/url?q=http://www.worldbank.org/en/news/press-release/2016/01/26/world-bank-lowers-2016-forecasts-for-37-of-46-commodity-prices-including-oil&amp;sa=D&amp;ust=1456417983508000&amp;usg=AFQjCNEtjtbhB_dpcE9mGSkL2Z9-81ByuQ\" target=\"_blank\">World Bank</a> recently cut its price forecast for 80% of the world\u2019s commodities based on oversupply and weaker emerging-market growth. After falling by 47% in 2015, oil prices are expected to fall another 27% in 2016. The <a href=\"http://www.worldenergyoutlook.org/media/weowebsite/2015/WEO2015_Factsheets.pdf\" target=\"_blank\">International Energy Agency</a> predicts oil to be at only $80/bbl by 2020, and their \u201cLow Price Scenario\u201d contemplates $50-$60/bbl \u201cwell into the 2020s.\u201d Countries dependent on oil exports and other commodities have to make choices about how to absorb these prolonged effects while minimizing the damage to their economies.\n\t</p>\n\t<p>\n\t\tCapital controls themselves are nothing new. China continues their use as they transition toward something closer to a market economy. In a more unconventional approach, Venezuela has long used them to control \u201cspeculators\u201d and to try to mitigate the effects of oil price volatility on the economy. Indeed, the <a href=\"http://www.imf.org/external/pubs/ft/survey/so/2012/POL120312A.htm\" target=\"_blank\">International Monetary Fund</a> (IMF) and the <a href=\"http://www.bloomberg.com/news/articles/2016-01-23/kuroda-advises-china-to-impose-capital-controls-to-defend-yuan\" target=\"_blank\">Bank of Japan</a>, have condoned the use of capital controls under some conditions.\n\t</p>\n\t<p>\n\t\tWhat is new is that, with this economic policy advice and the commodity price trough, we may see more countries than ever before implementing capital controls. As reported in the <a href=\"http://www.wsj.com/articles/battered-emerging-markets-race-to-stem-outflows-1453410496\" target=\"_blank\">Wall Street Journal</a>, oil-dependent Azerbaijan is imposing a 20% tax on any transaction that takes money out of the country; Saudi Arabia disallowed certain shorts against its currency by traders; and Nigeria halted imports of goods, such as some foods and furniture, and imposed spending limits on foreign-currency credit and debit cards. In the credit and political risk insurance marketplace, recently Zurich has even seen some governments and state-owned enterprises delay their own payments to lenders and suppliers because of prolonged low commodity prices.\n\t</p>\n\t<p>\n\t\tFor U.S. suppliers and lenders, these actions can cause increased costs of doing business, delays or even defaults of payment and potential inability to get dividends out of investments in these countries. In some cases, these are temporary inconveniences. In others, capital controls signal panic, with a corresponding market reaction and knock-on effects that can include shortages of basic goods and civil unrest. With the prolonged commodity price downturn that we seem to be in, U.S. suppliers and lenders to the emerging markets are well advised to hope for the first, but be prepared for the second.\n\t</p>\n\t<p>Related downloads</p>\n\t<p><a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/The-Global-Risks-Report-2016.pdf\" target=\"_blank\">Global Risks Report 2016</a></p>\n\t<p><a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/Global-Risks-Report-2016-Executive-Summary.pdf\" target=\"_blank\">Global Risks Report 2016 Executive Summary</a></p>", "description": "Combining life and general insurance in a captive can create a smoother performing portfolio with an improved risk profile for your business.", "title": "Capital controls are coming \u2013 Is your business ready?", "image": "/static/images/articles/risk-interconnectivity/capital-controls-are-coming/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "how-the-next-15-years-of-history-could-unfold"}, {"tag": "risk-interconnectivity", "slug": "obvious-hot-spots-not-only-geopolitical-risks"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2016"}], "header": "FT - Capital controls are coming \u2013 Is your business ready?", "tag": "risk-interconnectivity", "content_type": "article", "slug": "capital-controls-are-coming", "thumb": "/static/images/articles/risk-interconnectivity/capital-controls-are-coming/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tYour business faces unparalleled geopolitical risks today, but you can mitigate those risks to shape a positive future.\n\t</span>\n\n\t<p>\n\t\tGeopolitical risks have real repercussions for businesses, and the global scenario for 2016 will only increase vulnerabilities to investments and operations. These interconnected risks are not just emerging from the usual \u201chotspots\u201d such as the Middle East, either. The strain will be felt worldwide: multiple governments in South America are under extreme stress; a worldwide commodities dip is rattling the foundations of even major economies. In the assessment of Jim Thomas, Head of Credit &amp; Political Risk, Zurich Insurance Group, the state of play is challenging, but businesses that focus on becoming more resilient will be best positioned for future success.\n\t</p>\n<br/>\n\t<p>\n    Download the full report:<br/>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/The-Global-Risks-Report-2016.pdf\" target=\"_blank\">The Global Risks Report 2016</a>\n  </p>\n\n  <p>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/Global-Risks-Report-2016-Executive-Summary.pdf\" target=\"_blank\">The Global Risks Report 2016: Executive Summary</a>\n  </p>", "thumb": null, "description": "Your business faces unparalleled geopolitical risks today, but you can mitigate those risks to shape a positive future.", "title": "Video: Obvious hot spots not only geopolitical risks", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/obvious_hot_spots.mp4", "image": "/static/images/articles/risk-interconnectivity/obvious-hot-spots/video.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "how-the-next-15-years-of-history-could-unfold"}, {"tag": "risk-interconnectivity", "slug": "conflicts-of-business-interest"}, {"tag": "risk-interconnectivity", "slug": "hotbeds-of-opportunity"}], "header": "FT - Video: Obvious hot spots not only geopolitical risks", "tag": "risk-interconnectivity", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/obvious_hot_spots.ogv", "slug": "obvious-hot-spots-not-only-geopolitical-risks", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/obvious_hot_spots.webm"}, {"body": "<span class=\"intro-line\">\n    <span class=\"author\">January 14, 2016 | Steve Wilson</span>This 11th edition of The Global Risks Report is published at a time of profound change. Global risks materialize in new and unexpected ways and are becoming more imminent as their consequences reach people, institutions and economies.\n  </span>\n\n  <img src=\"/static/images/reports/risk-interconnectivity/global-risks-2016/likelihood-and-impact-top-10s.jpg\" width=\"600\"/>\n\n  <p>\n    Over the past decade, The Global Risks Report has expanded its scope from analysing the interconnected and rapidly evolving nature of global risks to also putting forward actionable solutions and calling for public-private collaboration in strengthening resilience. Now in its 11th edition, the Report describes a world in which risks are becoming more imminent and have wide-ranging impact: tensions between countries affect businesses; unresolved, protracted crises have resulted in the largest number of refugees globally since World War II; terrorist attacks take an increasing toll on human lives and stifle economies; droughts occur in California and floods in South Asia; and rapid advances in technologies are coupled with ever-growing cyber fragilities and persistent unemployment and underemployment.\n  </p>\n  <p>\n    Implications of sweeping digitization (also termed the \u201cFourth Industrial Revolution\u201d), ranging from transformations that are the result of rising cyber connectivity to the potential effects of innovations on socioeconomic equality and global security, remain far from fully understood. At the same time, climate change is unequivocally happening, and there is no turning back time.\n  </p>\n  <p>\n    The increasing volatility, complexity and ambiguity of the world not only heightens uncertainty around the \u201cwhich\u201d, \u201cwhen\u201d, \u201cwhere\u201d and \u201cwho\u201d of addressing global risks, but also clouds the solutions space. We need clear thinking about new levers that will enable a wide range of stakeholders to jointly address global risks, which cannot be dealt with in a centralized way.\n  </p>\n  <p>\n    Taken together, this calls for a resilience imperative \u2013 an urgent necessity to find new avenues and more opportunities to mitigate, adapt to and build resilience against global risks and threats through collaboration among different stakeholders.\n  </p>\n  <p>\n    By putting the resilience imperative at its core, this year\u2019s Global Risks Report combines four parts to present an analysis of different aspects of global risks \u2013 across both global risks and stakeholders \u2013 focused as much on the search for solutions as on the analysis of the risks themselves.\n  </p>\n\n  <img src=\"/static/images/reports/risk-interconnectivity/global-risks-2016/risk-trends-interconnection-map.jpg\" width=\"600\"/>\n\n  <p>\n    Download the full report:<br/>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/The-Global-Risks-Report-2016.pdf\" target=\"_blank\">The Global Risks Report 2016 (21.5 MB, pdf)</a>\n  </p>\n\n  <p>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/Global-Risks-Report-2016-Executive-Summary.pdf\" target=\"_blank\">The Global Risks Report 2016: Executive Summary (60 KB, pdf)</a>\n  </p>", "description": null, "title": "The Global Risks Report 2016", "image": "/static/images/reports/risk-interconnectivity/global-risks-2016/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "tackling-geopolitical-risks"}, {"tag": "risk-interconnectivity", "slug": "future-risks"}, {"tag": "risk-interconnectivity", "slug": "businesses-must-adapt"}], "header": "FT - The Global Risks Report 2016", "tag": "risk-interconnectivity", "content_type": "report", "slug": "global-risks-2016", "thumb": "/static/images/reports/risk-interconnectivity/global-risks-2016/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    How might geopolitical risk evolve over the next 15 years?\n  </span>\n\n  <p>\n    More than 250 members of the World Economic Forum's network attended 10 workshops around the globe, where they developed three \u201cplausible\u201d scenarios in which geopolitical risk intensifies. These are not predictions, but plausible trajectories that can usefully challenge current thinking and serve as a call to action for the development of more adaptable and resilient response systems.\n  </p>\n\n  <p>\n    Extrapolating existing trends, the scenarios \u201cdescribe how the seven driving forces of international security could interact.\u201d\n  </p>\n\n\n  <table>\n    <thead>\n      <tr>\n        <th width=\"20\">\n          Scenario\n        </th>\n        <th width=\"80\">\n          Summary\n        </th>\n      </tr>\n    </thead>\n    <tbody>\n      <tr>\n        <td class=\"th\">Walled Cities</td>\n        <td>The world resembles medieval times, with islands of order holding back a sea of disorder.</td>\n      </tr>\n      <tr>\n        <td class=\"th\">Strong Regions</td>\n        <td>After a volatile and competitive interregnum, the world of 2030 is stable with several seats of power.</td>\n      </tr>\n      <tr>\n        <td class=\"th\">Conflict &amp; Peace</td>\n        <td>The world drifts into a major war, which leads to a reworking of the global governance system.</td>\n      </tr>\n    </tbody>\n  </table>\n\n  <img src=\"/static/images/articles/risk-interconnectivity/how-history-could-unfold/infographic.jpg\" width=\"600\"/>\n\n  <p>\n    Download the full report:<br/>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/The-Global-Risks-Report-2016.pdf\" target=\"_blank\">The Global Risks Report 2016</a>\n  </p>\n\n  <p>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/Global-Risks-Report-2016-Executive-Summary.pdf\" target=\"_blank\">The Global Risks Report 2016: Executive Summary</a>\n  </p>", "description": "How might geopolitical risk evolve over the next 15 years?", "title": "Infographic: How the next 15 years of history could unfold", "image": "/static/images/articles/risk-interconnectivity/how-history-could-unfold/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "obvious-hot-spots-not-only-geopolitical-risks"}, {"tag": "risk-interconnectivity", "slug": "hotbeds-of-opportunity"}, {"tag": "risk-interconnectivity", "slug": "conflicts-of-business-interest"}], "header": "FT - Infographic: How the next 15 years of history could unfold", "tag": "risk-interconnectivity", "content_type": "article", "slug": "how-the-next-15-years-of-history-could-unfold", "thumb": null}, {"body": "<span class=\"intro-line\">\n    Increasingly interconnected geopolitical risks are a growing source of concern for businesses, highlighting the need for measures to improve resilience\n  </span>\n\n  <p>\n    There are pros (delicious) and cons (unhealthy) to cheeseburgers, but they are rarely caught up in geopolitical tension that directly affects a business. Last year, however, an iconic American fast food company had several of its Moscow locations temporarily shut down by Russian authorities in a thinly veiled response to U.S.\u00adled economic sanctions. The sanctions followed Russia\u2019s military action in Ukraine, and the closure of the eateries was accompanied by a proposal to launch government\u00adbacked, patriotic\u00ad themed Russian competitors.\n  </p>\n\n  <p>\n    The blurring of geopolitics and business is not new, but incidents of it appear to be on the rise. \u201cWe have seen an increase in losses by corporations due to geopolitical risks, specifically damage to assets and business interruption after that damage occurs,\u201d says Jim Thomas, Global Head, Credit and Political Risk, Zurich Insurance Group. \u201cIn some cases, we\u2019ve seen businesses forced to abandon projects altogether when the situation became too dangerous. Disruption of supply chains as a result of geopolitical risks has also become a very real issue.\u201d\n  </p>\n\n  <h2>Report highlights concerns</h2>\n\n  <p>\n    For the second year running, a survey of its members by the World Economic Forum (WEF) revealed that geopolitical risks are top of mind among global leaders. The results of the survey were reported in \u201cThe Global Risks Report 2016,\u201d which the WEF publishes in collaboration with Zurich Insurance Group. The report cites a \u201cvacuum created by frail or weakening states\u201d and a \u201creturn of strategic competition between strong states with conflicting interests\u201d as the prime reasons why \u201ccompanies are vulnerable even if they have no immediate presence in the geography where the risk arises.\u201d\n  </p>\n\n  <p>\n    \u201cGeopolitical risks\u201d covers an array of threats to businesses that includes interstate conflict, terrorism and failure of national governance. For businesses, new risks and costs arise from the difficulties of working in an unpredictable environment and complying with international standards when fragile governments do not themselves adhere to international regulations. These costs can be serious enough to become unsustainable in the long run. The Global Risks Report 2016 indicates that executives in 14 economies perceive failure of national governance as the highest risk to conducting business. Half of those economies are in South America\u2014many at the mercy of the commodities crisis\u2014and governance\u00adrelated risks could seriously undermine the competitiveness, job creation and economic development of the majority of the continent.\n  </p>\n\n  <p>\n    At the same time, not all businesses have the luxury of choosing stable locations. Mining and energy companies, for example, must operate where the natural resources are found.\n  </p>\n\n  <p class=\"quote\">\n    \u201cThere are many strategic assets and investments around the world that companies cannot walk away from.\u201d \u2013 Jim Thomas, Global Head, Credit and Political Risk, Zurich Insurance Group\n  </p>\n\n  <p>\n    \u201cTo stay committed to those opportunities, businesses must stay very risk aware and build resiliency into their systems. The key is to develop a systematic approach to the risks you know you face, and to reacting to new risks as they arise. These are times of challenging geopolitical risks, but they are not unprecedented. With a risk management strategy focused on resilience, businesses don\u2019t have to immediately rule out a potential market based solely on surface appearances.\u201d\n  </p>\n\n  <p>\n    Download the full report:<br/>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/The-Global-Risks-Report-2016.pdf\" target=\"_blank\">The Global Risks Report 2016</a>\n  </p>\n\n  <p>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/Global-Risks-Report-2016-Executive-Summary.pdf\" target=\"_blank\">The Global Risks Report 2016: Executive Summary</a>\n  </p>", "description": "Increasingly interconnected geopolitical risks are a growing source of concern for businesses, highlighting the need for measures to improve resilience", "title": "Conflicts of business interest", "image": "/static/images/articles/risk-interconnectivity/conflicts-of-business-interest/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "hotbeds-of-opportunity"}, {"tag": "risk-interconnectivity", "slug": "obvious-hot-spots-not-only-geopolitical-risks"}, {"tag": "risk-interconnectivity", "slug": "how-the-next-15-years-of-history-could-unfold"}], "header": "FT - Conflicts of business interest", "tag": "risk-interconnectivity", "content_type": "article", "slug": "conflicts-of-business-interest", "thumb": "/static/images/articles/risk-interconnectivity/conflicts-of-business-interest/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    <span class=\"author\">January 14, 2016 | Steve Wilson</span>The year 2016 marks a forceful departure from past findings, as the risks The Global Risks Report 2016 has highlighted over the past decade are now starting to manifest themselves in new, sometimes unexpected ways with impact to people, institutions and economies.\n  </span>\n\n  <img src=\"/static/images/articles/risk-interconnectivity/global-risks-2016-executive/changing-global-risk-landscape.jpg\" width=\"600\"/>\n\n  <p>Read more: <a href=\"http://reports.weforum.org/global-risks-2016/\" target=\"_blank\">Source: The Global Risks Report 2016, World Economic Forum</a><br/><a href=\"https://twitter.com/hashtag/risk2016\" target=\"_blank\">#risks2016</a></p>\n\n  <p>\n    Now in its 11th edition, The Global Risks Report 2016 draws attention to ways that global risks could evolve and interact in the next decade. The year 2016 marks a forceful departure from past findings, as the risks about which the Report has been warning over the past decade are starting to manifest themselves in new, sometimes unexpected ways and harm people, institutions and economies. Warming climate is likely to raise this year\u2019s temperature to 1\u00b0 Celsius above the pre-industrial era, 60 million people, equivalent to the world\u2019s 24th largest country and largest number in history, are forcibly displaced, and crimes in cyberspace costs the global economy an estimated US$445 billion, higher than many economies\u2019 national incomes. In this context, the Report calls for action to build resilience \u2013 the \u201cresilience imperative\u201d \u2013 and identifies practical examples of how it could be done.\n  </p>\n\n  <p>\n    Geopolitical concerns remain prominent in the minds of respondents to the Global Risks Perception Survey for the second year in a row. The Report therefore delves into the international security landscape and explores what drives this evolution and, in particular, how it could be affected by the Fourth Industrial Revolution and climate change. The three scenarios for possible futures developed in this context inform new ways of building resilience to security threats through public-private collaboration.\n  </p>\n\n  <p>\n    The Report also steps back and explores how emerging global risks and major trends, such as climate change, the rise of cyber dependence and income disparity are impacting already-strained societies by highlighting three clusters of risks as Risks in Focus. As resilience building is helped by the ability to analyse global risks from the perspective of specific stakeholders, the Report also analyses the significance of global risks to the business community at a regional and country-level.\n  </p>\n\n  <h2>Definition of global risks and trends</h2>\n\n  <p>\n    A global risk is an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years.\n  </p>\n\n  <p>\n    A global trend is a long-term pattern that is currently taking place and that could contribute to amplifying global risks and/or altering the relationship between them.\n  </p>\n\n  <h2>The Global risks perception survey</h2>\n\n  <p>\n    Almost 750 experts and decision-makers in the World Economic Forum\u2019s multistakeholder communities responded to this year\u2019s Global Risks Perception Survey. Respondents are drawn from business, academia, civil society and the public sector and span different areas of expertise, geographies and age groups.\n  </p>\n\n  <p>\n    The survey asked respondents to consider 29 global risks \u2013 categorized as societal, technological, economic, environmental or geopolitical \u2013 over a 10-year time horizon, and rate each according to their perceived likelihood of it occurring and impact if it does.\n  </p>\n\n  <p>\n    After its presence in the top five most impactful risks for the past three years, the failure of climate change mitigation and adaptation has risen to the top and is perceived in 2016 as the most impactful risk for the years to come, ahead of weapons of mass destruction, ranking 2nd, and water crises, ranking 3rd. Large-scale involuntary migration was also rated among the top five for impact, as was severe energy price shock (increase or decrease).\n  </p>\n\n  <p>\n    The risk rated most likely was large-scale involuntary migration, with last year\u2019s top scorer \u2013 interstate conflict with regional consequences \u2013 giving way to the environmental risks of extreme weather events and the failure of climate change mitigation and adaptation and followed by major natural catastrophes.\n  </p>\n\n  <p>\n    Global risks that remain serious because of their combined impact and likelihood involve some economic risks, including fiscal crises in key economies and high structural unemployment or underemployment. These are complemented by cyberattacks and profound social instability. Their assessment reflects the potentially profound impact of the Fourth Industrial Revolution on the economy and society and emphasizes the need for safeguarding future benefits.\n  </p>\n\n  <p>\n    Respondents were also asked which risks were related and could give rise to cascading risks: Three emerged strongly: the potential for climate change to exacerbate water crises, with impacts including conflicts and more forced migration, calling for improved water governance to adapt to climate change and accommodate a growing population and economic development; the need to address the global refugee crisis, adding emphasis to policies that can build resilience in addition to responding to the immediate crisis; and the risks of failing to fully understand the risks around the Fourth Industrial Revolution and how this transition will impact countries, economies and people at a time of persistently sluggish growth.\n  </p>\n\n  <h2>Risk in focus</h2>\n\n  <p>\n    Key to building resilience is the stability of societies. The first Risk in Focus therefore looks at the complex dynamics of societies in the age of digitization and discusses the phenomenon of the (dis)empowered citizen, which is a result of the interplay of varying dynamics: as technology empowers citizens to find information, connect with others and organize, those citizens feel disenfranchised by distant elites. It explores the road to social instability if both governments and business embark on either repressive actions or non-action out of uncertainty about how to deal with a more informed, connected and demanding citizenry, which could lead to an escalating downward spiral of broken trust and harsher response on either side. The chapter also, however, explores the benefits governments and business stand to gain by proactively looking for ways to engage and dialogue with concerned citizens.\n  </p>\n\n  <p>\n    Food security risk in the context of climate change is the second Risk in Focus. Building upon the climate-water nexus discussed in Part 1, the chapter looks at how changing climate and weather patterns could jeopardize food security and agricultural production across geographies. The most climate-vulnerable countries often heavily depend on agricultural productivity to sustain economic growth and development. But the recent years have also shown the climate vulnerability of G-20 countries such as India, Russia and the United States \u2013 the breadbasket of the world \u2013 and other large industrial producers of agricultural commodities. The chapter discusses how climate change\u2013resilient crops and supply chain networks, as well as financing and insurance schemes can help mitigate the social, economic and environmental aspects of food security risks related to climate change.\n  </p>\n\n  <p>\n    Drawing lessons from the Ebola crisis, the third Risk in Focus discusses global disease outbreaks. It warns that population growth, rapid urbanization and increasing transnational flows of commodities, people and animals intensify the risk of infectious transmission across geographies while equally diminishing the ability to respond \u2013 all at a time of growing resistance of microorganisms to today\u2019s most effective medicines. Preparedness and response measures discussed range from the behavioural, such as fact-based communication and education campaigns, to the need to invest in diagnostic, drug and vaccine R&amp;D and in its enabling environment, especially advancing a regulatory framework. It raises the imperative for public-private sector collaboration across areas such as data availability and analysis, a joint research agenda, regulatory frameworks, long-term financing and ways to promote responsible media engagement as part of effective crisis management communication.\n  </p>\n\n  <p>\n    For each Risk in Focus, examples are given of three practical mechanisms that can build resilience against the identified threats.\n  </p>\n\n  <h2>Risks to doing business</h2>\n\n  <p>\n    Private sector respondents to the World Economic Forum\u2019s Executive Opinion Survey were asked to identify their risks of highest concern for doing business in the next 10 years. The responses, from 140 economies, reveal patterns of concern at country and regional levels that can usefully inform initiatives to engage the private sector in building resilience to global risks.\n  </p>\n\n  <p>\n    On a global scale, two economic risks \u2013 unemployment and underemployment and energy price shocks \u2013 are mentioned as the top risks of highest concern for doing business in half of the 140 economies. These are followed by the failure of national governance, fiscal crises, asset bubbles and cyberattacks.\n  </p>\n\n  <p>\n    Economic risks predominate in responses from Europe, including fiscal crises, unemployment, asset bubbles and energy prices \u2013 the latter also being the top concern in Canada \u2013 while executives in the United States were most concerned about cyber-related risks and attacks. Respondents from Russia and Central Asia worried about fiscal crises and unemployment, along with the risks of unmanageable inflation and interstate conflict. Environmental risks worry business leaders in East Asia and the Pacific, alongside energy prices and asset bubbles.