Planning and ownership are critical to the success of transformation programmes as we enter a new business cycle.
Change is afoot. As economies emerge from the pandemic we are poised for our most robust post-recession recovery in 80 years, according to the World Bank.
The world has shifted on its axis in the past two years, megamergers have collapsed, customer needs have shifted, systemic threats are looming and ESG is the industry's new rallying cry. Within the insurance and reinsurance industry, much is on the change agenda and margins for error have never been tighter.
The themes on the change agenda are not particularly new, with activity continuing to centre around operational resilience, digital transformation, data analytics and the drive for efficiency. But much at stake. New risks are emerging and the pressure is on to innovate and focus more on the customer.
These are not short-term change programmes, but long-term strategic endeavours and by the end of it, there will be winners and losers. More and more, our clients are talking to us about 'transformation plans'. If the next business cycle runs for three and four years, it means that senior managers must decide now where their firms need to be by 2025 and how they are going to get there. In such a competitive space that presents great pressure and opportunity.
In the race to digitise, insurers, brokers and MGAs must consider where to invest and crucially, how to access and extract value from their data. Mid-sized market players are more likely to opt for plug and play solutions (bringing its own set of third party risks), while the behemoths are already on a trajectory towards major restructuring, reengineering core processes and digital transformation plans.
There is no doubt the global pandemic has served as a catalyst for firms to turbo-charge digitisation, but different companies are at different stages of the journey. As commercial P&C catches up with personal lines from an automated placement and distributed infrastructure perspective, carriers will also look to better leverage artificial intelligence and other forms of predictive analytics to fully realise the potential of their data assets.
Where COO meets CIO
A new generation of talent is being recruited with a strong focus on data science and analytics. But relationships will not disappear. The re/insurers, brokers and MGAs best positioned to leverage data and technology to empower their people will be those making insight-led decisions and gaining a competitive advantage.
In the race to industry 4.0, data scientists and actuaries, armed with AI and a host of models, will focus their attention on ensuring data is both accessible and meaningful. These insights will increasingly underpin the market's relationships, leading to better, quicker decision-making and relationship management.
One consequence is that tech and operations teams will need to work more collaboratively, with a requirement that business leaders become more tech-savvy. Organisations will have leaner front office teams, more data in the cloud and better technology infrastructures linking it all together. But to get there requires bold steps, a strong vision and ability to invest in areas that others are not.
There are also emerging and systemic risks associated with a more digitised environment that will need to be managed carefully. As companies outsource more of their systems to third parties and the world becomes even more connected, the cyber threat landscape could well produce the industry's next COVID-19.
A large cyber event has the potential to cause substantial disruption to operations, while also generating substantial claims. When a ransomware attack brought down Travelex in January 2020, for instance, and Lloyd's was forced to halt its currency exchange it offered a glimpse into how quickly our digitised systems can unravel.
People, process and technology
Effective change management still has people, process and technology at its heart. The first step as companies move into the new business cycle is deciding which programmes to prioritise and, perhaps more crucially (at least initially), which projects to wind down. A lot of technology projects are under significant scrutiny, but they are not necessarily delivering. A number of programmes from the last two years are being reset, but some should stop. It's time to look forward to the next cycle.
It is time to make better plans and to see transformations through to the end. Without the right approach, governance and ownership, firms are in danger of spending huge amounts of money on change over the next five years and not achieving their desired ROI. The right planning is therefore essential.
It is something we have seen clearly throughout the pandemic. Organisations with leaders that planned for disruption and instilled cultures which could adapt and respond quickly, proved the most resilient. As we look ahead to the inevitability of more turbulence in an unpredictable world, business leaders who plan and invest in the right areas will best position their firms to thrive.
Some of those leaders may not be there to see these projects through to completion. There is a lot of movement currently in the market and this has implications for change programmes. Smart businesses will ensure the right people are driving transformation, with ownership and accountability shared between several project leads. This will ensure the accountability and continuity through a programme's lifecycle.