As Australian businesses increasingly integrate technology into their operations, Lockton has highlighted the importance of addressing the associated risks alongside opportunities.
The firm’s recent commentary underscores the need for strategic planning, emphasising that technology must be implemented thoughtfully to prevent potential vulnerabilities that could impact both financial performance and brand reputation.
Lockton noted that companies today face mounting pressure to adopt digital tools and technologies, but warned that this can expose businesses to new risks if not carefully managed.
As demand for fast, efficient services grows, so too does the likelihood of disruptions – whether from cyberattacks, outages, or human error – posing unique challenges for executives.
The firm said that agility in responding to technology-related incidents is critical, as the speed at which digital risks evolve often demands quick, effective decision-making from leadership.
Lockton pointed to what it termed the “Hype Cycle,” a phenomenon where companies may adopt technologies without a full understanding of their functionality or limitations.
For example, artificial intelligence (AI) technologies, including machine learning and generative AI, have gained widespread attention and use across various sectors.
However, the firm cautioned that businesses should assess the relevance and applicability of these technologies for their specific needs, as mismatched expectations could result in costly misunderstandings or operational inefficiencies.
In sectors like financial services, machine learning has long been employed to improve fraud detection and customer insights.
However, Lockton explained that the recent focus on generative AI has created confusion among clients, regulators, and employees regarding the differences and specific applications of various AI technologies. This uncertainty has, in many cases, required businesses to engage in further education and dialogue to clarify AI’s role and limitations to stakeholders.
Lockton advised firms to carefully evaluate several key considerations when adopting new technologies, such as privacy and data security concerns.
With the Office of the Australian Information Commissioner (OAIC) offering guidelines on data handling, companies are encouraged to assess how their new tools align with these standards, particularly in the context of customer data management.
Additionally, firms should evaluate the broader regulatory landscape and anticipate any compliance challenges that could arise from technology use.
With companies increasingly relying on automated processes and AI, Lockton noted that insurers face new complexities in evaluating risk profiles.
Historically, insurers have built risk models that factor in human error as a known variable. However, as businesses implement technology-driven operations, these models may require adjustment to align with shifting risk exposures.
This could impact both premiums and claim outcomes, as traditional risk assessments may no longer fully capture emerging technology-related vulnerabilities.
Lockton said that, depending on industry trends, insurers may see either lower claims costs and premiums or increased claims that necessitate premium hikes.
While Lockton acknowledged that adopting new technology is key for Australian firms seeking a competitive advantage, it encourages businesses to ensure they understand both the benefits and limitations of their chosen tools.
Articulating clear goals for technology investments and communicating these effectively to stakeholders is critical, particularly in maintaining alignment with business objectives.