\n  </p>\n  \n  <p>\n    In South Asia concerns also include energy prices, together with fiscal crises, unemployment and failure of national governance \u2013 which is the top concern in Latin America and the Caribbean \u2013 followed by energy price shock and unemployment. Executives in the Middle East and North Africa likewise worry about energy prices, together with unemployment, terrorist attacks and interstate conflict. In Sub-Saharan Africa, the business community\u2019s top concerns include unemployment, energy prices, the failure of urban planning and the failure of critical infrastructure.\n  </p>", "description": null, "title": "The Global Risks Report 2016 Executive Summary", "image": null, "related_items": [{"tag": "risk-interconnectivity", "slug": "climate-adaptation"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2016-map"}, {"tag": "risk-interconnectivity", "slug": "wef-global-risk-highest-concern"}], "header": "FT - The Global Risks Report 2016 Executive Summary", "tag": "risk-interconnectivity", "content_type": "report", "slug": "global-risks-2016-executive", "thumb": "/static/images/articles/risk-interconnectivity/global-risks-2016-executive/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Does a more connected and automated world threaten jobs and businesses? Or does it mean more opportunities for growth?\n  </span>\n\n  <p>\n    The merger of man and technology was the main theme at Davos, highlighting how the trend could drive an unprecedented economic cycle laden with opportunities. But is this a good thing for everyone?\n  </p>\n\n  <p>\n    An Englishman named William Lee once invented a machine that would replace the hand knitting of textiles, and thus launch that industry into a new age of efficiency. He traveled to London to demonstrate the machine, hoping to obtain a royal patent. Queen Elizabeth I refused the request. She feared the machine would \u201cassuredly bring her poor subjects to ruin by depriving them of employment.\u201d The year was 1589. The Industrial Revolution lay nearly 200 years in the future, but Good Queen Bess knew a risk that could cause unrest among the population when she saw one.\n  </p>\n\n  <p>\n    How technology will impact society and businesses is a question as old as innovation itself, and it was a focus last week at the World Economic Forum\u2019s (WEF) Annual Meeting in Davos, Switzerland. Much of the discussion was around the Fourth Industrial Revolution, which is described in a new book of the same name by WEF Founder and Executive Chairman Klaus Schwab, as being \u201cnot only about smart and connected machines and systems. Its scope is much wider. Occurring simultaneously are waves of further breakthroughs in areas ranging from gene sequencing to nanotechnology, from renewables to quantum computing. It is the fusion of these technologies and their interaction across the physical, digital and biological domains\u201d that can make this era filled with potential and distinct.\n  </p>\n\n  <p>\n    But could it make many jobs extinct globally?\n  </p>\n\n  <p class=\"quote\">\n    They said it in Davos: A more systematic approach is required to integrate renewable energy sources into an overall smart grid.\u201d \u2013 Hiroaki Nakanishi, Chairman and CEO, Hitachi, on the challenges of distributing the clean energy necessary to power the Fourth Industrial Revolution\n  </p>\n\n  <h2>\n    Opportunities and risks\n  </h2>\n\n  <p>\n    In the WEF\u2019s recently released \u201cThe Global Risks Report 2016,\u201d one of the top five risks of highest concern over the next 18 months is unemployment and underemployment. One of the top five risks of highest concern over the next 10 years is profound social instability\u2014of which joblessness is a major driver. While the Fourth Industrial Revolution is cause for considerable optimism, it will invariably create new global risk scenarios, including those linked to employment issues. \u201cPrevious revolutions all generated economic growth and jobs, and moved the world forward,\u201d says Steve Wilson, Chief Risk Officer General Insurance, Zurich Insurance Group, a strategic partner in the WEF report. \u201cThere can be a complacency risk, however, if we assume that every time there is an industrial revolution it will do the same thing. It is possible that this one could be different. With the ability to automate work tasks, systems robotics and forthcoming quasi-artificial intelligence systems\u2014autonomous vehicles, for example\u2014jobs could be eliminated or easily replaced. I think that\u2019s where the big question around this revolution is pointing.\u201d\n  </p>\n\n  <p class=\"quote\">\n    They said it in Davos: We have technologies now that are really good at doing routine physical and knowledge work. And those technologies are rapidly getting better at work that we used to think of as a little bit less routine\u2014recognizing patterns, understanding human speech and responding to it. Jobs doing that kind of routine work are not coming back. Strengthening the labor movement will not bring them back. Raising the minimum wage will not bring them back. Entrepreneurship will not bring them back.\u201d \u2013 Andrew McAfee, Co-director, MIT Initiative on the Digital Economy.\n  </p>\n\n  <p>\n    It\u2019s a question that Carl Benedikt Frey and Michael A. Osborne of Oxford University explored in their 2013 paper \u201cThe Future of Employment: How Susceptible Are Jobs to Computerization?\u201d The results of their study include an estimate that 47 percent of total U.S. employment is in the high-risk category, meaning that associated occupations are potentially automatable over some unspecified number of years, perhaps a decade or two.\n  </p>\n\n  <p>\n    \u201cThere\u2019s a case to be made that among certain skill groups in the U.S., a lot fewer of them are working today than 30 years ago,\u201d says Frey. \u201cYou could argue about whether that is the result of globalization or technology. I think technology has something to do with it, in the sense that even countries like China are seeing declines in manufacturing employment right now. As manufacturing processes become increasingly automated in the future, a lot of mid- to low-skill workers will find it difficult to find a job. But that is not to say that the overall unemployment rate is necessarily going to surge, or that we\u2019ll see mass unemployment in the next decade or two. Because we know that when one new technology job is created in a local economy, it tends to create five local jobs in the non-technical sector.\u201d\n  </p>\n\n  <p class=\"quote\">\n    They said it in Davos: Automation is inevitable. The advance of AI is inevitable. We have to embrace that.\u201d \u2013 Vishal Sikka, CEO, Infosys India\n    Frey sees two key open questions for the future: Will the pace of new job creation be sufficient in the technology sector to create new jobs outside of the sector? And will the multiplier effect (technology jobs creating non-technology jobs) remain the same as more labor-saving technology is applied in the technology sector itself?\n  </p>\n\n  <h2>\n    \u201cSo vast and multifaceted\u201d\n  </h2>\n\n  <p>\n    In his book, Schwab says that the Fourth Industrial Revolution \u201cwill have a monumental impact on the global economy, so vast and multifaceted that it makes it hard to disentangle one particular effect from the next. Indeed, all the big macro variables one can think of\u2014GDP, investment, consumption, employment, trade, inflation and so on\u2014will be affected.\u201d\n  </p>\n\n  <p>\n    Every business sector will have to deal with technology evolving at high speed, and every individual business will have to decide if it will be pulled by changes or use them to push innovation. The financial industry, for example, which to date has maximized the benefits of technology, is currently swept up by the potential of blockchain, the cryptographic technology underlying Bitcoin. Politicians in Greece and Honduras are looking to blockchain technology to solve land registry problems, while banks are exploring how blockchain can overhaul financial markets. Blockchain is also making an appearance on Wall Street: In October, Nasdaq unveiled Linq, a platform enabling private companies to trade their shares using blockchain-based technology.\n  </p>\n\n  <p>\n    \u201cIt\u2019s not just the industry that\u2019s excited about blockchain\u2014it\u2019s the world, everyone,\u201d Garry Lyons, Chief Innovation Officer, MasterCard, says. \u201cEven at Davos, every single tech panel I have gone to mentions blockchain, and some people call it the second coming. But while we think it\u2019s very interesting, we don\u2019t want to, and no one wants to, be blindsided by rushing into it.\u201d\n  </p>\n\n  <p>\n    What impact blockchain will have, and what new risks it might create, are as yet unwritten chapters. However, the financial sector could experience shifts similar to those that affected other industries during past revolutions. \u201cManual work in heavy industries and factories has diminished heavily,\u201d says Wilson. \u201cAnd that could be the impact on white collar work in this new iteration of industrial revolution. Financial businesses, banking, insurance and so on\u2014jobs in all of these could be eliminated. What happened to heavy industry will likely happen to light industry this time around.\u201d\n  </p>\n\n  <h2>\n    Fiercer competition\n  </h2>\n\n  <p>\n    The big winners in all of this could be consumers. In terms of employment, technology mainly benefits relatively skilled workers and producers, but as consumers everyone benefits from declining prices and improved services that result from technology.\n    Businesses will have to stay on their toes to seize the opportunities that emerge. According to Frey, \u201ccompetition will become even fiercer. What tends to happen with revolutions in general is that new technologies emerge and some businesses fail to adapt. Look at Nokia\u2019s experience as smartphones evolved, and Kodak\u2019s with the shift to digital film. Companies are going to have to watch out and make sure they are adapting the right way, and it\u2019s difficult to say exactly what that is or how to achieve that. But in times of technological turbulence, there tends to be a shakeup in markets that causes some established companies to disappear and others to emerge.\u201d\n  </p>\n\n  <p class=\"quote\">\n    They said it in Davos: It\u2019s up in the air if [the Fourth Industrial Revolution] is a net negative or net positive. We know it\u2019s going to be disruptive.\u201d -- Mark Haefele, Global Chief Investment Officer for Wealth Management, UBS\n  </p>\n\n  <p>\n    One aspect of managing the risks associated with emerging opportunities in the Fourth Industrial Revolution will be to remain aware that the demographics of your customers will also be changing as a result of technology. For example, people could be living significantly longer in the future; last year, researchers at the Salk Institute reported they\u2019d made progress in keeping human cells young by keeping DNA more stably packed together.\n  </p>\n\n  <p>\n    \u201cUltimately, the consumer is a human being,\u201d says Wilson. \u201cEverything that your business does is somehow in the value chain of a product or a service that a human being consumes. What does it mean for your business if there are massive increases in human longevity? If you\u2019re selling surfboards, for example, then maybe your sales will increase and your business will grow because people can be surfing well into their 50s or 60s. If that\u2019s the case, how does that affect what your business will sell? And how does it affect the workforce that you have working for you?\u201d\n  </p>\n\n  <p>\n    In some ways, resilience to the risks of the Fourth Industrial Revolution resembles Darwinian evolution: Businesses will have to adapt to the world they find themselves in rather than the world they want. \u201cIn many ways, technology is like the evolution of living things,\u201d says Frey. \u201cIt\u2019s a good analogy. Although, on balance, we have benefited vastly from technology.\u201d\n  </p>\n\n  <p>\n    Related downloads:<br/>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/The-Global-Risks-Report-2016.pdf\" target=\"_blank\">The Global Risks Report 2016</a>\n  </p>\n\n  <p>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/Global-Risks-Report-2016-Executive-Summary.pdf\" target=\"_blank\">The Global Risks Report 2016: Executive Summary</a>\n  </p>", "description": "Does a more connected and automated world threaten jobs and businesses? Or does it mean more opportunities for growth?", "title": "Latest insight: Will the fourth industrial revolution drive global economies or eliminate millions of jobs?", "image": "/static/images/articles/risk-interconnectivity/davos-insight/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "risk-in-the-world"}, {"tag": "risk-interconnectivity", "slug": "how-the-next-15-years-of-history-could-unfold"}, {"tag": "risk-interconnectivity", "slug": "hotbeds-of-opportunity"}], "header": "FT - Latest insight: Will the fourth industrial revolution drive global economies or eliminate millions of jobs?", "tag": "risk-interconnectivity", "content_type": "article", "slug": "davos-insight", "thumb": "/static/images/articles/risk-interconnectivity/davos-insight/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    With cyber crime already costing the global economy an estimated $445 billion a year, organizations must be ready to detect and limit the damage from cyber attacks\n  </span>\n  <p>\n    Cyber\u2010dependency will be one of the most important trends shaping global development over the next 10 years. Yet businesses are only just waking up to the technological risks involved, according to the <a href=\"http://knowledge.zurich.com/risk-interconnectivity/global-risks-report-2016/\" target=\"_blank\">Global Risks Report 2016</a> from the World Economic Forum (WEF), developed in collaboration with Zurich Insurance Group and other leading institutions.\n  </p>\n  <p>\n    Participants at the recent WEF meeting in Davos echoed that sentiment and suggested that data liabilities should feature in corporate accounts. Michael Bodson, President and Chief Executive Officer Depository Trust &amp; Clearing Corporation, was quoted in the Financial Times saying that he was \u201ctruly paranoid\u201d about cyber risk and if even a mid\u2010size US bank lost its data through hacking it could cause a major panic in the banking system. While Gavin Patterson, chief executive of telecoms company, BT, said its network is dealing with hundreds of thousands of cyber attacks a day and corporate boards are not keeping up with the rapidly changing and developing threat, according to <span class=\"cursive\">Management Today</span>.\n  </p>\n\n  <p>\n    Executives in eight countries \u2013 the United States, Japan, Germany, Netherlands, Switzerland, Malaysia, Singapore and Estonia \u2013 see cyber attack as the greatest global risk to doing business, according to the WEF\u2019s Executive Opinion Survey 2015. Executives in the United Kingdom ranked it second. Zurich believes that executives in any country that has not ranked cyber within the top three risks to doing business, are underestimating the risk in these markets.\n  </p>\n\n  <img alt=\"Cyber Attack\" src=\"/static/images/articles/risk-interconnectivity/time-to-wake-up/cyber-attack.png\" width=\"416\"/>\n\n  <h2>Mapping the risk</h2>\n\n  <p>\n    With increasing interconnectivity between organizations, and every industry now heavily reliant on the internet to source and supply goods and services, every company should expect to trading partners.\n  </p>\n\n  <p>\n    Mapping the risk of such an attack is not a chore to be left to the IT department, the entire organization its customers.\n  </p>\n\n  <p class=\"quote\">\n    \u201cThe question is not: \u2018Will I be under attack,\u2019 but \u2018Will I be able to detect the attack and react to it?\u2019\u201d\n  </p>\n\n  <p>\n    \u201cCyber\u2010resilience means keeping in mind that a cyber incident will happen one day,\u201d says J\u00e9r\u00f4me Goss\u00e9, Zurich Insurance Group\u2019s head of security and privacy for Europe, the Middle East and Africa. \u201cThe question able to detect the attack and react to it?\u2019\u201d\n  </p>\n\n  <p>\n    \u201cTo manage this, you need to have the same approach as to any traditional risk: identify your most valuable assets and establish what you need to protect them from.\u201d And then have a process in place for how to recover from such an event with as little damage to your business as possible.\n  </p>\n\n  <h2>Cost of cyber crime</h2>\n\n  <p>\n    With the European Union recently agreeing a <a href=\"http://europa.eu/rapid/press-release_IP-15-6270_en.htm\" target=\"_blank\">new directive</a> requiring key infrastructure providers (including banks, healthcare providers and energy companies) to report details of cyber attacks to the authorities, organizations will increasingly have to be ready to show they have taken all possible steps to prevent and limit the damage from such attacks.\n  </p>\n\n  <p>\n    As the Global Risks Report 2016 identifies, companies do not always realize immediately that they have been hacked: \u201cMany attacks and intrusions are not immediately discovered \u2013 some are recognized only months and in some cases years later.\u201d Even when an attack comes to light, organizations can be reluctant to publicize it because of the reputational damage and the risk of being seen as weak and attracting further attacks. For example, when Google was hacked in 2010, another 34 Fortune 500 companies also lost intellectual property in the same incident \u2013 but only one of them reported the breach, according to <a href=\"http://www.mcafee.com/uk/resources/reports/rp-economic-impact-cybercrime2.pdf\" target=\"_blank\">research</a> by the Center for Strategic and International Studies and McAfee published in 2014.\n  </p>\n\n  <p>\n    Cyber crime costs the global economy an estimated $445 billion a year, according to the McAfee report, and the number of high\u2010profile incidents is rising. While a 2015 <a href=\"http://knowledge.zurich.com/cyber-risk/the-startling-economic-truth-about-cyber-risks/\" target=\"_blank\">report</a> from the Atlantic Council and Zurich Insurance Group said that if rising cyber risk continues unabated, the resulting missed opportunities could lead to more than $100 trillion in unrealized global growth. That\u2019s a fear shared by business leaders \u2013 some 61 per cent of CEOs say they are concerned that cyber threats could negatively impact their corporate growth, according to PricewaterhouseCoopers\u2019 <a href=\"https://www.pwc.com/gx/en/ceo-survey/2016/landing-page/pwc-19th-annual-global-ceo-survey.pdf\" target=\"_blank\">Annual Global CEO Survey</a>.\n  </p>\n\n  <p>\n    Risks vary by industry ranging from the theft of private customer information, including banking or healthcare information and trade secrets, to attacks against critical infrastructure.\n  </p>\n\n  <p>\n    \u201cOrganized criminals are looking for information they can sell on the dark web, and of course online retailers, healthcare and financial services companies hold very valuable information,\u201d says Goss\u00e9. \u201cFor utilities, energy, and manufacturing companies, the attacker is more likely to be a state or a competitor looking for trade secrets or military information.\u201d\n  </p>\n\n  <p>\n    The other main sources of cyber attacks are activists who want to embarrass or halt an organization\u2019s activities, and company insiders, be it employees with a grievance or those looking to use their privileged access to commit fraud.\n  </p>\n\n  <h2>Interconnectivity threat</h2>\n\n  <p>\n    The threat is not always direct. Companies share sensitive information with third parties for everyday activities such as processing salaries and sending marketing material to customers. They also provide access to their IT system to external sub\u2010contractors or partners. An attack on an outside system can quickly become a problem throughout the chain.\n  </p>\n\n  <p class=\"quote\">\n    \u201cCyber dependency will increase, raising the odds of a cyber attack with potential cascading effects across the cyber ecosystem.\u201d\n  </p>\n\n  <p>\n    The Global Risks Report 2016 identifies the risk of cyber security breaches \u201ccascading\u201d through the broader economy. \u201cAlthough organizations may recognize the benefit of cyber technologies for their bottom lines, they may not be fully internalizing cyber security risks and making the appropriate level of investment to enhance operational risk management and strengthen organizational resilience,\u201d the report says. \u201cAs the Internet of Things leads to more connections between people and machines, cyber dependency will increase, raising the odds of a cyber attack with potential cascading effects across the cyber ecosystem.\u201d\n  </p>\n\n  <h2>Taking the right steps</h2>\n\n  <p>\n    Organizations must start with a root\u2010and\u2010branch risk assessment to stave off cyber attacks and mitigate the risk of a successful breach to their activities, clients and reputations, says Goss\u00e9. \u201cEvery actor in every organization should be concerned about this and should work on the risk mapping scenarios,\u201d he says. \u201cOnce you\u2019ve done that, there are many steps to take: using technology to detect attacks and protect your IT infrastructure; proper data protection measures including encryption. Employee awareness is also important; you can have great IT security in place but if your employees don\u2019t respect the procedures then you will be in trouble.\n  </p>\n\n  <p>\n    \u201cOn the interconnectivity issue, it\u2019s really important that the security procedures you have in place are respected and implemented by your subcontractors,\u201d he adds. \u201cIt varies by industry, but it\u2019s better to select a limited number of subcontractors and partners who you trust and have verified.\u201d\n  </p>\n\n  <p>\n    Putting in place incident response procedures for damage limitation when a breach happens should be part and parcel of risk mapping, says Goss\u00e9. These steps should include a plan to notify customers directly and through the press, along with a list of external experts who can give immediate help, such as an IT forensics firm to help contain an incident, legal partners and public relations consultants.\n  </p>\n\n  <p>\n    The Global Risks Report 2016 also highlights the importance of cooperation between organizations and law enforcement agencies in tackling cyber attacks. \u201cIt is becoming clearer that cybercrime cannot be fought unilaterally,\u201d the report says. \u201cAlthough businesses can follow standard industry practices or adopt individually tailored ways to deal with cybercrimes, cooperation throughout the value chain (because attacks can be made through supplier systems) and with law enforcement is also helpful.\u201d\n  </p>\n\n  <p>\n    The need for collaboration between the private and public sector to tackle cyber risks was also emphasized in the 2015 Atlantic Council/Zurich Insurance Group report. The report encourages business leaders to engage with policymakers, and to take action on cyber security, while facing up to cyber risks within the business.\n  </p>\n\n  <h2>Key takeaways</h2>\n\n  <ul>\n    <li>Cyber attacks are growing in number and magnitude and cost the global economy an estimated $445 billion a year.</li>\n    <li>The EU will require key infrastructure providers to report cyber attacks to the authorities, increasing the pressure to have strong measures in place.</li>\n    <li>Interconnectivity means cyber attacks don\u2019t have to be direct \u2013 an attack on a supplier or subcontractor can hurt your organization.</li>\n    <li>Risk mapping is the crucial first step to protecting your organization from cyber threats.</li>\n  </ul>", "description": "With cyber crime already costing the global economy an estimated $445 billion a year, organizations must be ready to detect and limit the damage from cyber attacks", "title": "Time to wake up to the risks of cyber crime", "image": "/static/images/articles/risk-interconnectivity/time-to-wake-up/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "future-scenarios"}, {"tag": "risk-interconnectivity", "slug": "tackling-geopolitical-risks"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2016"}], "header": "FT - Time to wake up to the risks of cyber crime", "tag": "risk-interconnectivity", "content_type": "article", "slug": "time-to-wake-up", "thumb": "/static/images/articles/risk-interconnectivity/time-to-wake-up/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    At a time of heightened geopolitical risks, business growth can help defuse volatile global scenarios\n  </span>\n\n  <p>\n    Before the telecom company Roshan began operations in Afghanistan in 2003, the country\u2019s communications infrastructure was limited and controlled by the Taliban. To make an international call, Afghans had to travel to Pakistan. Today, Roshan has more than 6.5 million customers, and its network spans 287 districts and cities in all of Afghanistan\u2019s 34 provinces. The company claims to have invested approximately $600 million in the country, creating 1,100 new jobs for employees it trains, and indirect employment for more than 30,000 people.\n  </p>\n\n  <p class=\"quote\">\n    \u201cSuccess in a challenging market is marked by local knowledge, cultural sensitivity, awareness of risks, and measures to protect your investment if the local situation deteriorates.\u201d\n  </p>\n\n  <p>\n    Those numbers are very meaningful in a country where limited employment opportunities help fuel instability, and joining insurgency groups that pay roughly $20 per day is considered a job option.\n  </p>\n\n  <p>\n    \u201cBusinesses can bring in cash, know\u00adhow, networks and production facilities,\u201d says Richard Ghiasy, Researcher and Project Manager, Stockholm International Peace Research Institute (SIPRI), Armed Conflict and Conflict Management Program. \u201cThey can push for reform, and improve productivity and cultural understanding. Roshan has connected people and markets, but it also helped decrease the leverage Pakistan had with its communications infrastructure. People usually look to the public sector to solve big challenges, but the public sector can learn from businesses that do a good job of managing high\u00adrisk locations.\u201d\n  </p>\n\n  <h2>\n    Why not look to businesses?\n  </h2>\n\n  <p>\n    This is particularly relevant today, as geopolitical risks such as interstate conflict and terrorist attacks are increasingly interconnected to other global risk factors. \u201cThe Global Risks Report 2016,\u201d published by the World Economic Forum (WEF) in collaboration with leading institutions such as Zurich Insurance Group, notes that the \u201cinternational security landscape is in flux, challenging the assumption of continued social, political and economic progress that characterized the first 25 years after the end of the Cold War.\u201d\n  </p>\n\n  <p>\n    Very few global companies conduct business with the goal of reducing the magnitude of geopolitical risks\u2014but how and where business is transacted can play a meaningful role in increasing or decreasing risks. \u201cThe Global Risks Report 2016\u201d suggests that the private sector could play a larger role in international security. According to the report, \u201cthe implications of security risks affect companies assessing where to invest and do business as much as they affect governments engaged in trade, diplomacy and maintaining the security of their citizens, yet the potential of the private sector to contribute to peace and security is not reflected in global security mechanisms or at the multilateral level.\u201d\n  </p>\n\n  <p class=\"quote\">\n    \u201cCompanies have to re\u00adorient their focus and business models in order to operate in a new, interconnected corporate landscape where geopolitics and global economic trends have a great impact on business operations.\u201d\n  </p>\n\n  <p>\n    In a hyper\u00adconnected world, businesses may no longer have the luxury of waiting out geopolitical crises while trying to limit risk exposure; and avoiding investment in known or potentially volatile places does not insulate companies from volatility. A world of interconnected\u2014and sometimes instantly distributed\u2014risks means businesses should consider influencing international developments, as well as increasing their own resilience to these risks.