A recent blog post from WTW, part of its Bridging the Gap series, has highlighted the need for investment firms to adopt a proactive approach to risk management, integrating insurance solutions to mitigate potential financial impacts.
Laura Kelly, associate director of sales and client management at ORS – FINEX GB, noted in the post that the risk environment for investment firms has changed significantly since the pandemic.
The sector faces challenges such as the rise of artificial intelligence in business processes, sophisticated cyber threats – including deepfake and vishing attacks – and continued concerns around fraud, human error, and regulatory compliance.
To address these risks, investment firms must establish structured guidelines, protocols, and procedures. Kelly said that while insurance provides financial protection, it should be part of a broader risk management framework that identifies and mitigates vulnerabilities.
Leveraging accurate data is key to understanding and assessing risks. Firms can benefit from analysing both qualitative and quantitative risk factors to ensure they are adequately covered. The integration of trusted data sources helps in forecasting potential threats and structuring an insurance program that aligns with business needs.
WTW’s analysis suggests that firms should evaluate their risk appetite, existing mitigation strategies, and cost considerations when structuring their insurance coverage. Not all risks are insurable, and understanding how different policies respond to various scenarios is critical in ensuring adequate protection.
Richard Langdon, WTW’s FINEX Financial Institutions Wealth & Asset Management Sector lead, discussed the importance of quantifying risks to inform insurance decisions.
“As well as identifying key business risks, it is important to fully calibrate the potential financial impacts of the risk exposures you have across the business. Fully quantifying and qualitatively assessing the risks you face is crucial in order to tailor the measures you have around them, for example, the amount of insurance cover you buy to transfer these risks off your balance sheet,” he said.
He further noted that using historical claims data and industry-specific risk models allows firms to build insurance programs based on actual exposure levels.
For New Zealand investment firms, adapting to these emerging risks through a combination of risk management strategies and tailored insurance coverage can help mitigate financial and operational disruptions in an increasingly complex environment.
