New technologies present considerable opportunities for businesses. However, they can also bring risks, sometimes with unintended consequences. According to Allianz Risk Barometer respondents, the increasing utilization of Artificial Intelligence (AI), which is an important driver of change in many industries today, is the new technology that also comes with the greatest future risk potential (see chart below).
Which of these emerging trends comes with the greatest risk potential in the next five to 10 years?
Source: Allianz Global Corporate & Specialty. Figures represent the percentage of answers of all participants who responded (1,718). Figures don’t add up to 100% as up to three risks could be selected.
“From chatbots to autonomous cars, more widespread implementation of AI applications is transforming industry and society, bringing benefits such as increased efficiencies, new products and less repetitive tasks, “ explains Michael Bruch, Global Head of Liability Risk Consulting/ESG at AGCS.
“For example, in the insurance industry, AI applications will improve the transaction process, with many benefits already apparent. Customer needs can be better identified. Policies can be issued, and claims processed more quickly and cheaply. Large corporate risks, such as business interruptions, cyber security threats or macro-economic crises, can be better predicted. Meanwhile, chatbots can assist customers on a 24/7 basis.”
However, with progress in AI, machines may begin to make decisions on behalf of humans. Decision transfer and lack of transparency or human oversight may result in unforeseen risks or unpredictable outcomes creating complex liability issues. At the same time, ethical and social concerns related to AI are also becoming more prominent, says Bruch.
Digital platforms dominate
Of all the complex technological developments confronting companies today, the one with the most immediate impact is digital platforms. The collection of cloud based software and services used to drive business have developed over the last decade as firms have built on, or moved core functions on to, digital platforms. This trend has now reached critical mass, according to the AGCS Trend Compass, a report which identifies the most important technological, business and socio economic developments of the future.
Such platforms enable the direct digital interaction of two or more user sites, bringing together communities of buyers and sellers so goods, information, jobs and services can be freely offered or requested. This creates markets of enormous scale – seven out of the 10 most valuable companies globally are based on a platform business model. However, growing reliance on digital platforms also brings greater risk potential, according to Allianz Risk Barometer respondents, ranking second behind AI in this regard.
- Adeline Roupillard, Global Practice Head of Digital Transformation at AGCS
“Platforms can lead to a monopoly game – early platforms have come to dominate entire markets by redefining how participants interacted. In other industries, where platforms have not emerged as quickly, companies cannot afford competitor’s platforms to become the standard because then they will be tethered and pay a significant cost to do business. If as a company you do not run and lead the industry platform, you also run the risk of slowly losing your direct access to the clients and the valuable data resulting from the client relationship which can damage your brand.”
And as digital platforms become bigger and bigger, interconnectivity becomes an increasing risk. If one element breaks it can have an impact on a whole value chain, such as a business interruption cascading through an entire sector if a platform is unavailable due to a technical glitch or cyber event. The losses from such an event for multiple companies could be in the hundreds or even billions of dollars if any outage lasts for a significant amount of time.
The Allianz Risk Barometer is our annual report identifying the top corporate risks for the next 12 months and beyond, based on the insight of more than 2,700 risk management experts from over 102 countries and territories.
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