\n  </p>\n\n  <p>\n    \u201cWhen I talk to corporate executives who are considering making an investment in an emerging market, they\u2019re interested in how they can protect against risks, how they can build resiliency into their system, and how they can shore up their balance sheet against unexpected challenges,\u201d says Jim Thomas, Global Head, Credit and Political Risk, Zurich Insurance Group. \u201cIt comes down to knowing your exposures and adjusting your strategy accordingly, but that\u2019s not as simple as it sounds.\u201d\n  </p>\n\n  <p>\n    In Thomas\u2019 experience, the companies that have had the most success in operating in challenging environments are culturally savvy. Such businesses seek to understand the local market and don\u2019t fall into the trap of viewing markets as developed or developing, as emerging or as emerged. \u201cA sound investment in a challenging place should bring value to the local economy and an increased tax base at the federal level,\u201d says Thomas. \u201cMore holistically, success in a challenging market is marked by local knowledge, cultural sensitivity, awareness of risks, and measures to protect your investment if the local situation deteriorates.\u201d\n  </p>\n\n\n  <h2>\n    Business in action\n  </h2>\n\n  <p>\n    The global refugee crisis remains a major global risk that is both fallout from and a contributor to geopolitical tensions and conflict. It also provides a view into how business can collaborate with the public sector on global risk issues. Many companies are providing much needed financial support to UN agencies, funds and programs, yet business leadership is extending far beyond financial donations. In September, the UN Global Compact, in partnership with the UN Refugee Agency, launched the \u201cBusiness Action Pledge in Response to the Refugee Crisis\u201d to encourage the private sector to help with widespread societal disruption. The pledge calls on companies with operations or supply chains in countries which refugees are coming from, going to or passing through to take action.\n  </p>\n\n  <p class=\"quote\">\n    \u201cIf businesses engage in a new territory or in a deal with global risks, they rightly invest money and the time of so many experts into risk analysis. At the government level, it\u2019s often the case that a single person makes his or her own due\u00addiligence analysis of internal risks, external risks or global risks. In that sense, I think the public sector could learn a lot.\u201d\n  </p>\n\n  <p>\n    \u201cAs the number of displaced persons continues to increase, 2016 needs to be when public and private sectors truly embrace the importance of business contributions to peace and make collaboration imperative,\u201d says Lise Kingo, Executive Director, UN Global Compact. \u201cCompanies have to reorient their focus and business models in order to operate in a new, interconnected corporate landscape where geopolitics and global economic trends have a great impact on business operations. Directly addressing complex geopolitical risks extends beyond the scope of business. However companies, through their own operations, have the power to address societal risks\u2014such as injustice and inequality\u2014which is often where geopolitical risks develop.\u201d\n  </p>\n\n  <p>\n    It\u2019s clear businesses aren\u2019t shying away from helping reduce some global risks, but Ghiasy believes governments can also learn from how businesses assess risks. \u201cBusinesses keep an eye on the target at all times,\u201d he says. \u201cProfits in high\u00adrisk areas are tied to many things, including public relations and CSR [corporate social responsibility] spending, but businesses are very pragmatic about what they do as well. If they engage in a new territory or in a deal with global risks, they rightly invest money and the time of many experts into risk analysis. At the government level, it\u2019s often the case that a single person makes his or her own due\u00addiligence analysis of internal risks, external risks or global risks. In that sense, I think the public sector could learn a lot.\u201d\n  </p>\n\n  <h2>\n    Key takeaways\n  </h2>\n\n  <ul>\n    <li>Resilient businesses can help create stability in geopolitically challenging markets.</li>\n    <li>A sound investment in a challenging market combines local value creation, cultural sensitivity, risk awareness and measures to protect your investments if the local situation deteriorates.</li>\n    <li>The public sector can learn from the ways businesses effectively manage risks in difficult geopolitical situations.</li>\n  </ul>\n\n  <p>\n    Download the full report:<br/>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/The-Global-Risks-Report-2016.pdf\" target=\"_blank\">The Global Risks Report 2016</a>\n  </p>\n\n  <p>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/Global-Risks-Report-2016-Executive-Summary.pdf\" target=\"_blank\">The Global Risks Report 2016: Executive Summary</a>\n  </p>", "description": "At a time of heightened geopolitical risks, business growth can help defuse volatile global scenarios", "title": "Hotbeds of opportunity", "image": "/static/images/articles/risk-interconnectivity/hotbeds-of-opportunity/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "conflicts-of-business-interest"}, {"tag": "risk-interconnectivity", "slug": "how-the-next-15-years-of-history-could-unfold"}, {"tag": "risk-interconnectivity", "slug": "obvious-hot-spots-not-only-geopolitical-risks"}], "header": "FT - Hotbeds of opportunity", "tag": "risk-interconnectivity", "content_type": "article", "slug": "hotbeds-of-opportunity", "thumb": "/static/images/articles/risk-interconnectivity/hotbeds-of-opportunity/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Business can play a part in tackling growing geopolitical risks, says the Global Risks Report 2016\n  </span>\n  <p>\n    Companies will increasingly need to address geopolitical security as interstate conflict, terrorist attacks and refugee flows, demand greater strategic attention from business leaders and have a bigger impact on the global economy, according to the Global Risks Report 2016 from the World Economic Forum (WEF).\n  </p>\n  <p>\n    The report, developed in collaboration with Zurich Insurance Group and other leading institutions, argues that states and governments are less able to tackle geopolitical issues alone as these challenges are increasingly interconnected. And the private sector has expertise and resources that can help, such as data for tracking risk factors, information that can be shared on criminal activity, and, crucially, the ability to control supply chains during emergencies.\n  </p>\n  <p class=\"quote\">\n    \u201cThere is a growing role for public-private collaboration to tackle global security challenges.\u201d\n  </p>\n  <p>\n    \u201cThere is a growing role for public-private collaboration to tackle global security challenges,\u201d states the <a href=\"/risk-interconnectivity/reports/global-risks-2016/\">report</a>. \u201cWe need clear thinking about new levers that will enable a wide range of stakeholders to jointly address global risks, which cannot be dealt with in a centralized way.\u201d\n  </p>\n  <p>\n    In the past many companies have been reluctant to become too closely involved in geopolitical issues. Half the managers surveyed in a 2011 study by Wharton Business School<span class=\"super\">1</span> said their most common method of managing geopolitical risk was simply to avoid investing in volatile places. But that tactic is unlikely to hold up as companies seek new markets, with unrest and volatility able to spread quickly from one location to others.\n  </p>\n  <h2>Industry alliances</h2>\n  <p>\n    There is evidence, however, that this is changing. New global partnerships are emerging and action taken by the private sector against human trafficking is an example of the kind of influence companies can have. Initiatives from a number of different sectors including banking, technology and the trucking industry, are outlined in a 2014 WEF report Hedging Risk by Combating Human Trafficking<span class=\"super\">2</span>.\n  </p>\n  <p>\n    That report also highlights the travel sector, which started \u201cthe Code\u201d, a voluntary set of guidelines to help prevent child sex tourism and trafficking, in 2004. Spearheaded by Marilyn Carlson Nelson, the former chairwoman and chief executive officer of Carlson Companies, the Code was signed by Hilton Worldwide in 2011 and now has over 1,200 company signatories from countries including Colombia, China, Egypt, Thailand, Brazil and Russia.\n  </p>\n  <h2>International partnerships</h2>\n  <p>\n    In the past few decades, companies have also begun to play an increasing role in multi-stakeholder partnerships with UN organizations and non-governmental organizations<span class=\"super\">3</span>.\n  </p>\n  <p>\n    These partnerships have ranged from financial pledges such as Unilever\u2019s \u00a327 million of support to the World Food Programme since 2007<span class=\"super\">4</span>, to Coca-Cola\u2019s 5by20 initiative with UN Women which aims to support five million women entrepreneurs across the company\u2019s value chain by 2020<span class=\"super\">5</span>.\n  </p>\n  <p>\n    Economist David McWilliams, a Professor at the School of Business at Trinity College, Dublin, points to the UN Global Compact \u2013 a voluntary initiative by the private sector officially launched in 2000 to support UN sustainability goals \u2013 as an illustration of how influential corporations can be when they work together with governments on global challenges.\n  </p>\n  <p>\n    Some 8,000 companies have signed up to the UN Global Compact\u2019s ten-point code of behavior around the areas of human rights, labor, anti-corruption and the environment. They submit an audit each year to show how they are meeting these requirements and these are published online. A 2013 statement from the Coca-Cola Bottling Company of Ghana, for example, stated that it had bought a new more energy-efficient plastic bottling line and built a waste water treatment plant for its fruit juice supplier<span class=\"super\">6</span>.\n  </p>\n  <h2>Climate action</h2>\n  <p>\n    At the Paris climate talks in December, the 443 corporate signatories of the UN Global Compact\u2019s Caring for Climate initiative, set new targets for an estimated collective annual emissions saving of 93.6 million metric tons of carbon dioxide equivalent<span class=\"super\">7</span>.\n  </p>\n  <p class=\"quote\">\n    \u201cNever before have we seen this level of engagement from business and it is clear that the momentum is unstoppable.\u201d\n  </p>\n  <p>\n    In welcoming the Paris climate agreement, Lise Kingo, Executive Director, UN Global Compact, said the private sector should be applauded for bringing better business practices into the process and sending a forceful message on the importance of a solid climate agreement. \u201cWe believe the Paris Agreement sends the right market signals which will provide predictability, unlock capital, drive innovation and reward responsible business,\u201d she said. \u201cNever before have we seen this level of engagement from business and it is clear that the momentum is unstoppable.\u201d\n  </p>\n  <h2>Addressing the water crisis</h2>\n  <p>\n    Beyond the UN, companies contribute in other ways on global issues. International food company Nestl\u00e9, which has made the responsible treatment of water \u201ccritical\u201d to its business, proposed its own Sustainable Development Goal to the World Bank in 2013, aiming to cut its use of water to sustainable levels. \n  </p>\n  <p class=\"quote\">\n    \u201cWhile this measure may not be perfect when looking at the complexities of water withdrawals, usage and return flows,\u201d says Peter Brabeck-Letmathe, Nestl\u00e9 chairman, \u201cI am nevertheless convinced it can work as a good, practical approach for measurement-driven action.\u201d\n  </p>\n  <p>\n    Brabeck-Letmathe takes the issue of water so seriously he writes his own blog called <a href=\"https://www.water-challenge.com\">Water Challenge</a>. In a post entitled \u201cWe will fail to feed the world until we fix the water crisis\u201d he cites the experience of the Punjab, where water tables were dropping by one meter per year after pumps were subsidized for irrigation. There was no incentive to limit water use despite the inevitable consequences \u2013 drought and failing crops.\n  </p>\n  <h2>The need for partnerships</h2>\n  <p class=\"quote\">\n    \u201cFarmers saw the utter futility of changing their own habits without effective joint efforts of all major stakeholders in their watershed; and so they wouldn\u2019t,\u201d writes Brabeck-Letmathe. \u201cPlayed out on an international scale, this is the crux: Without partnership between all those who share a stake in the problem we won\u2019t make progress towards any meaningful solution.\u201d\n  </p>\n  <p>\n    From water issues to refugee crises, partnerships are vital to finding solutions to the world\u2019s increasingly interconnected global problems and, as suggested in the Global Risks Report 2016, many businesses appear ready to play a more important part.\n  </p>\n  <h2>Key takeaways</h2>\n  <ul>\n    <li>The Global Risks Report 2016 believes there is a growing role for public-private collaboration to tackle global security challenges.</li>\n    <li>Multinational corporations have traditionally avoided becoming too closely involved in geopolitical issues.</li>\n    <li>Action taken by the private sector against human trafficking is an example of the kind of influence companies can have.</li>\n    <li>The UN Global Compact is an example of how influential corporations can be when they work together with governments on global challenges.</li>\n  </ul>\n\n  <div class=\"notes\">\n    <p class=\"note\"><span class=\"super\">1</span><a href=\"http://finance.wharton.upenn.edu/~marstonr/pdf/managingriskmanagement.pdf\">http://finance.wharton.upenn.edu/~marstonr/pdf/managingriskmanagement.pdf</a></p>\n    <p class=\"note\"><span class=\"super\">2</span><a href=\"http://www3.weforum.org/docs/WEF_Human_Trafficking_Report_2015.pdf\">http://www3.weforum.org/docs/WEF_Human_Trafficking_Report_2015.pdf</a></p>\n    <p class=\"note\"><span class=\"super\">3</span><a href=\"http://www.un.org/en/ecosoc/newfunct/pdf15/2015partnerships_background_note.pdf\">http://www.un.org/en/ecosoc/newfunct/pdf15/2015partnerships_background_note.pdf</a></p>\n    <p class=\"note\"><span class=\"super\">4</span><a href=\"https://www.unilever.com/sustainable-living/transformational-change/global-partnerships/world-food-programme-partnership/index.html\">https://www.unilever.com/sustainable-living/transformational-change/global-partnerships/world-food-programme-partnership/index.html</a></p>\n    <p class=\"note\"><span class=\"super\">5</span><a href=\"http://www.unwomen.org/en/news/stories/2011/9/the-coca-cola-company-and-un-women-form-global-partnership-to-accelerate-women-s-economic-empowermen\">http://www.unwomen.org/en/news/stories/2011/9/the-coca-cola-company-and-un-women-form-global-partnership-to-accelerate-women-s-economic-empowermen</a></p>\n    <p class=\"note\"><span class=\"super\">6</span><a href=\"https://www.unglobalcompact.org/system/attachments/cop_2014/120491/original/2013_COMMUNICATION_ON_PROGRESS.pdf?1415637117\">https://www.unglobalcompact.org/system/attachments/cop_2014/120491/original/2013_COMMUNICATION_ON_PROGRESS.pdf?1415637117</a></p>\n    <p class=\"note\"><span class=\"super\">7</span><a href=\"https://www.unglobalcompact.org/news/2751-12-12-2015\">https://www.unglobalcompact.org/news/2751-12-12-2015</a></p>\n  </div>", "description": "Business can play a part in tackling growing geopolitical risks, says the Global Risks Report 2016", "title": "New ideas for tackling geopolitical risks in business", "image": "/static/images/articles/risk-interconnectivity/tackling-geopolitical-risks/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "global-risks-2016"}, {"tag": "risk-interconnectivity", "slug": "businesses-must-adapt"}, {"tag": "risk-interconnectivity", "slug": "future-risks"}], "header": "FT - New ideas for tackling geopolitical risks in business", "tag": "risk-interconnectivity", "content_type": "article", "slug": "tackling-geopolitical-risks", "thumb": "/static/images/articles/risk-interconnectivity/tackling-geopolitical-risks/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\t<span class=\"author\">January 14, 2016 | Steve Wilson</span>\u201cKey to building resilience is the stability of societies.\u201d Businesses have a role to play in promoting social stability through responsible corporate behavior and by working with governments and other stakeholders to find (potentially profitable) solutions to global challenges.\n\t</span>\n\n\t<h2>Businesses must adapt in increasingly complex world</h2>\n\n\t<p>The Global Risks Report 2016 (GRR 2016), an annual study published by the World Economic Forum (WEF) in collaboration with leading institutions such as Zurich Insurance Group, has found that global risks are becoming increasingly interconnected, posing a profound challenge to people, institutions and economies.</p>\n\n\t<p>About 750 experts and key decision makers from the WEF\u2019s global multi-stakeholder community were asked to rank 20 global risks over a 10-year time horizon according perceived likelihood and potential impact. This year, the failure of climate change mitigation and adaptation was ranked the most impactful risk, ahead of weapons of mass destruction and water crises, while large-scale involuntary migration was seen as the most likely disruptive global risk.</p>\n\n\t<p>More troubling, however, was the rising awareness of issues that could give rise to systemic risks, such as the potential for climate change to exacerbate water crises giving rise to geopolitical conflicts, and the overall sense that interconnectivity and independence are rising.</p>\n\n\t<h2>Vulnerable</h2>\n\n\t<p>That is bad news for business, which have proven particularly vulnerable to interconnectivity. A recent study of more than 30,000 U.S. public companies over the past 50 years by Boston Consulting Group, found that public companies were six times more likely to delist than they were 40 years ago, with more than one in three expected to do so over the next five years.</p>\n\n\t<p>\u201cWe believe that companies are going out of business quicker because they are failing to adapt to the growing complexity of their environment. Many misread the environment, select the wrong approach to strategy, or fail to support a viable approach with the right behaviors and capabilities,\u201d the report\u2019s authors concluded.</p>\n\n\t<p>Recognizing the challenges of operating in a rapidly changing world in which events in one part of the world can have unforeseen consequences in another, the GRR 2016 calls on business and governments to work together to build resilience \u2013 what the WEF calls the \u201cresilience imperative\u201d. These challenges will only be compounded as the Fourth Industrial Revolution unfolds, introducing an array of new risks which are poorly understood.</p>\n\n\t<h2>Resilience</h2>\n\n\t<p>As the Boston Consulting report notes, \u201cA paradigm shift in managerial thinking is needed. Leaders are used to asking, \u201cHow can we win this game?\u201d Today they must also ask, \u201cHow can we extend this game?\u201d They must monitor the changing risk environment and align their strategies with the threats they face. Understanding the principles that confer robustness in complex systems can mean the difference between survival and extinction.\u201d A key step towards that is integrating a holistic risk management approach into the company\u2019s business model. Risk management needs to begin at the Board level, because it is the board that sets strategy and is ultimately responsible for ensuring the long term survival of the company.</p>\n\n\t<p>Such a strategy not only needs to consider the risk landscape within the business, but also how it may affect customers, suppliers, distributors and other key stakeholders. It also needs to win the support of employees and other key stakeholders.</p>\n\n\t<p>Beyond that, however, companies need to understand that they are part of a complex global ecosystem and understand the consequence of their actions within the wider context of the society in which they operate. As the GRR 2016 notes, \u201cKey to building resilience is the stability of societies.\u201d Businesses have a role to play in promoting social stability through responsible corporate behavior and by working with governments and other stakeholders to find (potentially profitable) solutions to global challenges such as climate change, rapid urbanization, population aging, social alienation through unemployment and under-education, and others. In so doing, companies also build social equity, brand and the right to engage publicly on social issues of concern.</p>", "thumb": "/static/images/articles/risk-interconnectivity/businesses-must-adapt/thumb.jpg", "description": null, "title": "Video: Businesses must adapt in increasingly complex world", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/GRR2016.mp4", "image": "/static/images/articles/risk-interconnectivity/businesses-must-adapt/video.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "future-risks"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2016"}, {"tag": "risk-interconnectivity", "slug": "tackling-geopolitical-risks"}], "header": "FT - Video: Businesses must adapt in increasingly complex world", "tag": "risk-interconnectivity", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/GRR2016.ogv", "slug": "businesses-must-adapt", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/GRR2016.webm"}, {"body": "<span class=\"intro-line\">\n    The Global Risks Report 2016 is available. Check out this snapshot to see what global risks look like in the regions where you do business.</span>\n  <img src=\"/static/images/articles/risk-interconnectivity/risk-in-the-world/infographic.jpg\" width=\"559\"/>\n\n  <h2>\n    North America\n  </h2>\n  <h3>\n    #1 Risk\n  </h3>\n\n  <h3>\n    Cyber risk\n  </h3>\n\n  <p>\n    A future where the annual costs of being connected outweigh the benefits is not only possible, it is happening now. According to models used to create \u201cOvercome by Cyber Risks,\u201d a 2015 report from the Atlantic Council and Zurich Insurance Group, annual cybersecurity costs in high-income economies like the U.S. have already begun to outweigh the annual economic benefits arising from global connectivity. This isn\u2019t as dire as it sounds on the surface, as costs tend to be one offs and cyber benefits accumulate over time. Still, the Ponemon Institute found that the mean annualized cost for 58 benchmarked organizations in the U.S. is $15 million per year.\n  </p>\n\n  <h2>\n    Europe\n  </h2>\n\n  <h3>\n    #1 Risk\n  </h3>\n\n  <h3>\n    Large scale involuntary migration\n  </h3>\n\n  <p>\n    Large\u00adscale involuntary migration is strongly interconnected with other highly worrisome risks, including interstate conflict, state collapse, climate change and water crises. According to the UN, nearly 60 million people globally were displaced in 2014. The number of people displaced per day in 2014\u201442,500\u2014was four times greater than in 2010.\n  </p>\n\n  <h2>\n    Middle East and North Africa\n  </h2>\n\n  <h3>\n    #1 Risk (tie)\n  </h3>\n\n  <h3>\n    Water crises\n  </h3>\n\n  <h3>\n    Unemployment &amp; Underemployment\n  </h3>\n\n  <p>\n    According to the World Bank, unemployment rates in Egypt, Iran, Jordan, Lebanon, Libya, Tunisia and Yemen have remained stubbornly high, particularly among the young (15\u201324 years), with an average rate of 22 percent for young males and 39 percent for young females. Desertification is an equally concerning risk. The World Resources Institute has said water supplies in the region will deteriorate over the next 25 years, threatening economic growth and stoking geopolitical tensions.\n  </p>\n\n  <h2>\n    East Asia and the Pacific\n  </h2>\n\n  <h3>\n    #1 Risk\n  </h3>\n\n  <h3>\n    Natural catastrophes\n  </h3>\n\n  <p>\n    The World Bank pegs East Asia\u00adPacific as the most disaster\u00adstricken region in the world. Over the past 20 years, 61 percent of global losses due to natural catastrophe have occurred in the region. When disaster strikes, the poor and vulnerable are hit hardest. Disasters can set back years of progress in poverty reduction. But investing in disaster risk reduction and emergency preparedness makes good economic sense.\n  </p>\n\n  <h2>\n    Latin America and the Caribbean\n  </h2>\n\n  <h3>\n    #1 Risk\n  </h3>\n\n  <h3>\n    Failure of national governance\n  </h3>\n\n  <p>\n    In a region historically plagued by governance failures, a current example of this trend is apparent in the lack of success governments have had in formulating effective housing policies. According to a 2015 report from TrustLaw, a pro bono service of the Thomson Reuters Foundation, some 113 million people across South America\u2014or nearly one in five people\u2014live in slums, fueling inequality and social exclusion.\n  </p>\n\n  <h2>\n    Sub\u00adSaharan Africa\n  </h2>\n\n  <h3>\n    #1 Risk\n  </h3>\n\n  <h3>\n    Failure of national governance\n  </h3>\n\n  <p>\n    According to the Brookings Institution\u2019s \u201cForesight Africa\u201d report last year, \u201cMany conflicts in Africa have stemmed from longstanding issues of political, economic and social marginalization, as well as systemic inequalities and historical grievances between identity groups. In addition, weak institutions fail to protect individuals and preserve rule of law...increasingly, we are seeing dictators attempting to manipulate political systems to extend their stays in power, inflaming tensions with desperate citizens, whose uprisings could turn violent.\u201d\n  </p>\n\n  <h2>\n    South Asia\n  </h2>\n\n  <h3>\n    #1 Risk\n  </h3>\n\n  <h3>\n    Water crises\n  </h3>\n\n  <p>\n    By 2030, only 60 percent of the world\u2019s demand for water will be met by existing resources at the current rate of use, according to the UN. This region, home to nearly 1.6 billion people, is feeling the pressure of population growth and urbanization. An estimated 22 of 32 cities in India face daily water shortages; in Nepal, people queue for hours to get drinking water; in Karachi, water shortages have caused public unrest.\n  </p>\n\n  <h2>\n    Central Asia including Russia\n  </h2>\n\n  <h3>\n    #1 Risk (tie)\n  </h3>\n\n  <h3>\n    Energy price shock\n  </h3>\n\n  <h3>\n    Interstate conflict\n  </h3>\n\n  <p>\n    Leading economists believe that Russia is unprepared to ride out another shock on the oil market. According to more than half of the economists in a Bloomberg survey, if crude prices dip to $30 per barrel or less, Russia\u2019s economy could be pushed to the brink, threatening the nation\u2019s financial system. The country\u2019s willingness to leap into conflicts such as Syria and Ukraine only add to the region\u2019s risks.\n  </p>\n\n  <p>\n    Related downloads:<br/>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/The-Global-Risks-Report-2016.pdf\" target=\"_blank\">The Global Risks Report 2016</a>\n  </p>\n\n  <p>\n    <a href=\"http://knowledge.zurich.com/wp-content/uploads/2016/01/Global-Risks-Report-2016-Executive-Summary.pdf\" target=\"_blank\">The Global Risks Report 2016: Executive Summary</a>\n  </p>", "description": "The Global Risks Report 2016 is available. Check out this snapshot to see what global risks look like in the regions where you do business.", "title": "Infographic: What does risk look like in your part of the world?", "image": null, "related_items": [{"tag": "risk-interconnectivity", "slug": "davos-insight"}, {"tag": "risk-interconnectivity", "slug": "hotbeds-of-opportunity"}, {"tag": "risk-interconnectivity", "slug": "conflicts-of-business-interest"}], "header": "FT - Infographic: What does risk look like in your part of the world?", "tag": "risk-interconnectivity", "content_type": "infographic", "slug": "risk-in-the-world", "thumb": "/static/images/articles/risk-interconnectivity/risk-in-the-world/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\t<span class=\"author\">January 14, 2016 | Cecilia Reyes</span>The consequences of climate change, are causing growing concern among global leaders as they intersect with a large number of interconnected global risks.