Magazine article Risk Management

The Transforming Power of Technology

Magazine article Risk Management

The Transforming Power of Technology

Article excerpt

The risk management department at a company's corporate headquarters in the midwestern United States is working on an issue together with the risk management team at a manufacturing plant in Asia and its broker-advisers in Chicago, New York, London and Hong Kong. The distances and time zones are vast, but the teams are addressing the problem with the same effectiveness and timeliness they would if they were all at the same location. On any given day, they may exchange information and ideas more than a half-dozen times, despite the fact some members are working while their colleagues on the other side of the globe are sleeping. And it all happens without a single piece of paper changing hands.

This scenario provides a glimpse of how electronic commerce has emerged in this decade to exert a powerful influence on the practice of risk management. Advanced networks are linking desktop computers around the world to deliver a new generation of communications capabilities, information access and productivity gains for risk managers and their broker-advisers.

This wave of innovation has been occasioned by advancements in individual areas of technology: the sharp decline in the cost of both telecommunications service and electronic processing; the continual improvement of desktop computers; and the construction of "information superhighways" able to handle astounding volumes of voice, data, image and multimedia traffic. Perhaps the most prominent offspring of these developments is the Internet and its explosive growth.

For risk managers, the electronic commerce revolution has arrived just as their organizations' opportunities for accelerated growth are accompanied by increasing risks. The underlying factors behind this paradox are not new: the global expansion of business; the introduction of new products and services; technological change; shifting social and legal standards; and the relentless drive to contain and reduce costs.

The increasing complexity of the world insurance marketplace presents another challenge. The concentrations of risk capital long ago expanded from the United States and London to reach continental Europe and Bermuda. Now, developing nations with previously closed economies are beginning to welcome the infusion of outside risk capital. Alternative ways to manage and finance risk, including the use of capital markets, are multiplying daily.

These forces have forged a new set of imperatives for risk managers and their broker-advisers. Today's priorities include marshaling expertise and gaining access to information on a global scale while generating increased efficiencies in administrative and work-flow processes. This is where electronic commerce enters the picture--it has the technological muscle to play a key role in meeting these challenges.

Marshaling Expertise

It has been quite some time since the requirements of risk managers for advisory and brokerage services could be satisfied by a single local office. The order of the day now is the ability to summon the expertise of the best risk, market and industry specialists available--regardless of where they are located. Technology will not eliminate the value of face-to-face contact, but it does add a new dimension to the marshaling of resources. The professionals needed to develop a program or address an issue may be scattered around the globe, but electronic networking can mesh their efforts into closely coordinated teamwork.

The key to this seamless interaction is advanced messaging connectivity, which enables large groups to electronically exchange not only messages, but also word-processing text, spreadsheets, graphics presentations and other data files. All members of the risk management team can contribute to documents, eliminating constant rekeying, faxing, mailing, courier service and other tedious processes that penalize productivity and increase costs.

The capabilities of advanced messaging are especially significant in the document- and information-intensive risk management environment. …

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