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Profits Not Prison
Noel Vickery 2015 CFO Symposium Adelaide
10 years ago only 5% of major losses were not
predicted ‘Black Swan’ nor on risk registers.
Presently 20% of major losses are not included
on risk registers
Introduction
1. Cyber & IT - Don’t be a statistic
2. Directors & Officers - Your Personal Liability
3. Contractual Exposure - What the ……?
4. Supply Chain Risk – How many links in your chain?
5. Terrorism - Business terrorised by Insurers
Agenda
Cyber & IT
Cyber & IT Security
“While companies are investing millions of dollars in insurance policies to protect themselves from cyber security breaches, the market is fraught with pitfalls”
Zouhair Guelzim, chief information security officer of L’Oreal Americas.
Australia is a “paradise for white-collar criminals”. More than
20% of Australian businesses
experienced cyber crime in 2012
(Symantec)
Global Risk Ranking - Cyber risks (Allianz Risk Barometer 2015)
2015 5th
2013 15th
2014 8th
Cyber & IT Security
There are 2 Company types Those that have had an attack, and those that will
• Data stored in the ‘Cloud’ & other data storage
• IT and Computer Fraud
• Data theft
• Website ‘Hacked’ and held to ransom
• Breach of Privacy Act
• Social Media – Tweets, Facebook & YouTube
• Malware, viruses etc.
• Identity theft
• Unauthorised & erroneous electronic funds transfers
Cyber – IT - Technology
Real Risks
Which cyber risks are the main cause of
economic loss? Lo
ss o
f re
pu
tati
on
• 61%
B
usi
nes
s in
terr
up
tio
n
• 49%
Loss
of
clie
nt
dat
a
• 45%
Allianz Risk Barometer Cyber risks Top Business Risks 2015
• Which cyber risks do companies fear most? – data theft, loss of reputation and increased threats
• Protecting against Cyber Risk – better hardware, better processes and increased awareness,
• Insured Risk v Residual Risk
Loss of Reputation - Main Cost
What is preventing companies being better
prepared against cyber risks? R
isk
is u
nd
eres
tim
ated
• 73%
B
ud
get
con
stra
ints
• 59%
Hav
en’t
an
alys
ed t
he
pro
ble
m
• 54%
Allianz Risk Barometer Cyber risks Top Business Risks 2015
Given the increasing frequency of cyber security incidents, and the growing impact of those incidents on business, a board of directors’ oversight activities
should include ensuring the adequacy of a company’s cyber security measures.
The issues are complicated, but there are things Boards and management can do to begin to quantify
and mitigate the risks.
Cyber & IT– Business responsibility
Directors & Officers Liability
Your Personal wealth at risk
• What is the risk, and is it insured?
• Directors & Officers vs. Management Liability Is there cover for the corporate entity?
• Increasing legislation, exposures and penalties,
• One ‘shared’ insurance policy Limit
• Will an Corporate Entity claim leave a void for the directors?
What SHOULD be keeping you awake
at night? Directors & Officers Insurance
• Disclosure
• Operation of Insurance Policy – True advancement of Defence Costs – Fraud
• Corporate Indemnities – Legal restrictions
• Effective severability & non imputation clauses
• Insured vs. Insured exclusions
• Major Shareholder exclusion
• Insolvency exclusion & Debt related exclusions
COVERAGE ISSUES
Directors & Officers Insurance
Contractual Exposure
What the ……?
• Contracts, leases, purchase, supply, subcontracts
• Indemnities – should be written in specific not generalised terms
• Hold Harmless/Subrogation Waivers
• Proportionate Liability – Written out, by conduct or arbitral process
• Caps on Liability
• Insurance Protection
• Force Majeure & liquidated Damages
Contractual Exposure
Supply Chain Risk
Who is the weakest link in your chain?
• Power under the Sea – subsea cables
• Reliance on power and other utilities
• Damage to infrastructure
• Concentration of suppliers - globalisation
• Distribution channels
• Cyber & IT suppliers
• Weather & natural events - Volcanoes
• Insolvency of suppliers/manufactures
Supply Chain Risk
Terrorism Business terrorised by Insurers
Terrorism
the guardian.com
• Australian Terrorism Act
• Terrorism Risk excluded by prescribed insurance policies
• Insurance Policy Exclusion, overridden if Terrorist incident declared by Federal Govt
• But can your insurer deny your claim if no terrorist incident is declared?
Terrorism
• Managing costs – Profits not Prison
• Risk identification
• Truly understanding your business
• Understanding your business’ drivers
• The Devil is in the detail
• Uninsured risks or insurances not purchased
• Insurance certainty
Summary
54% of respondents managing
costs and improving
profit are among top three
priorities
51%
regulatory change
is top concern
2014 Global Insurance CFO survey
Locally focused. Nationally resourced.
Internationally represented.
• Founded in 1927- USA
• World's fourth largest insurance broking and risk management company.
• 30 locations across Australia.
• Network of 400 Offices throughout 30 countries
• Employs over 20,000 people worldwide
About Arthur J. Gallagher Australia
Profits Not Prison