\n\t</span>\n\n\t<h2>Climate adaptation is key to managing interconnected global risks</h2>\n\n\t<p>The consequences of climate change, are causing growing concern among global leaders as they intersect with a large number of interconnected global risks.</p>\n\n\t<p>The Global Risks Report 2016, published by the World Economic Forum in collaboration with Zurich Insurance Group and other leading institutions, found that while geopolitical risk such as uncontrolled immigration and interstate conflicts were seen as the most likely threat, climate issues were the risk factors most likely to influence other risks and thus had the greatest potential impact.</p>\n\n\t<p>Failure of national governance was seen as the highest risk to doing business by executives in 14 countries, half of them in Latin America, four in sub-Saharan Africa, two in Eastern Europe and one in Asia.</p>\n\n\t<h2>Geopolitical risks</h2>\n\n\t<p>Those findings are hardly surprising, given that geopolitical tensions are now at their highest level since the end of the Cold War, with growing tension over maritime rights in the south China Sea, an ongoing conflict between Russia and Ukraine creating security concerns across the old soviet bloc and military intervention in Syria.</p>\n\n\t<p>Elsewhere, there are heightened terrorism fears across Europe in the wake of the Paris attack in November 2015, continuing economic uncertainty across Europe after elections in Spain and the collapse of Portugal\u2019s government, and concerns over global growth following a slowdown in the BRIC economies.</p>\n\n\t<p>These tensions create numerous challenges for businesses and society. Companies face cancelled projects, interruptions to production and supply chains, restrictions on various activities and, potentially, politically motivated attacks on their employees and facilities. Heightened nationalism also increases the risk of protectionist measures and asset seizures.</p>\n\n\t<p>Geopolitical tensions also divert resources and energy from addressing other issues of mutual concern, including climate change, while politicizing debates around key issues such as market regulation, cyber-crime and mutual security.</p>\n\n\t<h2>Climate change</h2>\n\n\t<p>Climate change remains one of the most pressing contributing factors to geopolitical and other risks, but mitigations efforts have largely failed.</p>\n\n\t<p>In 2015, the global concentration of carbon dioxide \u2013 a key driver of climate change \u2013 exceeded 400 parts per million for the first time in recorded history, while global temperatures appear to have risen by 1 degree Celsius from the pre-Industrial era. The changes are already posing grave challenges for businesses and humanity, including an increase in coastal flooding, falling agricultural production, declining biodiversity, eco-system collapse (accompanied by declines in fish stocks, etc.), and higher costs for cooling, irrigation, etc.</p>\n\n\t<p>Those risks also have geopolitical consequences. Many people link the Arab spring uprising in 2011 to rising wheat prices, which resulted in protests in the streets of Libya, while potential disputes over water rights could lead to conflict.</p>\n\n\t<p>Globally, withdrawals of fresh water have increased threefold over the last fifty years and demand is anticipated to rise by a further 40% by 2030.</p>\n\n\t<h2>Collaboration and cooperation</h2>\n\n\t<p>Given the scale and ever increasing complexity and interconnectivity of the challenges posed by climate change, political and other risk factors, it is perhaps understandable that many stakeholders choose to focus instead on the issues that they can manage. In a 2011 survey by the Wharton Business School, for example, more than half of respondents said that the simplest way to manage geopolitical risks was to avoid investing in volatile markets.</p>\n\n\t<p>Interconnectivity, however, makes such calculations impractical. As the growing immigration crisis in the EU demonstrates, such risks no longer recognize national boundaries. That makes it increasing important that all stakeholders in society work together to address pressing global challenges.</p>\n\n\t<p>Businesses need to factor potential environmental risks and their contingencies into their business planning and become more proactive in addressing climate challenges. At Zurich, for example, we are contributing to pressing social and environmental issues with investments of up to USD 2 billion in green bonds to fund projects from hydroelectric power plants to ecological firms; as well as impact investing through private equity to help mitigate environmental risks by supporting a low-carbon economy and encouraging environmentally friendly technologies.</p>\n\n\t<p>The greatest challenge for corporations is to build resilience to climate and other hazards. This requires a new, more integrated and holistic risk management approach which takes interdependencies between risks into account, with a truly holistic risk management approach. Corporate boards must own the risk agenda because they own the strategy which is inherently intertwined with risk. The Board\u2019s role is to set the agenda, drive the culture of risk and oversee implementation throughout the organization.</p>", "thumb": "/static/images/articles/risk-interconnectivity/climate-adaptation/thumb.jpg", "description": null, "title": "Video: Climate adaptation is key to managing interconnected global risks", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/GRR2016_CR_main.mp4", "image": "/static/images/articles/risk-interconnectivity/climate-adaptation/video.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "global-risks-2016-executive"}, {"tag": "risk-interconnectivity", "slug": "wef-global-risk-highest-concern"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2016-map"}], "header": "FT - Video: Climate adaptation is key to managing interconnected global risks", "tag": "risk-interconnectivity", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/GRR2016_CR_main.ogv", "slug": "climate-adaptation", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/GRR2016_CR_main.webm"}, {"body": "<span class=\"intro-line\">\n    <span class=\"author\">January 14, 2016 | Steve Wilson</span>Building resilience against global risks necessitates consensus in identifying the risks that should most concern different stakeholders across regions and countries. This infographic focuses on the impact of global risks on the business community across different regions and countries. It draws on the views of executives in 140 economies covered by the World Economic Forum\u2019s Executive Opinion Survey about the risks of highest concern for doing business.\n  </span>\n\n  <p>\n    The risks of highest concern for doing business differ considerably from country to country, according to EOS data. However, some patterns emerge. In developed economies, economic risks such as asset bubbles and fiscal crises are high on the business agenda; concern is also present about technological risks such as cyberattacks and data theft. In these economies, it is increasingly evident that connectivity plays a central role in production processes, service provision and everyday life. In emerging and developing economies, the top concern is unemployment and underemployment as well as potential energy price shocks.\n  </p>\n\n  <img src=\"/static/images/articles/risk-interconnectivity/wef-global-risk-highest-concern/risk-map.jpg\" width=\"600\"/>\n\n  <p>Read more: <a href=\"http://reports.weforum.org/global-risks-2016/\" target=\"_blank\">Source: The Global Risks Report 2016, World Economic Forum</a><br/><a href=\"https://twitter.com/hashtag/risk2016\" target=\"_blank\">#risks2016</a></p>\n\n  <p>\n    A striking finding is the relative absence of environmental risks and, more generally, of long-term issues among the top concerns of business leaders in their respective countries. For instance, no executive considers failure of climate mitigation and adaptation as the number one risk for doing business in his/her country. This stands in contrast to the priorities considered by members of the multistakeholder community of the World Economic Forum who took part in the Global Risks Perception Survey and perceived it as the most impactful and the third most likely risk on a global scale. This finding highlights the divergence between national and global interests when it comes to some global risks such as climate change. It also calls for continued alignment across stakeholders whose actions are based on different time horizons.\n  </p>\n\n  <p>\n    The top global risks for doing business for each country are shown in this infographic. Full economy-level data are available at <a href=\"http://www.weforum.org/risks\" target=\"_blank\">www.weforum.org/risks</a>. Throughout Part 4 of the Report which features this graphic, the ranking of risks refers exclusively to the EOS question on risks of highest concern for doing business. Read the report to find out more.\n  </p>", "description": null, "title": "WEF Global risk of highest concern for doing business, by country, 2016", "image": "/static/images/articles/risk-interconnectivity/wef-global-risk-highest-concern/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "global-risks-2016-map"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2016-executive"}, {"tag": "risk-interconnectivity", "slug": "climate-adaptation"}], "header": "FT - WEF Global risk of highest concern for doing business, by country, 2016", "tag": "risk-interconnectivity", "content_type": "article", "slug": "wef-global-risk-highest-concern", "thumb": "/static/images/articles/risk-interconnectivity/wef-global-risk-highest-concern/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Amid growing concern from business leaders about international security risks, the World Economic Forum\u2019s Global Risks Report 2016, developed in collaboration with Zurich Insurance Group and other leading institutions, features scenarios to help companies and organizations examine the trends and driving forces behind future global developments.\n  </span>\n\n  <p>\n    The scenarios are based on three possible dystopian futures called: Walled Cities, Strong Regions, and War and Peace. You can read about them in more detail <a href=\"/risk-interconnectivity/reports/global-risks-2016/\" target=\"_blank\">here</a>.\n  </p>\n\n  <p>\n    This method of using a combination of storytelling and simulation about how the future might unfold is used by many organizations to make flexible long\u2010term plans. Emerging in the 1960s, it was a move away from forecast\u2010based planning and predictions.\n  </p>\n\n  <p>\n    Zurich advocates a holistic risk management view and approach, along with other tools such as Total Risk Profiling and Hazard Analysis, to help companies and organisations find their way in a world of increasingly interconnected risks. Scenario planning is an approach familiar to Angela Wilkinson, who is Counselor for Strategic Foresight at the Organization for Economic Co\u2010operation and Development. She was previously Director of Futures Programs at Oxford University\u2019s Smith School of Enterprise and Environment, and also spent a decade at Shell, one of the pioneers of scenario planning. Co\u2010author of \u201cStrategic Reframing: The Oxford Scenario Planning Approach\u201d, she tells us more about the technique:\n  </p>\n\n  <p>\n    \u201cI\u2019ve worked on scenario planning with both businesses and the public sector and, used well, it is transformative. It\u2019s a really good way of helping people develop agile, adaptive and creative responses to situations they\u2019re facing.\n  </p>\n\n  <p class=\"quote\">\n    \u201cPeople are thinking a lot more in terms of global changes, not just local and national changes, and this presents new challenges of emerging risk and global uncertainty.\u201d\n  </p>\n\n  <p>\n    \u201cThat\u2019s particularly important today when we face increasingly interconnected challenges with multiple drivers \u2013 whether it\u2019s migration, climate change, resource stress, the governance of new global business models such as Uber or Airbnb, or disruptive technologies such as Bitcoin. People are thinking a lot more in terms of global changes, not just local and national changes, and this presents new challenges of emerging risk and global uncertainty. Conventional risk management approaches assume the future can be known using data from the past, so can\u2019t deal with these.\n  </p>\n\n  <p>\n    \u201cThere is a tendency to see the world through the lens of quantifiable and downside risk. But the businesses that flourish from scenario planning engage with unpredictable uncertainty to create and identify new opportunities.\n  </p>\n\n  <h2>Space for dialogue</h2>\n\n  <p>\n    \u201cIn scenario planning, you are redirecting attention to futures that are already emerging in the here\u2010and\u2010now, not embarking on wild speculation. These stories open up a safe space for dialogue, and creative thinking. They improve the quality of strategic conversation, which leads to better decision making.\n  </p>\n\n  <p>\n    \u201cBy working with a set of alternative futures it is possible to reveal and test the official future \u2013 a dominant narrative that\u2019s been honed by past experiences and successes and is accepted by the status quo in power.\n  </p>\n\n  <p>\n    \u201cMy job is to facilitate this structured, strategic conversation so that it includes the potential of disruptive change, good or bad \u2013 and allows new voices and different perspectives to be heard. The art is to push people to the edge of their intellectual comfort zone, whilst exciting them with new ideas, so that they are active learners and doers. It\u2019s an immersive learning experience for those involved \u2013 people insert themselves into these different scenarios and develop their own stories of success. It\u2019s not like reading or writing a report and more like improvisational theatre!\n  </p>\n\n  <h2>Emerging possibilities</h2>\n\n  <p>\n    \u201cUnlike conventional forecasting which works by assuming the future is somewhere in the distance and knowable given sufficient data, scenario planning recognizes the emerging, transient and multiple nature of future developments already in the here\u2010and-now.\n  </p>\n\n  <p>\n    \u201cA scenario\u2010based planning process should help you understand the killer assumptions you are making and why your forecast might not turn out right. People do it intuitively in their everyday lives when they say something like: \u2018We are having a barbecue \u2010 what happens if it rains?\u2019 Yet when we work in groups and organizational settings our ability to effectively anticipate can become struck in groupthink (based around one ideal scenario) or fragmentation of ideas (too many scenarios). Scenario planning works by building only as many scenarios as are needed and useful \u2013 usually two, three or four  \u2013 and avoiding the traps of thinking a particular future is all good or all bad.\n  </p>\n\n  <p class=\"quote\">\n    \u201cEverybody\u2019s got killer assumptions about the future somewhere \u2013 often buried in their strategic conversation, organizational narrative, or strategy and planning.\u201d\n  </p>\n\n  <h2>Using scenarios</h2>\n\n  <p>\n    \u201cThe first thing to do is to find out how people in the organization understand their strategic challenges and how they make sense of the future. Everybody\u2019s got killer assumptions about the future somewhere \u2013 often buried in their strategic conversation, organizational narrative, or strategy and planning. Is their vision clear, shared and translated into measurable action? Do they need to align their values and forge common ground? Do they need scenario planning because they are dealing with a turbulent or uncertain situation? Or are they trying to implement a strategic plan and need an early warning system?\n  </p>\n\n  <p>\n    \u201cI worked with a company in the biotech industry that felt it had become stuck with its strategic innovation. They found their ideas kept falling in the same opportunity space of health, the sector they\u2019d been spun\u2010off from. Unintentionally, they were trying to re\u2010invent the parent company and they couldn\u2019t break this locked in thinking. So, they used the scenario planning intervention to create new ways of thinking and to address the questions: \u2018How can we grow but in a way that is different? What are the contexts we could be facing and what do they tell us about the new and different innovation domains we should be accessing?\u2019 They identified several billion\u2010dollar growth opportunities in other sectors.\n  </p>\n\n  <h2>Helping collaboration</h2>\n\n  <p>\n    \u201cIn the process of scenario planning, people start engaging with other colleagues and new and different ideas from other businesses, sectors and professional communities. They learn what\u2019s going on from the point of view of others, and this helps them to discover insights and create new opportunities.\n  </p>\n\n  <p class=\"quote\">\n    \u201cThis is an approach that helps collaborative strategy to create the future context and that\u2019s a big shift in the business world.\u201d\n  </p>\n\n  <p>\n    \u201cThere are a lot of tools for competitive strategy but this is an approach that helps collaborative strategy to create the future context and that\u2019s a big shift in the business world. Today, you need a good balance between collaborative and competitive strategy. It\u2019s no use being one step ahead of the competition, if everyone falls off the cliff together.\u201d\n  </p>", "description": "Amid growing concern from business leaders about international security risks, the World Economic Forum\u2019s Global Risks Report 2016, developed in collaboration with Zurich Insurance Group and other leading institutions, features scenarios to help companies and organizations examine the trends and driving forces behind future global developments.", "title": "Future scenarios", "image": "/static/images/articles/risk-interconnectivity/future-scenarios/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "global-risks-2016-map"}, {"tag": "risk-interconnectivity", "slug": "time-to-wake-up"}, {"tag": "risk-interconnectivity", "slug": "future-risks"}], "header": "FT - Future scenarios", "tag": "risk-interconnectivity", "content_type": "article", "slug": "future-scenarios", "thumb": "/static/images/articles/risk-interconnectivity/future-scenarios/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tLearn how to track regional risks as they evolve, and the implications they might have for your global business.\n\t</span>\n  <p>The risks to your business in a truly globalized world are too numerous and too interconnected to be completely avoided\u2014the more immediate risks are often easier to recognize, but there can be existential threats from pervasive risks that slowly drain your business of its vitality.</p>\n  <p>\u201cFor a modern business to survive and prosper requires a holistic view of the world and the interconnected risks that permeate it,\u201d says Steve Wilson, Chief Risk Officer, General Insurance, Zurich Insurance Group. \u201cFor example, technology has made it possible for nearly any business to operate on a global level, but along with that, cyber breaches and disruptions have become the new norm. The ripple effects of this have real implications.\u201d</p>\n  <h2>A strategy of resilience </h2>\n  <p>In a global risk landscape that is now commonly described as a \u201cnot if, but when\u201d proposition, it is tempting to focus solely on a defensive risk management strategy. However, history is full of examples of static approaches to risks inevitably leading to failure: nations conquered; entire business sectors upended; natural resources depleted.</p>\n  <p class=\"quote\">\u201cThis is not just a technical matter, but requires a view across all dimensions of your company.\u201d</p>\n  <p>For your business to continually evolve, thrive and stay ahead of the competition requires proactively rethinking your risk management strategy to incorporate reinvigorated strength and layer upon layer of resiliency.</p>\n  <p>\u201cResilience is an absolutely key concept,\u201d says Wilson. \u201cIf your business or part of your supply chain is located in a coastal area that\u2019s about to be hit by a hurricane, there\u2019s nothing you can do to avoid it. Nor can you opt out of the possibility that your business will suffer a cyber attack\u2014you can never prevent everything that you\u2019d like to see prevented. Prevention is obviously important, but so is resilience\u2014the ability to bounce back at least as strong as before, and maybe stronger. The starting point is to understand the exposures you face. This is not just a technical matter, but requires a view across all dimensions of your company.\u201d</p>\n  <p>Wilson and his colleagues at Zurich Insurance Group are among the thought and action leaders ushering in a new a new era of business resilience that is focused not just on reaction, but on action fueled by knowledge and uncommon insights. The goal is to encourage businesses to think more broadly about how to enhance the long-term sustainability of an organization against a backdrop of constant change. In so doing, businesses will not abandon measures that help manage and mitigate short-term disruptions, but they should seek to expand existing risk management activities and supplement them with a broader focus on the factors that contribute to resilience. Moving from urgency-driven risk management to more collaborative efforts to strengthen risk resilience can serve to benefit not only the business itself, but the local and global communities it serves, as well.</p>", "thumb": "/static/images/articles/risk-interconnectivity/a-risk-to-your-business-is-born/thumb.jpg", "description": "Learn how to track regional risks as they evolve, and the implications they might have for your global business.", "title": "Video: A risk to your business is born", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/risk-and-opportunities-in-europe.mp4", "image": "/static/images/articles/risk-interconnectivity/a-risk-to-your-business-is-born/video.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "future-risks"}, {"tag": "risk-interconnectivity", "slug": "a-future-built-on-resilience"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2015"}], "header": "FT - Video: A risk to your business is born", "tag": "risk-interconnectivity", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/risk-and-opportunities-in-europe.ogv", "slug": "a-risk-to-your-business-is-born", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/risk-and-opportunities-in-europe.webm"}, {"body": "<span class=\"intro-line\">\n\t\tWith risk events inevitable it\u2019s critical to focus on resiliency as a key element of your holistic risk management strategy.\n\t</span>\n  <h2>Executive Summary</h2>\n  <p>The 2015 edition of the Global Risks report completes a decade of highlighting the most significant long-term risks worldwide, drawing on the perspectives of experts and global decision-makers. Over that time, analysis has moved from risk identification to thinking through risk interconnections and the potentially cascading effects that result. Taking this effort one step further, this year\u2019s report underscores potential causes as well as solutions to global risks. Not only do we set out a view on 28 global risks in the report\u2019s traditional categories (economic, environmental, societal, geopolitical and technological) but also we consider the drivers of those risks in the form of 13 trends. In addition, we have selected initiatives for addressing significant challenges, which we hope will inspire collaboration among business, government and civil society communities.</p>\n  <p>A global risk is an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years.</p>\n  <p>A trend is defined as a long-term pattern that is currently taking place and that could amplify global risks and/or alter the relationship between them.</p>\n  <h2>Mapping Global Risks in 2015</h2>\n  <p>The Global Risks Landscape, a map of the most likely and impactful global risks, puts forward that, 25 years after the fall of the Berlin Wall, \u201cinterstate conflict\u201d is once again a foremost concern (see Table 1). However, 2015 differs markedly from the past, with rising technological risks, notably cyber attacks, and new economic realities, which remind us that geopolitical tensions present themselves in a very different world from before. Information flows instantly around the globe and emerging technologies have boosted the influence of new players and new types of warfare. At the same time, past warnings of potential environmental catastrophes have begun to be borne out, yet insufficient progress has been made \u2013 as reflected in the high concerns about failure of climate-change adaptation and looming water crises in this year\u2019s report.</p>\n  <p>These multiple cross-cutting challenges can threaten social stability, perceived to be the issue most interconnected with other risks in 2015, and additionally aggravated by the legacy of the global economic crisis in the form of strained public finances and persistent unemployment. The central theme of profound social instability highlights an important paradox that has been smouldering since the crisis but surfaces prominently in this year\u2019s report. Global risks transcend borders and spheres of influence and require stakeholders to work together, yet these risks also threaten to undermine the trust and collaboration needed to adapt to the challenges of the new global context.</p>\n  <p>Table 1: Ten Global Risks in Terms of Likelihood and Impact</p>\n  <img src=\"/static/images/articles/risk-interconnectivity/a-future-built-on-resilience/top-10-risks.jpg\" width=\"100%\"/>\n  <p>Source: Global Risks Perception Survey 2014, World Economic Forum</p>\n  <p> The world is, however, insufficiently prepared for an increasingly complex risk environment. For the first time, the report provides insights on this at the regional level: social instability features among the three global risks that Europe, Latin America and the Caribbean, and the Middle East and North Africa are least prepared for. Other societal risks, ranging from the failure of urban planning in South Asia to water crises in the Middle East and North Africa, are also prominent. And capacity to tackle persistent unemployment \u2013 an important risk connected with social instability \u2013 is a major concern in Europe and sub-Saharan Africa.</p>\n  <p>The Global Risks Perception Survey 2014 gathered the perceptions of almost 900 members of the World Economic Forum\u2019s multistakeholder community between July and September 2014.</p>\n  <p>As in previous years, Part 2 explores three risk constellations that bear on the survey findings. In 2015, these are:</p>\n  <p>Interplay between geopolitics and economics: The interconnections between geopolitics and economics are intensifying because states are making greater use of economic tools, from regional integration and trade treaties to protectionist policies and cross-border investments, to establish relative geopolitical power. This threatens to undermine the logic of global economic cooperation and potentially the entire international rule-based system.</p>\n  <p>Urbanization in developing countries: The world is in the middle of a major transition from predominantly rural to urban living, with cities growing most rapidly in Asia and Africa. If managed well, this will help to incubate innovation and drive economic growth. However, our ability to address a range of global risks \u2013 including climate change, pandemics, social unrest, cyber threats and infrastructure development \u2013 will largely be determined by how well cities are governed.