Reputational risk is high on businesses’ agendas as many firms have now switched to hybrid or home working models
BrokerFest 2021: The Covid-19 pandemic has changed how a lot of people work, with many insurance firms moving to a hybrid model that combines home and office working - however, this has also increased the reputational risk for SMEs.
Cyber attacks targeting businesses has soared during lockdown as a result of more staff working from home and potentially being more lax about their online security. Therefore, the reputational risk for companies is correspondingly growing around risks such as data breaches.
Reputational risk “is a hidden threat or danger to the name or standing of a business or entity”.
Speaking during the cyber conference stream at Insurance Times’ BrokerFest 2021 event on Monday 11 October, Richard Hodson, director of UKGlobal Broking Group, told delegates: “They say that today’s news is tomorrow’s fish and chip paper - I think this quite true.”
He pointed out that there is now more focus on intangible risks - often described as being difficult to quantify using traditional risk management methods - as opposed to tangible ones.
As an example, he cited Facebook’s share price plummeting by $6bn (£4bn) earlier this month due to a service outage in October, as well as a whistleblower interview.
Further demonstrating this point, in October, the FCA issued guidance for businesses about the risks of operating a hybrid or home working model.
Hodson’s session was titled ’Understanding the opportunity in reputational risk products’.
Reputational risk landscape
The cyber insurance market is estimated to be worth around $7.3bn as of last year, Hodson said.
He continued: “Cyber insurance is really about shifting your perceptions. Cyber insurance from a protection perspective is one of the best reputational products you can have because most SMEs do not have IT forensics, PR firms and lawyers.
“From a cyber perspective, reputation is having that easy access to experts that you don’t have in-house.”
Hodson believes that insurance products which cover reputational risk are not going to be commoditised just yet because “there’s a lot of work to be done on it”.
He added: “[Around] 10 years ago, when cyber insurance came to the UK market, everyone was watching the US.”
One challenge cyber insurance has is that it lacks standardisation due to the evolving nature of cyber attacks. However, this product has also helped increase awareness around business interruption, Hodson noted.
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BrokerFest 2021: Hybrid working heightens reputational risk for SMEs