</p>\n  <p>Governance of emerging technologies: The pace of technological change is faster than ever. Disciplines such as synthetic biology and artificial intelligence are creating new fundamental capabilities, which offer tremendous potential for solving the world\u2019s most pressing problems. At the same time, they present hard-to-foresee risks. Oversight mechanisms need to more effectively balance likely benefits and commercial demands with a deeper consideration of ethical questions and medium to long-term risks \u2013 ranging from economics to environmental and societal.</p>\n  <p>Mitigating, preparing for and building resilience against global risks is long and complex, something often recognized in theory but difficult in practice. Against this backdrop, Part 3 features three proven or promising initiatives that were instituted in response to extreme weather events and climate-change adaptation. The modelling of the Murray-Darling Basin river system in Australia has pioneered innovative methods of water management that are now being adapted for use elsewhere in the world. The Resilient America Roundtable is currently helping selected local communities across the United States to understand how they might be affected by different risks and then design resilience strategies. Z\u00dcRS Public, part of an extensive flood management programme in Germany, is a public-private collaboration that for several years now has been a tool for communicating with homeowners and businesses about their exposure to flood risk.</p>\n  <p>Over the past 10 years, the Global Risks report has raised awareness of the dangers from the interconnected nature of global risks and has persistently called for multistakeholder collaboration to address them. By offering a broad-ranging overview from risk identification and evaluation to practices \u2013 from the \u201cwhat\u201d to the \u201chow\u201d \u2013 this year\u2019s report aims to provide the most comprehensive set of insights yet for decision-makers in its decade-long history.</p>\n\t<p>Source: Global Risks 2015, World Economic Forum</p>", "thumb": "/static/images/articles/risk-interconnectivity/a-future-built-on-resilience/thumb.jpg", "description": "With risk events inevitable it\u2019s critical to focus on resiliency as a key element of your holistic risk management strategy.", "title": "Video: A future built on resilience", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/a-future-built-opti.mp4", "image": "/static/images/articles/risk-interconnectivity/a-future-built-on-resilience/video.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "future-risks"}, {"tag": "risk-interconnectivity", "slug": "a-risk-to-your-business-is-born"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2015"}], "header": "FT - Video: A future built on resilience", "tag": "risk-interconnectivity", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/a-future-built-opti.ogv", "slug": "a-future-built-on-resilience", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/a-future-built-opti.webm"}, {"body": "<span class=\"intro-line\">\n    Automation and big data will shape global development over the next decade. But how much do we understand about the impact this will have on countries, economies and people?\n  </span>\n  <img src=\"/static/images/articles/risk-interconnectivity/future-risks/future-risks.jpg\" width=\"559\"/>", "description": "Automation and big data will shape global development over the next decade. But how much do we understand about the impact this will have on countries, economies and people?", "title": "Infographic: Future Risks", "image": null, "related_items": [{"tag": "risk-interconnectivity", "slug": "businesses-must-adapt"}, {"tag": "risk-interconnectivity", "slug": "tackling-geopolitical-risks"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2016"}], "header": "FT - Infographic: Future Risks", "tag": "risk-interconnectivity", "content_type": "infographic", "slug": "future-risks", "thumb": "/static/images/articles/risk-interconnectivity/future-risks/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    The 2015 edition of the Global Risks report completes a decade of highlighting the most significant long-term risks worldwide.\n  </span>\n  <p>\n    Over that time, analysis has moved from risk identification to thinking through risk interconnections and the potentially cascading effects that result. Taking this effort one step further, this year\u2019s report underscores potential causes as well as solutions to global risks. Not only do we set out a view on 28 global risks in the report\u2019s traditional categories (economic, environmental, societal, geopolitical and technological) but also we consider the drivers of those risks in the form of 13 trends. In addition, we have selected initiatives for addressing significant challenges, which we hope will inspire collaboration among business, government and civil society communities.\n  </p>\n  <p>\n    Download the full report:<br/>\n    <a href=\"http://www.zurich.com/_/media/dbe/corporate/docs/whitepapers/global-risks-2015-report.pdf?la=en\" target=\"_blank\">Global Risks 2015 report (3 MB, pdf)</a>\n  </p>", "description": "The 2015 edition of the Global Risks report completes a decade of highlighting the most significant long-term risks worldwide.", "title": "Global Risks 2015 report", "image": "/static/images/reports/risk-interconnectivity/global-risks-2015/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "risk-viewed-in-the-round"}, {"tag": "risk-interconnectivity", "slug": "global-risks-landscape-and-interconnection-maps"}, {"tag": "risk-interconnectivity", "slug": "one-two-punch-of-captives"}], "header": "FT - Global Risks 2015 report", "tag": "risk-interconnectivity", "content_type": "article", "slug": "global-risks-2015", "thumb": "/static/images/reports/risk-interconnectivity/global-risks-2015/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    To what extent is urbanization a critical driver of social instability, failure of infrastructure, water crises &amp; the spread of infectious diseases?\n  </span>\n  <h2>The Risks of Rapid Urbanization in Developing Countries</h2>\n  <p>\n    It is estimated that by 2050 more than two thirds of the world\u2019s population will live in cities, up from about 54 percent today. While the many benefits of organized and efficient cities are well understood, we need to recognize that this rapid, often unplanned urbanization brings risks of profound social instability, risks to critical infrastructure, potential water crises and the potential for devastating spread of disease. These risks can only be further exacerbated as this unprecedented transition from rural to urban areas continues.\n  </p>\n  <p>\n    How effectively these risks can be addressed will increasingly be determined by how well cities are governed. The increased concentration of people, physical assets, infrastructure and economic activities mean that the risks materializing at the city level will have far greater potential to disrupt society than ever before.\n  </p>\n  <p>\n    Urbanization is by no means bad per se. It brings important benefits for economic, cultural and societal development. Well managed cities are both efficient and effective, enabling economies of scale and network effects while reducing the impact on climate of transportation. As such, an urban model can make economic activity more environmentally-friendly. Further, the proximity and diversity of people can spark innovation and create employment as exchanging ideas breeds new ideas.\n  </p>\n  <p>\n    But these utopian concepts are threatened by some of the factors driving rapid urbanization. For example, one of the main factors is rural-urban migration, driven by the prospect of greater employment opportunities and the hope of a better life in cities. But rapidly increasing population density can create severe problems, especially if planning efforts are not sufficient to cope with the influx of new inhabitants. The result may, in extreme cases, be widespread poverty. Estimates suggest that 40% of the world\u2019s urban expansion is taking place in slums, exacerbating socio-economic disparities and creating unsanitary conditions that facilitate the spread of disease.\n  </p>\n  <p>\n    The Global Risks 2015 Report looks at four areas that face particularly daunting challenges in the face of rapid and unplanned urbanization: infrastructure, health, climate change, and social instability. In each of these areas we find new risks that can best be managed or, in some cases, transferred through the mechanism of insurance.\n  </p>\n  <h2>Infrastructure</h2>\n  <p>\n    The quality of a city\u2019s infrastructure is central to the residents\u2019 quality of life, social inclusion and economic opportunities. It also determines the city\u2019s resilience to a number of global risks, in particular environmental, social and health-related risks, but also economic risks such as unemployment. The availability and quality of infrastructure are at the core of many of the challenges faced by rapidly urbanizing cities in developing countries, while underinvestment  is posing similar challenges in most developed economies  (WEF data.)\n  </p>\n  <ul>\n    <li>Infrastructure investments in most developed economies are insufficient to maintain the quality of infrastructure (WEF and OECD data): Transportation infrastructure (roads, railroad, airports, ports)</li>\n    <li>Electric power supply and distribution</li>\n    <li>Water supply and sewage</li>\n    <li>Communications infrastructure</li>\n  </ul>\n  <p>\n    This underinvestment is particularly notable in the U.S., UK and Germany.\n  </p>\n  <p>\n    Infrastructure failure would have significant implications for property and business continuity for city authorities as well as local and central Government bodies. Insurers can help in these areas in terms of risk engineering advice on infrastructure maintenance and also appropriate levels of insurance property damage and business interruption coverage.\n  </p>\n  <p>\n    As cities expand rapidly, there is a risk that infrastructure will not keep pace with their growth or the increased expectations of their populations. Action is urgently needed to close the infrastructure gap and reduce the potential for risks to have catastrophic cascading effects. The <a href=\"http://www.oecd.org/futures/infrastructureto2030/40953164.pdf\" target=\"_blank\">OECD</a> estimates that governments will have to spend approximately USD 71 trillion by 2030 to provide adequate global infrastructure for electricity, road and rail transport, telecommunications, and water.\n  </p>\n  <p>\n    This level of financing may not be achievable given that many governments are under tight budget constraints and that many developing countries allocate much of their national income to meeting the basic needs of their population.\n  </p>\n  <p>\n    Consequently, cities are looking for public-private collaboration to involve the private sector in the design, construction and maintenance of infrastructure. Zurich addressed this issue recently in \u201cLong-term investments, risks and regulation: an insurance perspective\u201d.\n  </p>\n  <p>\n    <a href=\"http://knowledge.zurich.com/insurance-and-society/long-term-investments-risks-and-regulation-an-insurance-perspective/\" target=\"_blank\">http://knowledge.zurich.com/insurance-and-society/long-term-investments-risks-and-regulation-an-insurance-perspective/</a>\n  </p>\n  <h2>Health</h2>\n  <p>\n    Throughout the 20<sup>th</sup> century, the health of city dwellers increasingly benefitted from better access to education and healthcare, better living conditions, and targeted public-health interventions. In advanced economics, emergency medical care can be accessed within hours and advanced facilities for longer term treatments are readily accessible. However, when urbanization is rapid and unplanned, a combination of high population density, poverty and lack of infrastructure can have the opposite effect, fostering conditions for communicable diseases to flourish.\n  </p>\n  <p>\n    It is striking that, today, almost 700 million urban dwellers lack adequate sanitation. The problem is particularly acute in sub-Saharan Africa and south-central Asia, where 62 percent and 43 percent, respectively, of the urban population live in slums  and are faced with unacceptable levels of risk to illnesses, worm infections, cholera and diarrhea.\n  </p>\n  <p>\n    Most worryingly, in today\u2019s hyper connected world, it is easier for pathogens to be carried from one city to another with potential for large scale outbreaks.\n  </p>\n  <p>\n    The economic impact of Ebola is enormous for the affected countries and neighboring states. The World Bank Group estimates the economic cost of Ebola to be approximately USD 32 billion, in the worst-case scenario. One of the key aggravating factors to the Ebola crisis was the lack of a governance mechanism that would allow an effective link between what was being observed at the country and city levels and the alert mechanisms needed to trigger an emergency response.\n  </p>\n  <h2>Climate Change</h2>\n  <p>\n    Rapid, inadequate and poorly planned expansion of cities can also leave urban populations highly exposed to the effects of climate change. The migration from rural areas to cities is at least partially driven by the increasing prevalence of extreme weather; however cities tend to be located near the sea or natural waterways, where they are at more risk of flooding (<a href=\"https://www.zurich.com/en/industry-knowledge/flood-resilience\" target=\"_blank\">https://www.zurich.com/en/industry-knowledge/flood-resilience</a>). Fifteen of the world\u2019s twenty megacities \u2013 those with over 10 million inhabitants \u2013 are located in coastal zones threatened by sea-level rise and storm surges. Making cities more resilient to extreme weather events should be a priority for both local governments and the private sector.\n  </p>\n  <p>\n    The insurance industry has a lot to offer in terms of risk management advice, products and services (i.e., property insurance) regarding the management of flooding.\n  </p>\n  <p>\n    A point in case is Zurich\u2019s UK post event flood paper which was produced as part of Zurich\u2019s flood resilience program \u2013 Post Event Review Capability (PERC). It provides an overview and key insights into the flooding (i.e., Xaver event) that took place in 2013. The paper draws on public information and provides Zurich\u2019s perspective as result of its own experience as an insurer in the affected areas.\n  </p>\n  <h2>Social Instability</h2>\n  <p>\n    Cities\u2019 capacity to generate prosperity already largely determines global growth: just over half the world\u2019s population lives in cities, but they generate more than 80% of global GDP. Ultimately, new migrants in cities are expected to create greater economic value than they would have in the countryside. This in turn has the potential to drive greater personal wealth and the desire to protect personal assets and income, offering another role for the insurance industry. However, even when cities are successful, the process of absorbing migrants into urban economies is not necessarily smooth. While moving to a city offers individuals more opportunities to improve their living conditions, the high cost of living and competition for livelihoods can also trap people in poverty.\n  </p>\n  <p>\n    Rapid and unplanned urbanization can also quickly lead to urban violence and social unrest. Widening inequalities also tend to be more starkly visible in urban than rural areas. The combination of inequality, competition for scarce resources such as land, impunity from the law and weak city governance increases the risk of violence and potential breakdowns in law and order. Some cities in developing countries are already extremely dangerous, for example San Pedro Sula in Honduras suffered 169 killings per 100,000 residents in 2011.\n  </p>\n  <p>\n    Urbanization can also create connected and cascading effects. For example, high population density fuels property bubbles while a shortage of affordable housing contributes to social exclusion, with this combination threatening to destabilize the wider economy and increase social instability.\n  </p>\n  <p>\n    Ultimately, urbanization creates opportunities but also exacerbates risks, and the speed at which it is happening challenges our capacity to plan and adapt. This is particularly true in developing economies. For rapid urbanization to provide opportunities to all, carefully considered urban planning and good governance with effective regulatory frameworks are required.\n  </p>\n  <p>\n    The inability of governments to provide appropriate infrastructure and public services is at the core of many urban challenges in developing countries.\n  </p>\n  <p>\n    What is more, as the world continues to urbanize, power will increasingly be concentrated in cities. This power \u2013 ranging from economic to social \u2013 not only makes cities the center of gravity, but offers greater scope to find practical solutions to the most pressing challenges. Indeed, many observers and organizations are now focusing on cities and the connections between them rather than directing their attention at the national level. The strength of city-level institutions in addition to national institutions \u2013 their capacity to be flexible, innovative and dynamic, and effectively involve multiple stakeholders in governance \u2013 will largely determine whether urbanization makes the world more resilient or more vulnerable in the face of global risks.\n  </p>\n  <p>\n    As these risks are interconnected, a holistic view and approach is key to mitigating them. They can affect all of us in unpredictable ways, and they are your concern as well as ours. As with all risk management, the very first step is awareness \u2013 so it is necessary to highlight and discuss the challenge of interconnected risks on a broader level to ensure adequate levels of public awareness. Close contact between business, governments, communities, city councils, and academic institutions is essential in reaching effective solutions as this will foster an environment where innovative public private partnerships can develop. At Zurich, we see the big picture of interconnected risks and we collaborate with those who care about them. (<a href=\"https://www.zurich.com/en/industry-knowledge\" target=\"_blank\">https://www.zurich.com/en/industry-knowledge</a>) Whether its technological developments for smart traffic control or risk management of critical infrastructure, it has never been so important to ensure that our cities are both efficient and resilient.\n  </p>", "description": "To what extent is urbanization a critical driver of social instability, failure of infrastructure, water crises & the spread of infectious diseases?", "title": "The risks of rapid urbanization in developing countries", "image": "/static/images/articles/risk-interconnectivity/risks-of-rapid-urbanization/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "responding-to-global-risks-report"}, {"tag": "risk-interconnectivity", "slug": "insuring-fdi-success"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2015"}], "header": "FT - The risks of rapid urbanization in developing countries", "tag": "risk-interconnectivity", "content_type": "article", "slug": "the-risks-of-rapid-urbanization-in-developing-countries", "thumb": null}, {"body": "<span class=\"intro-line\">\n    <span class=\"author\">January 14, 2016 | Steve Wilson</span>What are the risks to business of highest concern in the long- and short-term? See how the risks are interconnected as shown in The Global Risks Report which continues to raise awareness about global risks and their potential interconnections, and to provide a platform for discussion and action to mitigate, adapt and strengthen resilience.\n  </span>\n\n  <img src=\"/static/images/articles/risk-interconnectivity/global-risks-2016-map/highest-concern.png\" width=\"600\"/>\n\n  <p>Read more: <a href=\"http://reports.weforum.org/global-risks-2016/\" target=\"_blank\">Source: The Global Risks Report 2016, World Economic Forum</a><br/><a href=\"https://twitter.com/hashtag/risk2016\" target=\"_blank\">#risks2016</a></p>\n\n  <p>Source: World Economic Forum, Global Risks 2016</p>\n\n  <p>\n    As in previous years, assessments of risks in this year\u2019s Report are based on the Global Risks Perception Survey. The survey captures the perceptions of almost 750 experts and decision-makers in the World Economic Forum\u2019s multi-stakeholder communities and was conducted in Fall 2015. Respondents are drawn from business, academia, civil society and the public sector and span different areas of expertise, geographies and age groups.\n  </p>\n\n  <p>\n    To tease apart short- and longer-term thinking and shed light on the psychology behind the responses, the survey asked experts to nominate risks of highest concern over two time horizons: 18 months and 10 years. Global risks that have recently been in the headlines \u2013 such as large-scale involuntary migration, interstate conflict and cyberattacks \u2013 tend to feature higher as short-term concerns, indicating that recent  events significantly influence our thinking about risks and, hence, stakeholder action.\n  </p>\n\n  <p>\n    The longer-term concerns are more related to underlying physical and societal trends, such as the failure of climate change mitigation and adaptation, water crises and food crises. Interestingly, extreme weather events and social instability are considered a concern in both the short and long term, reflecting an  expectation that the frequency and intensity of crises will continue to rise. One of the roles of this Report  is to raise awareness about the importance of long-term thinking about global risks \u2013 especially significant when it comes to attempting to limit the extent of climate change and to adapt to the change that is already inevitable.\n  </p>\n\n  <p>\n    Three risk clusters are discussed in more detail: the cluster linking the failure of climate change mitigation  and adaptation with water crises and large-scale involuntary migration; the cluster linking large-scale involuntary migration with a range of risks related to social and economic stability; and the cluster linking economic global risks with uncertainty around the impacts of the Fourth Industrial Revolution.\n  </p>\n\n  <h2>Coping with the changing climate</h2>\n\n  <img src=\"/static/images/articles/risk-interconnectivity/global-risks-2016-map/interconnection-map.png\" width=\"600\"/>\n\n  <p>Read more: <a href=\"http://reports.weforum.org/global-risks-2016/\" target=\"_blank\">Source: The Global Risks Report 2016, World Economic Forum</a><br/><a href=\"https://twitter.com/hashtag/risk2016\" target=\"_blank\">#risks2016</a></p>\n\n  <p>Source: World Economic Forum, Global Risks 2016</p>\n\n  <p>\n    Climate change and water crises, which have featured prominently in the Global Risks Landscape over the last five years, are joined this year by largescale involuntary migration. The links among these risks appear clearly in the Global Risks Interconnections Map 2016 (Figure 2 below), and the intertwined challenges are unfolding against a background of many socio-economic pressures.\n  </p>\n\n  <p>\n    As illustrated by the Global Risks Interconnections Map, climate change and water risks are intricately linked to food security concerns \u2013 a subject explored further in Part 3 of the Report. About 70% of the world\u2019s current freshwater withdrawals are used for agriculture, rising to over 90% in most of the world\u2019s least-developed countries. Carbon dioxide also causes ocean acidification, which makes it harder for small shellfish to form the calcium carbonite shells they need to grow \u2013 with implications rising up the food chain, threatening the availability of food from the seas as well.\n  </p>\n\n  <p>\n    Challenges around water management are already immense. On the one hand, over a billion people lack access to improved water. Some 2.7 billion \u2013 or 40% of the world\u2019s population \u2013 suffer water shortages for at least a month each year. The Organization for Economic Co-operation and 2030 across Asia. Globally, based on current trends, water demand is projected to exceed sustainable supply by 40% in 2030. Adding to the pressures, agricultural production will have to increase in the coming decades to feed a growing population and a rising demand for meat.\n  </p>\n\n  <p>\n    Unless current water management practices change significantly, many parts of the world will therefore face growing competition for water between agriculture, energy, industry, and cities. Tensions are likely to grow within countries, especially between rural and urban areas and between poorer and richer areas, and also potentially between jurisdictions. More than 60% of the world\u2019s trans-boundary water basins lack any type of cooperative management framework. Even where such frameworks do exist, they often do not cover all states that use the basin. Interstate tensions over water access are already apparent in some parts of South Asia, and could impact the evolution of the international security landscape, as discussed in Part 2.\n  </p>\n\n  <p>\n    Climate change will only exacerbate these challenges. The latest Intergovernmental Panel on Climate Change (IPCC) report, in November 2014, reaffirmed that this warming in the climate system is \u201cunequivocal\u201d and that human influence is \u201cextremely likely\u201d to be the dominant cause. Atmospheric concentrations of three major greenhouse gases (carbon dioxide, methane and nitrous oxide) are at their highest level in 800,000 years, with CO2 concentration up 13% since 1990. The world today is estimated to be about 1\u00b0C warmer, on average, than it was in the 1950s, and the effects are being felt. Regional analysis of the Global Risks Perception Survey shows that declining water availability features as the most likely risk in the Middle East and North Africa and South Asia, and the likelihood of extreme weather events is considered especially high in North America, South Asia and East Asia and the Pacific.\n  </p>\n\n  <p>\n    Scientists caution that a total warming of 2\u00b0C implies a high risk of catastrophic climate change that could damage human well-being on a global scale. Yet even if each country meets its Intended Nationally  determined Contributions plans, submitted to the United Nations Framework Convention on Climate Change (UNFCCC) and agreed at the Paris Climate Conference in December 2015, warming is projected to reach 2.7\u00b0C by 2100.\n  </p>\n\n  <p>\n    Given these developments, it will, therefore, be impossible to live without adaptation \u2013 but adaptation planning is complicated by the difficulty of predicting not only the expected degree of warming but also the expected pace. One source of uncertainty is the Arctic feedback loop \u2013 will ice sheets collapse slowly or rapidly? The average sea level is already rising by 3 millimeters per year, faster than any other time in the last two millennia; many of the world\u2019s cities lie on the coast or on river banks, with poor neighborhoods most likely to be in low-lying areas vulnerable to flooding. Another source of uncertainty is the \u201cAmazon Dieback\u201d scenario: recent oscillation between unusually dry years and heavy flooding could be an early indicator of irreversible system phase change. If the Amazon stops absorbing carbon and starts releasing the estimated 120 billion tons of carbon it holds \u2013 equivalent to 15 years\u2019 worth of 100% fossil fuel emissions \u2013 the impact will be global.\n  </p>\n\n  <p>\n    Failure to address climate change and water crises will forcibly displace more people \u2013 the IPCC warns that droughts and coastal floods could cause \u201clarge-scale demographic responses \u2013 for example, through migration\u201d. Forced displacement is already at an unprecedented level, causing severe humanitarian challenges, as explored more in the Report.\n  </p>", "description": null, "title": "Global Risks Interconnections Map 2016", "image": "/static/images/articles/risk-interconnectivity/global-risks-2016-map/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "wef-global-risk-highest-concern"}, {"tag": "risk-interconnectivity", "slug": "climate-adaptation"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2016-executive"}], "header": "FT - Global Risks Interconnections Map 2016", "tag": "risk-interconnectivity", "content_type": "article", "slug": "global-risks-2016-map", "thumb": "/static/images/articles/risk-interconnectivity/global-risks-2016-map/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    FDI plays a major role in sustainable economic growth and global capital allocation, and global insurers can support FDI with a holistic risk management approach.\n  </span>\n  <p>\n    Foreign direct investment (FDI) has a positive part to play in sustainable economic development and growth, and the efficient allocation of global capital is now widely acknowledged. Unlike portfolio investments, which can expose receiver countries to considerable volatility, FDI is a generally steadfast source of capital that supports macroeconomic stability and allows emerging economies in particular to quickly ramp up their capital stock and knowledge economy.\n  </p>\n  <p>\n    Global insurers have a part to play in this process as they can underpin FDI by supporting risk management and by providing homogenous protection across countries. Yet their role is too often complicated by protectionist regulations and a fragmented insurance market.\n  </p>\n  <p>\n    \u201cIf I\u2019m putting capital investment into a country, I\u2019d want to know that I can protect my investment, shareholders and employees,\u201d says Andrew Gitsham, Head of International Product Underwriting at Zurich Insurance Group. \u201cI\u2019d want to know that I can mirror my company\u2019s coverage in the same way that I mirror it in my home market. I\u2019d want to know I can create a captive.\u201d Captive insurance companies provide insurance to their parent companies, giving large corporations a way to insure themselves.\n  </p>\n  <p class=\"quote\">\n    The role of insurance in supporting trade is widely understood, but there is far less awareness of insurance\u2019s role in FDI by multinational companies.\n  </p>\n  <p>\n    Insurers help these businesses manage risks associated with cross-border investment and provide cover for some of these risks. Global insurers underpin FDI, and with it economic development and growth, through services that range from expert risk assessment and thorough risk coverage to holistic risk management in the form of international insurance programs and captives. This function could be significantly strengthened via improved insurance regulation.\n  </p>\n  <p>\n    At present, such regulation is fragmented, resulting in legal and regulatory uncertainties about risk and claims management. The costs of managing FDI-associated risks rise in turn. Also muddying the waters in many countries is regulation favoring domestic carriers and domestic (retail) insurance customers, which hinders international competition among insurers, international risk pooling and the provision of a homogenous and understandable insurance coverage worldwide\u2014and FDI.\n  </p>\n  <p>\n    \u201cIn these places, the result isn\u2019t just more costly insurance solutions. The broader economic benefits associated with FDI are reduced, too, with slower and less resilient economic growth and increased risk for financial instability,\u201d says Thomas H\u00fcerlimann, CEO, Global Corporate, Zurich Insurance Group.\n  </p>\n  <p>\n    There is a clear opportunity to strengthen the value insurance can provide through global solutions in support of FDI, and doing so would boost economic growth potential while concurrently maintaining local supervisors\u2019 control of their own insurance markets. In an ideal world, at a minimum, non-admitted DIC (Difference in Conditions)/DIL (Difference in Limits) would be allowed. This would help countries support FDI while still preserving regulatory control over domestic markets\u2014a win-win. Two other recommendations whose time has come: Allowing claims handling and risk engineering by foreign insurers; and, locally paid tax, as if there were local policies.\n  </p>\n  <p>\n    FDI is a cornerstone of global economic growth, and with a bit of cooperation, global insurers such as Zurich could apply their expertise to help maximize the benefits of foreign investment.\n  </p>", "description": "FDI plays a major role in sustainable economic growth and global capital allocation, and global insurers can support FDI with a holistic risk management approach.", "title": "Insuring FDI\u2019s success", "image": "/static/images/articles/risk-interconnectivity/insuring-fdi-success/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "global-risks-2015"}, {"tag": "risk-interconnectivity", "slug": "risk-viewed-in-the-round"}, {"tag": "risk-interconnectivity", "slug": "geopolitical-risks-on-the-rise-in-executive-minds"}], "header": "FT - Insuring FDI\u2019s success", "tag": "risk-interconnectivity", "content_type": "article", "slug": "insuring-fdi-success", "thumb": "/static/images/articles/risk-interconnectivity/insuring-fdi-success/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Combining life and general insurance in a captive can create a smoother performing portfolio with an improved risk profile for your business.\n  </span>\n  <p>\n    Most companies recognize the value added by their employees, but a recent survey has revealed something else: Many businesses might not recognize that those same employees represent part of a globally interconnected web of risk. As a result, businesses sometimes fail to adequately incorporate the risks associated with managing a global workforce into a holistic risk management strategy, and may incur unnecessary costs while missing out on important diversification benefits.\n  </p>\n  <p>\n    The survey of 155 risk managers and senior business decision-makers (SBDMs) worldwide at large companies (500+ employees) by Bloomberg Audience Insights and Zurich showed that human resources (HR) is one of the functions least likely to be integrated into the overall risk strategy and function, with nearly one in five risk managers and nearly one in three SBDMs responding that it is not well integrated.\n  </p>\n  <p>\n    What\u2019s more, only 56 percent of risk managers and 35 percent of SBDMs would consider using or are already using a captive\u2014an insurance company that insures or reinsures the risk of its parent and its affiliated companies\u2014for global employee benefits.\n  </p>\n  <p>\n    Yet the possible financial, cost and risk benefits of an approach that includes these benefits within a captive are clear. HR risks tend to be smaller, more frequent and more predictable than, for example, property, liability and marine risks, and generally non-correlated with them, thus creating a less volatile, smoother-performing portfolio with an improved risk profile and lower solvency requirements. Other potential advantages includes the possibility of tailor-made coverage that is not necessarily available in the commercial market, and a data warehouse affording more accurate reductions of future claims trends.\n  </p>\n  <p>\n    There are several factors that explain why so many companies are missing such an opportunity, starting with the fact that HR \u201chas always been a bit different,\u201d in the words of Ian Veitch, Global Head of Proposition &amp; Underwriting, Corporate Life &amp; Pensions, Zurich Insurance Group.\n  </p>\n  <p>\n    Employee benefits have long centered around attracting, retaining and building talent, with less focus on getting the best possible deal for that risk\u2014never mind which risk elements should be retained internally and which should be placed in the market. The thinking on employee benefits and captives is much newer than it is around property and casualty risks. Corporate silos and an overestimation of the difficulties in surmounting potential hurdles, such as unions and worker councils, also contribute to HR\u2019s tendency to put captives on the back burner\u2014though momentum has started to build.\n  </p>\n  <p class=\"quote\">\n    \u201cMany companies don\u2019t like to be the first or second company to do something, but when 10 companies are doing it and it\u2019s accepted practice, they happily get involved,\u201d Veitch says.\n  </p>\n  <h2>The talent benefits</h2>\n  <p>\n    Early adopters and fast followers will have already noted that captives allow the HR function to better manage talent risk by freeing HR from the financial management of risk, as well as through potential cost savings.\n  </p>\n  <p>\n    \u201cMore of the pot of money to support the HR function can be made available to value-added stuff,\u201d says Veitch. \u201cNot only does it free up cash, it frees up time to allow HR to focus on the other key parts of employee benefits. It can worry about what the pay structures are, what motivates you. It allows HR to focus more on employees, so employees should be happier.\u201d\n  </p>\n  <p>\n    \u201cIf I want to offer a certain type of benefit not commercially available in the market in order to retain talent or attract talent from another market into that market, using a captive allows me to do that,\u201d notes Wendy Liu, Global Partnership Director, Corporate Life and Pensions, Zurich Insurance Group. \u201cIf the risk ultimately sits with the captive, we as a provider have more of an appetite to offer a benefit that we don\u2019t want to provide commercially.\n  </p>\n  <p>\n    \u201cCaptives aren\u2019t about reducing benefits, which is a perception that risk managers often have to hurdle to implement the captive program,\u201d Liu adds. \u201cIt\u2019s a win-win, because it allows HR managers to better design a program that they think will be more effective and efficient.\u201d\n  </p>\n  <p>\n    In a well-managed captive, employees may well be oblivious to the fact of whether benefits are being funded by an internal vehicle like a captive versus an external vehicle such as an insurance company. Their concern is simply whether there is someone to pay, for example, for death and disability when appropriate. As such, it is incumbent on companies considering a captive that includes global employee benefits to select a fronting insurance partner that can do the core administration properly for the members (such as paying claims on time), is technically expert in every country covered and can provide the data to show whether or not the captive is working as it should\u2014for the company and its employees alike.\n  </p>\n  <p>\n    \u201cCaptives are about managing risk, and it doesn\u2019t make any sense to have a captive if you\u2019re going to end up with no data,\u201d Zurich\u2019s Veitch says. \u201cA CRO taking some risk back onto the company\u2019s own books wants data to know that it\u2019s been a sensible decision.\u201d\n  </p>", "description": "Combining life and general insurance in a captive can create a smoother performing portfolio with an improved risk profile for your business.", "title": "The one-two punch of captives", "image": "/static/images/articles/risk-interconnectivity/one-two-punch-of-captives/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "responding-to-global-risks-report"}, {"tag": "risk-interconnectivity", "slug": "work-practices-on-the-move"}, {"tag": "risk-interconnectivity", "slug": "the-risks-of-rapid-urbanization-in-developing-countries"}], "header": "FT - The one-two punch of captives", "tag": "risk-interconnectivity", "content_type": "article", "slug": "one-two-punch-of-captives", "thumb": "/static/images/articles/risk-interconnectivity/one-two-punch-of-captives/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    \u201cMegarisks have always existed, but because they\u2019re something nobody can control, corporations tend to react to them fatalistically. But this is starting to change, with the world\u2019s leading companies taking a holistic approach to the situation.\u201d\n  </span>\n  <p>\n    A few years ago, the pharmaceutical industry was almost paralyzed\u2015by a triple blow from the Olympics, a hurricane and subprime mortgages. To set the scene: pharmaceutical companies use tiny amounts of an inexpensive solvent, acetonitrile, to measure impurities in the drugs they make. Acetonitrile is a byproduct of acrylonitrile, which is used to make plastics for things like car parts and acrylic fibers for things like carpets.\n  </p>\n  <p>\n    And now to the action: China shut a chemical plant to reduce air pollution for the Olympic Games in Beijing in August 2008. The following month, Hurricane Ike knocked out another chemical plant in Texas. Then Lehman Brothers failed, marking the start of the global financial crisis. As a result, new-home construction and car sales dried up, sinking demand for acrylonitrile\u2015fewer new carpets and new cars were being bought.\n  </p>\n  <p>\n    Production of acetonitrile, the byproduct, also dropped. That meant pharmaceutical companies found themselves unable to continue clinical trials because of a lack of the solvent.\n  </p>\n  <p>\n    It\u2019s an example of how \u201cmegarisks\u201d beyond anyone\u2019s control can sneak up on a company in what seems like a completely unrelated sector. It also shows just how interconnected risks have become in a global economy.\n  </p>\n  <p>\n    Megarisks\u2015such as sudden regulatory changes, demographic shifts or natural disasters\u2015have always existed, but because they\u2019re something nobody can control, corporations tend to react to them fatalistically. But this is starting to change: the world\u2019s leading companies are now methodically looking at how they can survive such threats, with a holistic approach to the situation.\n  </p>\n  <p class=\"quote\">\n    \u201cIt\u2019s a challenge for business,\u201d says John Scott, chief risk officer at Zurich Global Corporate. \u201cHow do you understand those big, exogenous risks and to what extent do they affect your business model? Because they are risks you need to mitigate in some way.\u201d\n  </p>\n  <p>\n    To achieve this, he says, companies need to \u201cidentify the big global risks and the connections between them.\u201d Risks rarely stand alone; they form a multidimensional web that can amplify their effects and deliver a substantial blow to an unwary organization. Look at how defaults on home mortgages hit automotive suppliers after the last financial collapse. \u201cIn the 2008 crisis, people focused on the minutiae and not on the big picture,\u201d Dr. Scott says.\n  </p>\n  <p>\n    And as if the risks themselves weren\u2019t enough, damage now often comes from the immediacy of public reactions via social media when problems arise\u2015a risk that has sprung up only in the past few years.\n  </p>\n  <p>\n    \u201cIn an extremely interconnected world, media risks will be made public globally in a matter of minutes,\u201d notes Sven Heiligtag, principal at McKinsey &amp; Co. in Hamburg. \u201cTen years ago, fewer people would have known or cared. Today, within five minutes of a problem, the public knows it, and you have people saying they won\u2019t buy from that company and regulators and NGOs [nongovernmental organizations] coming in.\u201d\n  </p>\n  <p>\n    In such a setting, traditional approaches to risk management simply aren\u2019t enough.\n  </p>\n  <p>\n    So what is the solution and where does it start? A conventional enterprise risk-management approach segregates risks into smaller packages, so that ownership of the risks can be assigned. But some risks come out of the blue\u2015the way the Olympics affected drug makers\u2015while others fall between the cracks of corporate silos.\n  </p>\n  <p>\n    \u201cA lot of pure risks are easy to give ownership to,\u201d says J. Tyler Leverty, professor of finance at the University of Iowa. But for external risks, \u201cit\u2019s hard to assign ownership unless there\u2019s a chief risk officer. It\u2019s not so you can point a finger at somebody, but [rather] that you have somebody whose job is to think about these risks. If you ask most employees about the risks in their jobs, they can\u2019t answer beyond their cubicle.\u201d\n  </p>\n  <p>\n    That won\u2019t work for dealing with megarisks. Just as the top management develops the vision for where the company is going, it also has to keep an eye out for the big threats that can derail that journey.\n  </p>\n  <p>\n    The corporations that are most successful in dealing with risk in a holistic way have a dedicated risk manager, who reports to the board, but also a cross-disciplinary committee that reports to the risk manager, Dr. Leverty says.\n  </p>\n  <p>\n    Mr. Heiligtag suggests a three-layer line of defense: the first is frontline management of operational risks; the second is functional experts and internal audits; the third is the executive risk committee or a business-unit leadership, with the board overseeing all layers. \u201cCompanies need full transparency and prioritization of risks. It\u2019s also key that top management take responsibility for managing risks,\u201d Mr. Heiligtag says.\n  </p>\n  <p>\n    But how can organizations get transparency and spot risks early?\n  </p>\n  <p>\n    Companies are moving from an internal, reactive focus on risk to a more external view, says Jonathan Blackmore, senior partner and risk leader for Europe, Middle East, India and Africa at EY. \u201cWorld-class organizations will have a risk radar, or will scan the horizon for potential risks that might impact them. They will gather information on what\u2019s going on externally. They are looking across their sectors as well as looking at other sectors and asking whether that could happen to them.\u201d\n  </p>\n  <p>\n    There is a tension among short-, medium- and long-term threats. From a strategic point of view companies need to look at the long term, but from an operational point of view they need to act on risk immediately, says Antonio Borghesi, professor of economics and enterprise management at the University of Verona and co-author of the book \u201cRisk Management: How to Assess, Transfer and Communicate Critical Risks.\u201d For example, the risk for security or cyber crime must be managed immediately.\n  </p>\n  <p class=\"quote\">\n    Zurich has highlighted four major, global pressure points for companies today: digital; physical world; lifestyle and regulation and governance.\n  </p>\n  <p>\n    Unplanned information technology and telecommunications outage was the top threat named by 77% of the 690 companies in 82 countries, responding to a survey conducted in December by the Business Continuity Institute. Data breach and cyber attack came next, each cited by 73% of respondents. Digital threats can lurk in the familiar as well as the unfamiliar: the Heartbleed bug wasn\u2019t a malicious attack, but a long-unnoticed weakness in widely used security coding.\n  </p>\n  <p>\n    Digital challenges are an example of the need for short-term and long-term risk management. While cyber-security threats change quickly and need to be monitored constantly, other digital trends are developing that could have big impacts on long-term strategic planning. Smart cities could dramatically change how we communicate in the future, including how companies provide products and services, says Deborah Higgins, head of learning and development at the Business Continuity Institute.\n  </p>\n  <p>\n    Smart cities are also an example of how digital risks interconnect with physical-world risks. Other physical-world challenges also rank high among concerns\u2015adverse weather was named by 57% of BCI survey respondents.\n  </p>\n  <p>\n    Lifestyle challenges, such as a changing workforce, can squeeze companies\u2019 ability to recruit talent, or can quickly shift the marketplace for products and services. Demographics, stresses on pension funds, a rising middle class with rising expectations\u2015all these can affect strategic planning. In the BCI survey, human illness and pandemics were a top concern in Asia and India. But in the United Arab Emirates, the availability of skills and talent was more of a worry.\n  </p>\n  <p>\n    Regulation and governance \u201chave been a nightmare for global organizations,\u201d says Mr. Blackmore of EY.\n  </p>\n  <p>\n    Increased regulation started with the financial-services industry and spread into utilities, pharmaceuticals and life sciences. \u201cWe think that trend will continue,\u201d he says. Meanwhile, in emerging markets, the risk from regulation is that \u201cit\u2019s not clear what it is\u2015and it can change overnight.\u201d\n  </p>\n  <p>\n    While it can help to drill down into each category, \u201cit\u2019s no good being an expert in just one area of risk,\u201d Dr. Scott of Zurich says. \u201cYou have to be able to work across all risk types and see the big picture, or you can\u2019t communicate the relative importance of various risks.\u201d\n  </p>\n  <p>\n    Once armed with an idea of possible threats, companies need to do scenario-planning or stress-testing. \u201cIf an event [did] happen, what would the effect be, what would be the implications, how would we respond?\u201d Mr. Blackmore says. Companies can use this information to develop resilience or business continuity plans.\n  </p>\n  <p>\n    One of the biggest challenges in managing risk is that it\u2019s a moving target, a project that\u2019s never complete.\n  </p>\n  <p>\n    \u201cYou have to continually monitor,\u201d Dr. Borghesi says. \u201cEach change in the real world can be a change in your risk condition.\u201d\n  </p>\n  <h2>The takeaway:</h2>\n  <p>\n    Holistic risk management requires board-level attention. It needs to be embedded in all aspects of the organization and not treated as a bolt-on. Holistic risk management needs to look for the interconnections among risks. Scenario planning can give you a picture of how different risks will affect you.\n  </p>", "description": "\u201cMegarisks have always existed, but because they\u2019re something nobody can control, corporations tend to react to them fatalistically. But this is starting to change, with the world\u2019s leading companies taking a holistic approach to the situation.\u201d", "title": "Risk viewed in the round", "image": null, "related_items": [{"tag": "risk-interconnectivity", "slug": "geopolitical-risks-on-the-rise-in-executive-minds"}, {"tag": "risk-interconnectivity", "slug": "global-risks-landscape-and-interconnection-maps"}, {"tag": "risk-interconnectivity", "slug": "one-two-punch-of-captives"}], "header": "FT - Risk viewed in the round", "tag": "risk-interconnectivity", "content_type": "article", "slug": "risk-viewed-in-the-round", "thumb": "/static/images/articles/risk-interconnectivity/risk-viewed-in-the-round/thumb.jpg"}, {"body": "<p>\n\t\tListen in on this simulated board discussion as a global panel of experts discuss the bold scenario planning and practical steps necessary for businesses to build resilience to cyber risks. In this roundtable conversation, participants consider the mission critical components of the board\u2019s role in managing cyber risks as they accumulate at an increased rate.\n\t</p>\n\t<p>\n\t\tKey to the board\u2019s role is understanding what the business is trying to protect, and making sure that a culture of awareness exists throughout the enterprise. While business continuity planning is not the board\u2019s responsibility, it can help response to the challenges of cyber risks by encouraging the C-suite to test existing plans for weaknesses and make sure everyone in the company understands individual responsibilities.\n\t</p>", "thumb": "/static/images/articles/cyber-risk/resilience-to-cyber-risks/thumb.jpg", "description": null, "title": "Video: Resilience to cyber risks: The board in action", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/managing-cyber-risks.mp4", "image": "/static/images/articles/cyber-risk/resilience-to-cyber-risks/video.jpg", "related_items": [{"tag": "cyber-risk", "slug": "cyber-risks-responsibilities-at-every-business-level"}, {"tag": "cyber-risk", "slug": "anatomy-of-a-cyber-risks-stress-test"}, {"tag": "cyber-risk", "slug": "conversations-that-help-boards"}], "header": "FT - Video: Resilience to cyber risks: The board in action", "tag": "cyber-risk", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/managing-cyber-risks.ogv", "slug": "resilience-to-cyber-risks", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/managing-cyber-risks.webm"}, {"body": "<span class=\"intro-line\">\n\t\tWe raise awareness of a global challenge: income protection gaps. The reduction in household income when the main wage earner becomes incapable to work.\n\t</span>\n\t<p>\n\t\tMost people don\u2019t think that an illness or an injury will happen \u2013 not to them. But an accident or illness that can deplete personal savings can affect anyone.\n\t</p>\n\t<p>\n\t\tZurich asked more than 11,000 people on four continents how long their savings would last if they couldn\u2019t work due to an injury or sickness. One in five said less than a month. Even for the six out of 10 who thought their savings would last a little longer, the risks are substantial.\n\t</p>\n\t<p>\n\t\tEducating people about the risks, and solutions available to address the so-called \u2018income protection gap\u2019 \u2013 the shortfall gap in earnings if someone can\u2019t work due to disability \u2013 is a crucial first step. It\u2019s also important to educate people about how to protect themselves against such risk.\n\t</p>\n\t<p>\n\t\tOnly one out of three people surveyed already had some form of life or illness cover. Typically, people over-estimated the cost; coverage may available for much less than people think.\n\t</p>\n\t<p>\n\t\tDisability coverage can benefit not only employees, but also employers by providing a good \u2018loyalty incentive.\u2019 Our survey showed that six out of 10 hires would rather have a good benefits package than an increase in their base salary.\n\t</p>\n\t<p>\n\t\tAs a global insurer, Zurich has a key role to play in mitigating risk. That\u2019s why we\u2019ll continue to work to raise awareness, and work with individuals, public and private sectors, governments and regulators, to help narrow the income protection gap.\n\t</p>\n\t<p>Download the 2016 full report and additional materials here:</p>\n\t<p>\n\t\t<a href=\"https://www.zurich.com/_/media/dbe/corporate/knowledge/docs/income-protection-gaps-executive-summary-june-2016.pdf?la=en\" onclick=\"ga('send', 'event', 'download', 'click', 'Opportunity &amp; Challenge - executive summary report');\" target=\"_blank\">Income protection gaps: executive summary (233.23 KB/PDF)</a>\n\t</p>\n\t<p>\n\t\t<a href=\"https://www.zurich.com/_/media/dbe/corporate/knowledge/docs/income-protection-gaps-challenge-and-opportunity-june-2016.pdf?la=en\" onclick=\"ga('send', 'event', 'download', 'click', 'Opportunity &amp; Challenge -  challenge and opportunity report');\" target=\"_blank\">Report: Income protection gaps: challenge and opportunity (3.32 MB/PDF)</a>\n\t</p>", "thumb": "/static/images/articles/protection-gap/income-protection-gaps-challenge-and-opportunity/thumb.jpg", "description": "We raise awareness of a global challenge: income protection gaps. The reduction in household income when the main wage earner becomes incapable to work.", "title": "Video: Income protection gaps: challenge and opportunity", "image": "/static/images/articles/protection-gap/income-protection-gaps-challenge-and-opportunity/video.jpg", "related_items": [{"tag": "protection-gap", "slug": "income-protection-gaps-executive-summary"}, {"tag": "protection-gap", "slug": "income-protection-tackling-the-knowledge-gap"}, {"tag": "protection-gap", "slug": "acting-while-the-sun-shines"}], "header": "FT - Video: Income protection gaps: challenge and opportunity", "tag": "protection-gap", "content_type": "video", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/income-protection-gaps-challenge-and-opportunity.mp4", "slug": "income-protection-gaps-challenge-and-opportunity", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/income-protection-gaps-challenge-and-opportunity.webm"}, {"body": "<p>Europe is experiencing a strong cyclical recovery from post-2008 challenges. Economic activity is picking up and, in some areas, unemployment is dropping. With low funding costs, companies that are resilient to risks are in a position to invest more in their products and growth. This marks a huge opportunity to establish a competitive advantage over their peers, according to Guy Miller, Chief Market Economist, Head of Macroeconomics, Zurich Insurance Group.</p>", "thumb": "/static/images/articles/risk-interconnectivity/risk-and-opportunities-in-europe-2016/thumb.jpg", "description": null, "title": "Video: A future built on resilience", "video_mp4": "//phantom-ft.s3.amazonaws.com/zurich/a-future-built-opti.mp4", "image": "/static/images/articles/risk-interconnectivity/risk-and-opportunities-in-europe-2016/video.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "risk-insomnia-top-regional-concerns"}, {"tag": "risk-interconnectivity", "slug": "complex-risks-without-boundaries"}, {"tag": "risk-interconnectivity", "slug": "creating-resilience-during-the-commodities-downturn"}], "header": "FT - Video: Risk and Opportunities In Europe, 2016", "tag": "risk-interconnectivity", "content_type": "video", "video_ogg": "//phantom-ft.s3.amazonaws.com/zurich/a-future-built-opti.ogv", "slug": "risk-and-opportunities-in-europe-2016", "video_webm": "//phantom-ft.s3.amazonaws.com/zurich/a-future-built-opti.webm"}, {"body": "<span class=\"intro-line\">\n    Diversification, risk assessment and risk mitigation are essential for businesses to proactively deal with the unpredictable impacts of geopolitical risks.\n  </span>\n  <p>\n    Geopolitical risks are particularly challenging for companies: they are hard to predict and their results can cascade into many other business risks. The interplay between economic and geopolitical challenges makes it even more difficult for businesses to manage their global value chain. These risks can have significant impact on businesses operating, selling or sourcing in the area.\n  </p>\n  <p>\n    In the Global Risks 2015 report, published by the World Economic Forum in partnership with Zurich Insurance Group and other leading institutions, geopolitical risks accounted for three of the top five most likely risks. This is a significant development; the first time geopolitical risk has even appeared in the top 10 global risks recently, making a shift from the focus on economic risk that prevailed between 2007 and 2014.\n  </p>\n  <p>\n    While the report focuses on a timeline of 10 years, the business leaders and other decision-makers surveyed can also address shorter horizons. Interstate conflict was cited by 47% of respondents as a concern over the next 18 months, with similar results for other geopolitical risks, such as state collapse or crisis, failure of national governance, and terror attacks.\n  </p>\n  <p>\n    The report \u201cdemonstrates that geopolitical risks are on the minds of executives,\u201d says Jim Thomas, Executive Vice President and Managing Director, Credit and Political Risk at Zurich Insurance Group.\n  </p>\n  <p class=\"quote\">\n    \u201cThere have always been latent political risks. It\u2019s the surprising, high-visibility events recently that have raised awareness.\u201d\n  </p>\n  <p>\n    When a Tunisian street vendor, Tarek al-Tayeb Mohamed Bouazizi, set himself on fire on December 17, 2010, as a protest against harassment by local officials, it became the catalyst for the Arab Spring. Within months, the governments had fallen in Tunisia, Egypt, Libya and Yemen and there was widespread public action across the Middle East, which continues today with violence in Libya and the civil war in Syria. According to the 2011 International Business Report (IBR) by professional services firm Grant Thornton UAE, 22% of businesses globally reported a negative impact from the uprisings\u2014mostly related to fuel costs, because oil prices rose as a result of the region\u2019s unrest. In addition, supply chains took a hit from longer shipping times because cargo was rerouted or even totally blocked. \u201cIt shows that risks are connected and that investments have been impacted in a violent way, very quickly, in seemingly stable places,\u201d Mr. Thomas says.\n  </p>\n  <p>\n    What distinguishes geopolitical risks from other risk categories is their unpredictable duration. Wars may last a couple of years or drag on for decades. That makes business planning especially difficult amid conflict.\n  </p>\n  <p>\n    The strong interconnectivity between geopolitical risk and other risks holds clear ramifications for business. These include price volatility for energy and other commodities; foreign-exchange volatility; supply-chain disruptions and the collapse of consumer demand for products and services. Linda Conrad, Director of Strategic Business Risk, Global Corporate in North America at Zurich Insurance Group, points out that during a regional or national crisis, governments may struggle to maintain critical infrastructure and transportation nodes, or to contain a civil or labor disturbance. Governments may also try to increase revenues by raising taxes or confiscating assets under such politically charged circumstances.\n  </p>\n  <p>\n    Companies will feel the effects of geopolitical turmoil whether their activities in the area are manufacturing, selling or supplying, Ms. Conrad adds, and all organizations must consider the risks posed to their people, plant, procurement and their profitability. Political and economic risks also affect which potential new markets companies choose to enter, where they choose to source suppliers, where they site new facilities or subsidiaries, or where they make acquisitions.\n  </p>\n  <h2>Growth requires risk</h2>\n  <p>\n    In many cases, playing it safe isn\u2019t an option: geopolitical risk is part of the territory in some sectors. Mining companies, for example, have to go where the resources are, which might include unstable or dangerous countries.\n  </p>\n  <p>\n    For most other companies, international growth\u2014especially in fast-growing emerging economies\u2014is essential to survival. Yet investment and sourcing decisions should be made with eyes wide open.\n  </p>\n  <p>\n    \u201cWe find that for the vast majority of companies we work with, it isn\u2019t a question of \u2018should we or shouldn\u2019t we invest in this market,\u2019\u201d Mr. Thomas says. \u201cThe approach is more that \u2018this is a good opportunity and we have to expand globally in order to keep growing.\u2019 Companies are always looking for opportunities abroad. They may be able to choose within a particular region, but the assumption is that the investment is going to be made.\u201d\n  </p>\n  <p class=\"quote\">\n    How can companies deal with geopolitical risks? The process can be broken into three steps: diversification, risk assessment and risk mitigation.\n  </p>\n  <ul>\n    <li><strong>Diversification</strong> can be seen in the \u201cChina plus one\u201d strategy to other regions beyond Asia. \u201cSo many companies rely on China as a key supplier,\u201d Mr. Thomas says, \u201cbut you don\u2019t want to be too reliant on one country or one supplier.\u201d Companies wanting to reduce their risk exposure continue to tap suppliers in China, but they find additional or production sites in at least one other country. This can also help diversity other location-based exposures, such as the potential for natural disasters, resource restrictions, or infrastructure issues, which may be more prevalent in certain geographies.</li>\n    <li><strong>Risk assessment</strong> requires taking stock of all the facets of geopolitical risk, whether it\u2019s supply chain, cyber, regulatory or financial. A risk such as income disparity could manifest in a relatively benign manner, such as a weak consumer market or scattered protests, or it could evolve into strikes that shut down suppliers, or result in protests that spill into violence. A company should be aware of the possible scenarios that might erupt from such a risk.</li>\n  </ul>\n  <p>\n    Look at Egypt, a nation of 90 million people, which had a stable government for 30 years. In January 2011 protests broke out against poverty, corruption and unemployment, leading to 840 deaths and the president\u2019s ousting. Gross domestic product growth slumped to 0.1% a year from 5%. Tourism dried up\u2014to 9.5 million tourists in 2013 from 14.7 million in 2010. Multinationals closed facilities in the country, hoping the shutdowns would be temporary, and several oil companies pulled out. Shipments of valuable Egyptian cotton and other goods were disrupted. The currency has depreciated 21%, driving up food and fuel prices and sending many more people into poverty. Unemployment has risen to 13% from 8.9% since 2011, and in 2014 inflation reached 10%. Four years on from the Arab Spring, tourism is rebounding in spite of the rising risk of terrorism and high levels of corruption, and economic growth is forecast for 3.5% this year.\n  </p>\n  <p>\n    The growing global threats highlighted in the Global Risks 2015 report underscore the need for companies to be more proactive in addressing emerging risks. The report offers both an 18-month and a 10-year time horizon. It is important to develop a three-pronged global strategy to longer-term risks:\n  </p>\n  <p>\n    (1) anticipate / quantify exposures, and (2) mitigate / plan resilience, then (3) finance / insure business exposures. Tools such as business interruption modeling, supplier risk assessments, and business continuity planning can work together with insurance solutions to support companies in identifying and managing exposures that can have the largest impact, individually or in combination.\n  </p>\n  <h2>Domino effect</h2>\n  <p>\n    When many companies decide to abandon an unstable market, it can accelerate the country\u2019s problems\u2014and make the situation more acute for companies that had decided to hang on. Risks originating in one country can also affect its neighbors.\n  </p>\n  <p>\n    In Russia, sanctions imposed because of that country\u2019s actions in the Ukraine beginning in February 2014 have driven down the ruble more than 50%, fueling inflation. Interest rates, below 6% before the crisis, jumped as high as 17%, making Russia less attractive as a destination for foreign investment. Foreign direct investment had been booming, rising 40% in 2013 from a year earlier, only to fall 70% in 2014 as companies canceled plans in Russia or even pulled out of the country completely. The result: the World Bank lowered its economic projection for Russia to a contraction of 2.9% from a contraction of 1.5%.\n  </p>\n  <p>\n    Countries and markets do return to peaceful growth, however. Rwanda saw foreign investment climb to $21 million in 1988, only to drop to $2 million in 1992 amid civil war and genocide. By 2013, the country attracted $110.78 million in foreign investment.\n  </p>\n  <p>\n    Egypt illustrates how geopolitical risks are interconnected with other risks, such as internal market collapse, currency controls (instituted in 2012) and security. However, geopolitical risks can arise without a revolution taking place. Under its then-President Hugo Ch\u00e1vez, Venezuela expropriated hundreds of companies, foreign operations of multinationals and land from 2005 until his death in 2013. Governments may change regulations to favor local companies. Rising corruption\u2014which is hard to measure\u2014can add time and money to bureaucratic red tape. Failure of national governance can mean a government is unable to cope with a natural disaster or to provide basic infrastructure.\n  </p>\n  <p>\n    Sanctions are the international community\u2019s method for peacefully dealing with a country\u2019s actions that other nations find objectionable. However, much of the geopolitical risk today comes from non-state actors and from terror organizations, to individual terrorists and criminal gangs. These risks are harder to gauge because the actors aren\u2019t tied to a territory, nor do their goals allow for negotiation or cooperation. These non-state groups may even threaten to undermine the logic of our current global economic cooperation and, potentially, the entire international rule-based system.\n  </p>\n  <p>\n    \u201cIt\u2019s not just a rise of non-state actors, but also a proliferation of them in terms of the resources and capabilities they possess and the amount of territory that some of them control, such as ISIS,\u201d Mr. Thomas says. \u201cIt\u2019s something everyone is struggling with right now. Dealing with it is going to require the same considerations of being risk-aware and taking the effort to protect yourself.\u201d\n  </p>\n  <ul>\n    <li><strong>Risk mitigation</strong> follows from the risk assessment and should include contingency plans on multiple levels, from simple shifting to an alternative supplier to knowing how to evacuate personnel if necessary, to having adequate security. \u201cToo often, people seek solutions once the house is on fire,\u201d Mr. Thomas says. Insurance is a key factor in risk mitigation. \u201cMost executives know they can get trade credit insurance for international transactions, but they don\u2019t know you can insure against political risk, expropriation, capital controls, terrorism or political violence,\u201d he says. \u201cIf you\u2019re manufacturing in a country and these kinds of perils arise, they can mean the end of your operation there, but with the right coverage, you may be able to continue or at least obtain compensation.\u201d</li>\n  </ul>\n  <p>\n    Supply-chain risk assessment and insurance, coupled with business continuity planning, can help increase resilience if a supplier is shut down due to political events, if ports are closed, if local governments mishandle natural catastrophes. Kidnappings and ransoms can be insured, along with experts who can help in working to get your employee back. Cyber insurance is growing as cyber-criminal gangs operate with impunity from foreign countries.\n  </p>\n  <p>\n    While coverage for sudden currency devaluation doesn\u2019t exist, devaluations are often followed by capital controls that prevent multinationals from repatriating profits\u2014with insurance coverage available. Venezuela and Argentina recently moved to relax their long-standing currency controls, for example.\n  </p>\n  <p>\n    Many large corporations have captive insurance entities for self-insurance. Companies need to review the risks their captives cover, even when geopolitical strife seems far away, Ms. Conrad says. For example, risks surrounding property, equipment, worker safety and the supply chain may increase as a result of insufficient infrastructure, which in turn is a result of governments in crisis being unable to conduct proper maintenance or construction. Captives can be used as long-term vehicles to help insure emerging risks, with manuscript policies and customized programs for political exposures, supply chain, cyber or other risks. Captive usage can encourage discipline in the risk-management process, from gathering data and attempting to quantify exposures, to promoting risk engineering to improve preventative loss control. Another intrinsic benefit of captives is the possibility to work with partner companies to grow into risk assumption, stepped up over time in partnership. Captives can also encourage moving the risk agenda into catastrophe protection and a more global enterprise approach.\n  </p>\n  <p>\n    \u201cWe exist to facilitate cross-border investments, so companies can make the investments they need to make while still being protected from many of the geopolitical risks they face,\u201d Mr. Thomas says.\n  </p>\n  <h2>Takeaways:</h2>\n  <ul>\n    <li>Geopolitically based risks have clear ramifications for business, and companies could benefit from better understanding these exposures to their business model.</li>\n    <li>Geopolitical risks can take many interconnected forms, from infrastructure and supply-chain disruptions to a lack of rule of law, to expropriation, to war.</li>\n    <li>Diversification, accurate risk assessment and risk mitigation are essential to proactively dealing with geopolitical and value-chain exposures in a holistic risk-management approach.</li>\n    <li>Neighboring countries can be affected by another nation\u2019s risks.</li>\n    <li>Insurance coverage and analysis tools exist for many of the subsets of geopolitical risks, allowing international trade and investment to continue.</li>\n  </ul>", "description": "Diversification, risk assessment and risk mitigation are essential for businesses to proactively deal with the unpredictable impacts of geopolitical risks.", "title": "Geopolitical risks: on the rise in executive minds", "image": "/static/images/articles/risk-interconnectivity/geopolitical-risks/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "global-risks-landscape-and-interconnection-maps"}, {"tag": "risk-interconnectivity", "slug": "one-two-punch-of-captives"}, {"tag": "risk-interconnectivity", "slug": "responding-to-global-risks-report"}], "header": "FT - Geopolitical risks: on the rise in executive minds", "tag": "risk-interconnectivity", "content_type": "article", "slug": "geopolitical-risks-on-the-rise-in-executive-minds", "thumb": null}, {"body": "<span class=\"intro-line\">\n    To achieve a company's strategic objectives, the board must decide what risks it is willing to take. This task particularly challenging when it comes to assessing global risks. Businesses face a plethora of these global risks, placing the onus on boards to recognise them and take steps to migrate them. It is a daunting task, but not impossible one.\n  </span>\n  <p>\n    The catalyst for this guide has been the latest annual report on global risks from the World Economic Forum (WEF). We make no apology for referencing this excellent study because it provides vital insights into how industry leaders and experts perceive evolving, interconnected risks that cut across national boundaries, the economy, technology, society, and the environment.\n  </p>\n  <p>\n    The WEF\u2019s Global Risks 2014 report analyses 31 global risks over the coming decade. The risks are grouped under five classifications \u2013 economic, environmental, geopolitical, societal and technological \u2013 and measured in terms of their likelihood and potential impact.\n  </p>\n  <p>\n    The 10 risks of highest concern to respondents are:\n  </p>\n  <ol>\n    <li>Fiscal crises in key economies</li>\n    <li>Structurally high unemployment/underemployment</li>\n    <li>Water crises</li>\n    <li>Severe income disparity</li>\n    <li>Failure of climate change mitigation and adaptation</li>\n    <li>Greater incidence of extreme weather events</li>\n    <li>Global governance failure</li>\n    <li>Food crises</li>\n    <li>Failure of a major financial mechanism/institution</li>\n    <li>Profound political and social instability.</li>\n  </ol>\n  <p>\n    Of these threats, income disparity, extreme weather events and unemployment/underemployment are the three most likely to cause major cross-border damage in the next 10 years. Fresh fiscal crises, climate change and water shortages, although seen as less likely, are the three that would have the largest global impact. Further, the study describes the coalescence of various global risks into three unwelcome scenarios: a \u2018generation lost\u2019 because of social and economic strains on young people; \u2018digital disintegration\u2019 due to the world's increasing reliance on the internet despite its vulnerabilities; and \u2018instability in an increasingly multipolar world\u2019 from rising geopolitical tensions.\n  </p>\n  <p>\n    WEF\u2019s study highlights how global risks are not only interconnected, but also have systemic impacts. It concludes that greater effort is needed to manage them effectively. And that is where this guide comes in. It is one thing to analyse global risks but, in the absence of a global authority to control them, it falls to organisations, boards and individual leaders to understand their impacts and build resilience to them at both a strategic and operational level.\n  </p>\n  <p>\n    This is by no means negative thinking. Improved resilience breeds increased confidence, greater enterprise and other benefits. Equally positive is the reality that a threat to one organisation can be an opportunity for another. A constant theme of this guide is that businesses can achieve competitive advantage through an effective response to global risks.\n  </p>\n  <p>\n    Written by leading experts, the following chapters will help IoD members and other leaders, in both large and small organisations, understand how interdependencies between risks evolve, offering them fresh thinking and practical advice to supplement traditional risk management tools.\n  </p>", "description": "To achieve a company's strategic objectives, the board must decide what risks it is willing to take. This task particularly challenging when it comes to assessing global risks. Businesses face a plethora of these global risks, placing the onus on boards to recognise them and take steps to migrate them. It is a daunting task, but not impossible one.", "title": "Responding to global risks: A practical guide for business leaders", "image": null, "related_items": [{"tag": "risk-interconnectivity", "slug": "one-two-punch-of-captives"}, {"tag": "risk-interconnectivity", "slug": "the-risks-of-rapid-urbanization-in-developing-countries"}, {"tag": "risk-interconnectivity", "slug": "work-practices-on-the-move"}], "header": "FT - Responding to global risks: A practical guide for business leaders", "tag": "risk-interconnectivity", "content_type": "article", "slug": "responding-to-global-risks-report", "thumb": "/static/images/articles/risk-interconnectivity/responding-to-global-risks-report/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Profound social instability is viewed as the most interconnected risk in 2015, while interstate conflict is seen as the most likely threat.\n  </span>\n  <img src=\"/static/images/articles/risk-interconnectivity/global-risks-landscape/risk-interconnection-map.jpg\" width=\"559\"/>\n  <p>Source: World Economic Forum, Global Risks 2015</p>\n  <img src=\"/static/images/articles/risk-interconnectivity/global-risks-landscape/trend-interconnection-map.jpg\" width=\"559\"/>\n  <p>Source: World Economic Forum, Global Risks 2015</p>\n  <img src=\"/static/images/articles/risk-interconnectivity/global-risks-landscape/risk-landscape.jpg\" width=\"503\"/>\n  <p>Source: World Economic Forum, Global Risks 2015</p>", "description": "Profound social instability is viewed as the most interconnected risk in 2015, while interstate conflict is seen as the most likely threat.", "title": "Global Risks landscape and interconnection maps", "image": null, "related_items": [{"tag": "risk-interconnectivity", "slug": "one-two-punch-of-captives"}, {"tag": "risk-interconnectivity", "slug": "responding-to-global-risks-report"}, {"tag": "risk-interconnectivity", "slug": "the-risks-of-rapid-urbanization-in-developing-countries"}], "header": "FT - Global Risks landscape and interconnection maps", "tag": "risk-interconnectivity", "content_type": "infographic", "slug": "global-risks-landscape-and-interconnection-maps", "thumb": null}, {"body": "<span class=\"intro-line\">\n    Mobility is a fast-moving workplace trend. How do employers and employees cope with interconnected risks like BYOD and a lack of face time?\n  </span>\n  <p>\n    New technologies are fundamentally changing the way we all work, throwing up new risks and challenges for businesses and employees. The changes are coming so fast that employers, employees and lawmakers haven\u2019t yet entirely figured out the best way to go forward. The multiple dimensions\u2014technology, business practices, attitudes and laws\u2014are interconnected and so are the risks, not just within the realm of mobility but beyond.\n  </p>\n  <p>\n    The biggest change has come from mobile devices, such as smart phones and tablets, which allow individuals to connect, including to work, anywhere, anytime. As a result, the line between business and pleasure is blurring, while the work-life balance is pushed to the edge as employees are on call 24/7/365. Routing personal activities through corporate servers exposes both workers and employers to privacy and security issues.\n  </p>\n  <p>\n    \u201cEverybody wants their company to be a good place to work, to attract good people,\u201d says Linda Conrad, Director of Strategic Business Risk at Zurich Insurance Group. \u201cFlexibility is very attractive to people, and mobility provides that. It gives them more control over their own time and their life.\u201d\n  </p>\n  <p>\n    Only 2.6% of workers in the U.S. work primarily from home, according to Global Workplace Analytics, a consulting and research firm. However, nearly a quarter of Americans report working from home at least some of the time, according to the U.S. Bureau of Labor Statistics.\n  </p>\n  <p class=\"quote\">\n    \u201cHow do we incentivize a new generation of people who expect to do everything everywhere?\n  </p>\n  <p>\n    If you want to have a successful corporation, you need some kind of cohesiveness. It may get increasingly difficult to create a corporate culture if people never see each other,\u201d says Ms. Conrad.\n  </p>\n  <p>\n    Many global organizations have long faced the challenge of inculcating values in employees spread over many locations; now they have to worry about the same task for workers who may be in the same city yet aren\u2019t often physically present at the office. The remedy for mobile workers is the same as for those in foreign offices: regularly scheduled face-to-face gatherings, where people can get to know each other as more than a voice on a phone or a name on an email, Ms. Conrad says.\n  </p>\n  <p>\n    Companies also face the question of responsibility and benefits when employees are injured outside the workplace, whether while traveling or while working from home.\n  </p>\n  <p>\n    \u201cIt\u2019s unlikely a company would deny a claim by an individual working from home who falls down the stairs and breaks a leg,\u201d says Paolo Marini, Global Head of Customer Management at Zurich Insurance Group\u2019s Global Life segment. \u201cAt the same time, the risk of abuse is certainly there.\u201d\n  </p>\n  <h2>Technology as role-changer</h2>\n  <p>\n    At the same time, mobility is upending corporate roles and chains of command. \u201cIn a typical hierarchical office, a worker with a problem tells the boss, who would kick the problem farther upstairs, or to the relevant person in another location. Now, you talk directly to the other guy,\u201d says Larry Collins, Vice President of E-Solutions at Zurich Insurance Group. \u201cInformation improves because the person who has the information is talking directly to the person most in need of the information. It\u2019s as much an issue of effectiveness as it is an issue of efficiency.\u201d\n  </p>\n  <p>\n    Mr. Collins\u2014who directs his far-flung workers from Schaumburg, Illinois\u2014recruited a team of people with 30-40 years of experience, some of who had retired, to do virtual risk assessments. Some work from home, some from an office, some a combination of the two.\n  </p>\n  <p>\n    \u201cThey all use technology differently,\u201d he says. \u201cWe\u2019re getting far more products and far better products, and freeing other staff to do difficult work. These people very much wanted to use their skills but didn\u2019t want a full-time career again. Some have called me up to thank me. That has never happened to me before.\u201d\n  </p>\n  <p>\n    It shows how while the risks are interconnected, so are the benefits. Technology shortens lines of communication and gives workers flexibility in time, location and kind of device, resulting in happy workers.\n  </p>\n  <h2>BYOD gathers pace</h2>\n  <p>\n    One key to these workers\u2019 satisfaction was that they had the power to choose devices they felt comfortable with. A global survey last year by Gartner Inc. found half of employers will require employees to BYOD\u2014bring your own device\u2014to work by 2017.\n  </p>\n  <p>\n    \u201cThe speed at which new devices are appearing in the workplace is such that no corporation could keep up with equipping their employees with the latest technology,\u201d Mr. Collins says. \u201cBYOD is going to be faster and more cost-effective. If I know I have a specific kind of tablet I\u2019m looking for and it\u2019s going to work for me, then I\u2019m a satisfied worker. I now have the work platform I find acceptable.\u201d\n  </p>\n  <p>\n    BYOD is a double-edged sword. If you opt for BYOD to respond to the risk of fast-changing technology, you expose yourself to the related risk of not having complete control over employee-owned devices\u2014which are connected to your network. \u201cAll the viruses, malware and inappropriate websites, if the company I\u2019m working for isn\u2019t prepared, all that will come with me,\u201d he warns.\n  </p>\n  <p>\n    Three-fourths of mobile applications will fail security tests through next year, according to a report by Gartner. The report adds that the applications are developed with focus on usefulness, but that related security testing often is casual. It shows how difficult it is for companies to ascertain their BYOD risk, amid the multitude of applications.\n  </p>\n  <p>\n    Another risk connected to BYOD is network capacity. A worker plugged into the corporate network with a personal device might use both personal and business accounts simultaneously, such as a smart-phone feed that monitors the worker\u2019s home. \u201cAll that traffic is going through the network, so the network has to be able to handle a lot more,\u201d he says.\n  </p>\n  <p>\n    Organizations need to be ready with bigger pipelines for that data, he says. They also need to be aware of the latest ruses by attackers and to keep employees well-informed about how to protect themselves\u2014and the organization\u2014from intruders.\n  </p>\n  <h2>Data at risk</h2>\n  <p>\n    A survey last year by TEKsystems of 2,000 IT professionals found that 38% thought more than half their companies\u2019 sensitive data is at risk and 20% thought all corporate data could be compromised because of BYOD.\n  </p>\n  <p>\n    BYOD puts corporate computers in the middle of a web of interconnected risks: intruders seeking entry to the corporation, hackers and thieves seeking the employee\u2019s personal information, employee error or carelessness, inappropriate employee behavior and more.\n  </p>\n  <p>\n    What if an employee\u2019s device is compromised by a virus that shuts down the corporate IT system, or an application for personal use gives a third party access to corporate networks? What if an employee\u2019s device is lost or stolen?\n  </p>\n  <p>\n    Most IT departments wipe clean a compromised BYOD\u2014but that deletes the employee\u2019s personal data, and employers need to get the employee to sign a waiver to allow the deletion, says Route 1, a digital security and identity-management solutions company.\n  </p>\n  <p>\n    At the same time, once an employee leaves a company, the employer may no longer have a way to get back data stored on the BYOD.\n  </p>\n  <p>\n    What an organization can do in the name of cyber security and what is a violation of privacy pose two more interconnected risks. BYOD is still so new, there\u2019s not yet legal precedent in major jurisdictions, leaving it in a gray area. As of February, there were no BYOD-specific cases at the European level, nor at the country level in France, Germany, Italy, Spain or the Netherlands. However, other privacy cases have illustrated that limits do exist on companies\u2019 monitoring of their workers\u2019 private email accounts. For example, a German company was fined more than \u20ac1 million for screening employee data to combat corruption and for monitoring communication sent by external e-mail accounts by employees.\n  </p>\n  <p>\n    Employees who take their devices on business travel abroad present another security risk. Many countries don\u2019t have legal restrictions against technical surveillance, and \u201celectronic eavesdropping has been reported on airlines, in hotel rooms, taxis and meeting rooms,\u201d warns the U.S. Federal Bureau of Investigation.\n  </p>\n  <p>\n    The FBI recommends avoiding wi-fi networks, clearing the device\u2019s Internet browsers after each use, and logging into your corporate network only from your organization\u2019s own computers. It also suggests changing all passwords upon return home.\n  </p>\n  <p>\n    Companies use an array of techniques to protect themselves, from high security for network access, to clear corporate policies about BYOD, to use of outside vendors that promise to separate corporate information from employees\u2019 personal data.\n  </p>\n  <p>\n    While companies may do their best to maintain security, the vast possibilities for attack make it hard to keep up, especially when so many flaws may seem benign. However, an attitude of \u201cif it isn\u2019t broken, don\u2019t fix it\u201d doesn\u2019t work with BYOD. A study by Dell of customers with BYOD policies found half have suffered a security breach.\n  </p>\n  <p>\n    To protect themselves, companies are increasingly looking to cyber insurance. In a survey of U.S. companies late last year by Zurich and Advisen, almost 55% said they planned to buy cyber insurance in the next year, almost double the rate of the year earlier. New lines of insurance coverage are being created to keep up with the evolving risks. Cyber insurance options can include extortion, privacy liability, breach mitigation costs, consumer redress, electronic vandalism, errors and omissions liability and more.\n  </p>\n  <p>\n    Companies need to consider how they treat other risks in order to adjust their BYOD policies and risk management to their overall risk profile.\n  </p>\n  <h2>Downsides of always-on work</h2>\n  <p>\n    The risks from the overlap of personal and business on BYOD go beyond technology to interconnect with other areas, such as talent management.\n  </p>\n  <p class=\"quote\">\n    \u201cMany of us have tablets, smart phones or whatever, that have personal and business issues on them,\u201d Mr. Collins adds. \u201cMany of us put in very long hours in the office. We\u2019re classic work integrators: we answer work email and answer personal email. Productivity is simply different.\u201d\n  </p>\n  <p>\n    Some studies have found productivity is higher for employees who work from home. Cisco Systems Inc. in 2009 estimated that increased productivity by its telecommuting workers saved the company $277 million a year. One Chinese travel agency reported a 13% increase during a nine-month experiment with home-based work. The gains inspired the company to let all employees choose whether to work from home. More than half switched, and productivity rose 22%.\n  </p>\n  <p>\n    While it\u2019s more productive, \u201csome people may have trouble drawing the line. How can you ensure that you can occasionally be mentally separated from work?\u201d Ms. Conrad asks.\n  </p>\n  <p>\n    \u201cPeople may feel they are expected to work 24/7,\u201d she says. \u201cIt increases the stress level. An email pops through at 8 p.m. and you may think you have to answer it right away. Before, an email at 8 o\u2019clock would have arrived after you\u2019d left for the day and it would have waited.\u201d\n  </p>\n  <p>\n    In a survey of 1,000 U.K. workers by file-sharing company Egnyte and TLF Research, 40% of respondents said they would feel obliged to work during personal time if their employer introduced a BYOD policy.\n  </p>\n  <p>\n    Some companies are already taking steps to address this issue. Daimler AG lets workers set an out-of-office message telling the sender which colleague is handling their responsibilities and then deletes the email. \n  </p>\n  <p>\n    Companies are still working out the answers to the questions that increased mobility poses, and the task is getting harder as new devices with new capabilities go on the market, opening up more new territory in the brave new world of connectivity. A holistic approach to the interconnected risks\u2014technological, cyber security, talent management\u2014is key to making mobility a success.\n  </p>\n  <h2>The takeaways:</h2>\n  <ul>\n    <li>The risks of mobile employees are interconnected: keeping up with technology, cyber security, employee satisfaction, corporate culture.</li>\n    <li>Companies need to consider policies around mobility and BYOD in a holistic way that reflects how interconnected the implications are.</li>\n    <li>BYOD gives workers flexibility but takes away freedom, lets employers get the latest technology without paying but opens more doors than ever for breaking into corporate networks.</li>\n  </ul>", "description": "Mobility is a fast-moving workplace trend. How do employers and employees cope with interconnected risks like BYOD and a lack of face time?", "title": "Work practices on the move", "image": "/static/images/articles/risk-interconnectivity/work-practices-on-the-move/header.jpg", "related_items": [{"tag": "risk-interconnectivity", "slug": "responding-to-global-risks-report"}, {"tag": "risk-interconnectivity", "slug": "global-risks-2015"}, {"tag": "risk-interconnectivity", "slug": "insuring-fdi-success"}], "header": "FT - Work practices on the move", "tag": "risk-interconnectivity", "content_type": "article", "slug": "work-practices-on-the-move", "thumb": "/static/images/articles/risk-interconnectivity/work-practices-on-the-move/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n\t\tHere today, gone tomorrow: income can be a fragile thing, especially if a household is hit by disability or another severe reason.\n\t</span>\n\t<p>\n\t\tThink for a moment and ask yourself this question- if you lost your ability to work, how long would your savings last? 10 months? A year, maybe? We asked that question globally to more than 11'000 people, and the results were staggering. For six out of 10 people, their savings would last less than six months. And for one in five, it was less than a month.\n\t</p>\n\t<p>\n\t\tAnd surprisingly, although over 40 percent had lost income due to inability to work, they still massively underestimated their personal risk. If a family\u2019s main earner is unable to work or even passes away, it\u2019s likely that the family\u2019s earnings, and their standard of living, will decline. The difference between what you earn while you\u2019re working and the replacement income you get due to disability or ill health is what we call the income protection gap. A decline in welfare support, an aging population and increasing proportion of part-time or temporary workers, is adding to this growing challenge.\n\t</p>\n\t<p>\n\t\tAbout one third of our respondents had some form of life or illness cover. However, this global survey is helping us tackle some of the common misconceptions that exist around income protection and disability. More than half of those without income protection would consider purchasing it if they knew more about it. So raising awareness is a crucial first step.\n\t</p>\n\t<p>\n\t\tPeople also over-estimated the cost of this cover. For one in five respondents they would be willing to pay ten percent of their income to have the cover in place. The good news is, decent cover is available for much less than this.\n\t</p>\n\t<p>\n\t\tEmployers have a key role to play here as well. Our survey showed that for six out of ten employees, they would rather have a good benefits package, including life and ill-health coverage, than just an increase in their base salary. So for employers there\u2019s a great opportunity to attract talent, to retain talent, and to help close that income protection gap at the same time.\n\t</p>\n\t<p>\n\t\tAs a global insurer, Zurich has a key role to play in helping mitigate risk. That\u2019s why we\u2019ll continue to raise awareness of this crucial issue, and to work with individuals, with the public sector, the private sector, and with governments and regulators to help narrow that income protection gap.\n\t</p>\n\t<p>\n\t\tAt the end of the day, we all want to be supported when the unplanned or the unexpected happens. And protecting your income shouldn\u2019t depend upon how much your savings are, and that protection needs to be there when you or your family need it most.\n\t</p>\n\t<p>Download the 2016 full report and additional materials here:</p>\n\t<p>\n\t\t<a href=\"https://www.zurich.com/_/media/dbe/corporate/knowledge/docs/income-protection-gaps-executive-summary-june-2016.pdf?la=en\" onclick=\"ga('send', 'event', 'download', 'click', 'Executive Summary - executive summary report');\" target=\"_blank\">Income protection gaps: executive summary (233.23 KB/PDF)</a>\n\t</p>\n\t<p>\n\t\t<a href=\"https://www.zurich.com/_/media/dbe/corporate/knowledge/docs/income-protection-gaps-challenge-and-opportunity-june-2016.pdf?la=en\" onclick=\"ga('send', 'event', 'download', 'click', 'Executive Summary -  challenge and opportunity report');\" target=\"_blank\">Report: Income protection gaps: challenge and opportunity (3.32 MB/PDF)</a>\n\t</p>", "description": "Here today, gone tomorrow: income can be a fragile thing, especially if a household is hit by disability or another severe reason.", "title": "2016 Income protection gaps report: executive summary", "image": "/static/images/articles/protection-gap/income-protection-gaps-executive-summary/header.jpg", "related_items": [{"tag": "protection-gap", "slug": "income-protection-gaps-challenge-and-opportunity"}, {"tag": "protection-gap", "slug": "income-protection-tackling-the-knowledge-gap"}, {"tag": "protection-gap", "slug": "acting-while-the-sun-shines"}], "header": "FT - 2016 Income protection gaps report: executive summary", "tag": "protection-gap", "content_type": "article", "slug": "income-protection-gaps-executive-summary", "thumb": "/static/images/articles/protection-gap/income-protection-gaps-executive-summary/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    Cyber crime respects no borders. A better global governance framework would be a significant step toward addressing the threats posed by new technologies. A report by the ESADEgeo-Center for Global Economy and Geopolitics and Zurich suggests ways to counter the risks and move closer to an adequate governance structure.\n  </span>\n  <p>\n    There is an urgent need to act to stem cyber risks, including threats that originate across borders. Better global governance would be a significant step toward efforts to mitigate risks. A report by the ESADEgeo-Center for Global Economy and Geopolitics and Zurich reviews the challenges to this approach and offers innovative solutions.\n  </p>\n  <h2>Emerging technologies will fundamentally change the nature of cyber risk</h2>\n  <p>\n    Cyberspace has become essential to our daily lives and a practical necessity for governments and businesses. Yet this dependency comes at a price: Cyber security is arguably the most salient non-traditional security issue on the global agenda, and cyber risks increasingly are linked to other global risks.\n  </p>\n  <h2>Addressing an inadequate global cyber governance framework</h2>\n  <p>\n    Cyber attacks respect no borders, making it essential to approach cyber governance in a \u2018holistic\u2019 and global way. Despite recent progress, we still lack a comprehensive and functional regime of global cyber security. A study that included mapping the rules, institutions, and procedures of the current global cyber governance framework revealed the true nature and extent of the issues at stake. The study discovered a global cyber governance regime comprised of three distinct types of concerns and participants. At one end of the spectrum, where governance deals mainly with technical issues and relies on a multi-stakeholder model, governance is effective. At the other end of the spectrum, which includes the realm of threats like cyber warfare and state-sponsored sabotage, effective global governance is completely lacking. Between these two extremes is a \u2018gray zone\u2019 where interests of industry, governments and individuals, global governance models and organizational cultures coincide. This middle zone offers a promising place to start to work to encourage effective international efforts.\n  </p>\n  <h2>Offering ideas for a new governance framework</h2>\n  <p>\n    The private sector should take steps to effectively manage cyber risk, even in the absence of an overarching global governance framework. Sharing more information and ensuring a properly-functioning insurance market are some ways to do this. Lacking a broad international consensus, the private sector can still play an active role by lobbying for guiding principles to overlay the global cyber governance framework.\n  </p>\n  <p>\n    For policymakers, major progress might be achieved by, for example, strengthening global institutions, and include creating a G20 + 20 Cyber Stability Board. A cyber alert system modeled after the World Health Organization (WHO) would also be an effective tool. Enhancing public-private cooperation, including dialogue and incentives for investment in cyber security, would be a further step forward. Beyond embracing dialogue, policymakers should increase representation of less-developed countries and civil society in the global governance framework.\n  </p>", "description": "Cyber crime respects no borders. A better global governance framework would be a significant step toward addressing the threats posed by new technologies. A report by the ESADEgeo-Center for Global Economy and Geopolitics and Zurich suggests ways to counter the risks and move closer to an adequate governance structure.", "title": "Report: Global cyber governance: preparing for new business risks", "image": "/static/images/reports/cyber-risk/global-cyber-governance/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "managing-cyber-risks-is-a-team-game"}, {"tag": "cyber-risk", "slug": "risks-of-hacks-and-their-costs-vary-greatly"}, {"tag": "cyber-risk", "slug": "innovation-in-pursuit-of-resilience-in-the-age-of-cyber-risks"}], "header": "FT - Report: Global cyber governance: preparing for new business risks", "tag": "cyber-risk", "content_type": "report", "slug": "global-cyber-governance", "thumb": "/static/images/reports/cyber-risk/global-cyber-governance/thumb.jpg"}, {"body": "<span class=\"intro-line\">\n    The average data breach costs $3.79 million. But your business doesn\u2019t have to be average at protecting against cyber risks.\n  </span>\n  <p>\n    Over the past two years, the cost to a business of each lost or stolen record resulting from a cyber breach has gone up in most sectors, in some cases dramatically so. A just-released global analysis of data breaches from the Ponemon Institute shows that for large companies around the globe the average cost of a data breach is $3.79 million.\n  </p>\n  <p>\n    The data shows that while the costs vary by industry, they are not limited to any particular sector. The sectors with the largest increases from two years ago are education (now at $300 per lost or stolen record, up 170 percent), retail ($165, up 112 percent), healthcare ($363, up 55 percent), industrial ($155, up 50 percent) and media ($126, up 22 percent).\n  </p><p>\n    \u201cWhen we\u2019re asked about the industries that tend to be most at risk from cyber attacks, the top three are always financial institutions, retail and healthcare,\u201d says Lori Bailey, Global Head of Special Lines, Zurich Insurance Group (Zurich). \u201cBreaches in those sectors get the headlines, but when you\u2019re assessing the potential severity of follow-on effects you need to incorporate any industry that is heavily reliant on technology, logistics or computers. That can be manufacturing, energy and utilities, airlines\u2014all depend on interconnected networks and suppliers talking to one another. In fact, over 50 percent of supplier disruptions were caused by cyber issues last year, according to a Zurich-sponsored study by the Business Continuity Institute.\u201d\n  </p>\n  <h2>Focusing on \u201cwhat\u201d to protect</h2>\n  <p>\n    Business sectors differ in terms of customers, employees and the amount of data and automated processes that are moving through the company. That means that sectors have differing cyber risk exposures and specific needs to manage those risks. Linda Conrad, Head of Strategic Business Risk, Global Corporate in North America, Zurich, says,  \u201cOrganizations should undertake a business impact analysis to determine what their business needs to protect, take steps to protect critical functions and data, and then put a robust backup plan and insurance in place.\u201d\n  </p>\n  <p>\n    The main difference from one industry to another is understanding what\u2019s important to protect. \u201cIn retail, you have people\u2019s credit card numbers, and it\u2019s extremely important to protect that data,\u201d says Conrad. \u201cHowever, if you take manufacturing, for example, there aren\u2019t thousands of credit card transactions, but they may have automated systems in their assembly line, supply procurement or logistics. Sales ordering and even payroll are also frequently automated. In these cases, it\u2019s not data that needs to be safeguarded; it\u2019s actually the processes themselves. So an important first step for any information security organization is to define and prioritize what they\u2019re protecting for the enterprise.\u201d\n  </p><p>\n    Businesses\u2019 exposure to cyber risks will likely continue to increase rapidly as the world and they become ever more interconnected. Faced with this growing complexity, companies need to ensure that cyber risks are not dealt with in isolation, but rather addressed as part of a truly holistic risk management strategy. That says Bailey, requires \u201cmany different stakeholders to be involved, to make sure that every aspect of the organization is working in tandem to assess and monitor the exposures that the company might have. One glitch in the process can really have a domino effect. \u201cThat\u2019s the real challenge risk managers face today: trying to understand how cyber fits into the larger picture of risk connectivity, playing out various scenarios and then increasing resiliency from a holistic standpoint.\u201d\n  </p>\n  <p class=\"quote\">\n    \u201cThe main difference from one industry to another is understanding what\u2019s important to protect. If you take manufacturing, for example, there aren\u2019t thousands of credit card transactions, but they may have automated systems in their assembly line.\u201d\n  </p>", "description": "The average data breach costs $3.79 million. But your business doesn\u2019t have to be average at protecting against cyber risks.", "title": "What\u2019s your cyber breach price tag?", "image": "/static/images/articles/cyber-risk/cyber-breach-price-tag/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "managing-cyber-risks-is-a-team-game"}, {"tag": "cyber-risk", "slug": "risks-of-hacks-and-their-costs-vary-greatly"}, {"tag": "cyber-risk", "slug": "innovation-in-pursuit-of-resilience-in-the-age-of-cyber-risks"}], "header": "FT - What\u2019s your cyber breach price tag?", "tag": "cyber-risk", "content_type": "article", "slug": "whats-your-cyber-breach-price-tag", "thumb": null}, {"body": "<span class=\"intro-line\">\n    Cyberspace has become an integral part of daily life. But it has also become a major geopolitical battleground, creating significant challenges for governments and businesses.\n  </span>\n  <p>\n    Technological advances such as the \u201dinternet of things\u201d, 3D technology and driverless cars are creating immense opportunities for businesses, but also creating existential risks. As Zurich/Atlantic Council\u2019s report <a href=\"http://knowledge.zurich.com/cyber-risk/cyber-risk/\" target=\"_blank\">Beyond Data breaches: global interconnections of cyber risk</a> observed, cyber risk is becoming increasingly systemic and interconnected as technology develops.\n  </p>\n  <h2>But how well placed is the global community to improve global cyber governance?</h2>\n  <p>\n    Indeed, the scale, interconnectivity and importance of today\u2019s internet in some way resembles the pre-crisis 2008 financial system. We are now reaching a tipping point, where the growing complexity of this integrated digital landscape becomes unmanageable, leading to the possibility of a systemic disruption or collapse. Increasing cyber risks are curtailing investments into new technologies, lead to key opportunities being missed and reduce economic growth on a global scale.\n  </p>\n  <h2>Global governance</h2>\n  <p>\n    Comprehensive cyber governance is essential to mitigating emerging cyber risks and managing the growing complexity of cyberspace. And because cyber attacks respect neither national nor organizational borders, such governance must be global in nature.\n  </p>\n  <p>\n    In his recent book, \u201cWorld Order\u201d, Henry Kissinger suggested that, eventually, technology may spell the end of our long-held perceptions of sovereignty and world order.\n  </p>\n  <p>\n    For now, however, it would seem that statecraft is alive and well in cyberspace, with significant implications for global cyber governance; and therefore for businesses. The <a href=\"http://www.zurich.com/_/media/dbe/corporate/docs/whitepapers/global-risks-2015-report.pdf?la=en\" target=\"_blank\">Global Risks 2015</a> report points out that, if anything, declining trust and ideological differences among global players is contributing to a weakening of internet governance. A recent example is the <a href=\"http://www.reuters.com/article/2015/03/19/us-china-security-usa-eu-idUSKBN0MF1YH20150319\" target=\"_blank\">disagreement</a> between China on the one hand, and the U.S. and EU on cyber security rules. In addition, governments often occupy a dual role in which they are both defenders against foreign intruders, but in many cases also perpetrators of attacks.\n  </p>\n  <p>\n    Given the growing importance of global cyber governance, Zurich has teamed up with ESADEgeo, a leading Spanish business school focused on geopolitical issues and led by former NATO Secretary-General Javier Solana. The result of this partnership will be a Risk Nexus paper, containing analysis and targeted recommendations for action. The report is due to be released in late April 2015.\n  </p><p>\n  </p><h2>As ever, one of the key questions for business regarding the report will be: \u201cwhat does this mean for us?\u201d</h2>\n  <p>\n    In one sense, the private sector is well placed to act as an agent of change, championing basic principles for improved global cyber governance. While ideological splits such as those detailed above exist at a governmental level, the private sector shows greater cooperation and consensus. The IPO of China\u2019s biggest on-line retailer, Alibaba, on the New York Stock Exchange, for example, was a reminder that its two main shareholders are Yahoo (U.S.) and Softbank (Japan).\n  </p>\n  <p>\n    But a pragmatic approach will also be required. Geopolitical tensions are unlikely to be resolved in the near future, and so businesses must take appropriate steps to protect themselves against the gap in global cyber governance in the meantime.\n  </p>\n  <p>\n    At a minimum, that would include instituting state-of-the-art cyber defenses and, as there are no complete guarantees against attack, a robust plan for mitigating and recovering from any event.\n  </p>\n  <p>\n    The potential implications of an attack are so severe, with potential disruptions to supply chains and significant business interruption, safety and reputation risks, that cyber security needs to be on the agenda at a board and c-suite level and applied globally.\n  </p>", "description": "Cyberspace has become an integral part of daily life. But it has also become a major geopolitical battleground, creating significant challenges for governments and businesses.", "title": "Protecting growth: The importance of improving global cyber governance", "image": "/static/images/articles/cyber-risk/protecting-growth/header.jpg", "related_items": [{"tag": "cyber-risk", "slug": "global-cyber-governance"}, {"tag": "cyber-risk", "slug": "risks-of-hacks-and-their-costs-vary-greatly"}, {"tag": "cyber-risk", "slug": "innovation-in-pursuit-of-resilience-in-the-age-of-cyber-risks"}], "header": "FT - Protecting growth: The importance of improving global cyber governance", "tag": "cyber-risk", "content_type": "article", "slug": "protecting-growth-the-importance-of-improving-global-cyber-governance", "thumb": null}]