Embracing the disruption by emerging technologies Expert perspectives on the Fourth Industrial Revolution TABLE OF CONTENTS 1 INTRODUCTION 1 RISK AND REWARDS 2 TAKING CHARGE OF DISRUPTIVE TECHNOLOGY RISKS 2 Brian C. Elowe, Managing Director and US Client Executive Practice Leader at Marsh 3 TECHNOLOGY INNOVATION IS DISRUPTING RISK MANAGEMENT 6 Melissa Gale, Senior Manager, Risk Solutions at Lyft 4 HOW RISKY ARE THESE TOP 10 EMERGING TECHNOLOGIES? 9 Andrew Maynard, Director, Risk Innovation Lab at Arizona State University 5 DISRUPTIVE TECHNOLOGY BRINGS RISK AND OPPORTUNITY TO INFRASTRUCTURE PROJECTS 12 Adrian Pellen, Infrastructure Segment Leader, US and Canada, Construction Practice at Marsh FINTECH 6 FINTECH IN CHINA: WHAT’S BEHIND THE BOOM? 15 Cliff Sheng et al., Partner and Head of Financial Services, Greater China at Oliver Wyman 7 FINTECH SPURS INNOVATION IN ASIAN WEALTH MANAGEMENT 19 Steven Seow, Head of Wealth Management, Asia for Mercer 8 WHAT ARE THE IMPLICATIONS OF THE RAPID GROWTH OF FINTECH IN CHINA? 22 Jasper Yip et al., Engagement Manager of Financial Services, Greater China at Oliver Wyman 9 HOW BANKS CAN KEEP UP WITH DIGITAL DISRUPTORS 25 Scott A. Snyder, Senior Vice President, Managing Director and Chief Technology and Innovation Officer for Safeguard Scientifics 10 INSURETECH IN CHINA: REVOLUTIONIZING THE INSURANCE INDUSTRY 29 Cliff Sheng, Partner and Head of Financial Services, Greater China at Oliver Wyman CYBER RISKS AND SECURITY 11 CYBER RISK IN ASIA: INCREASING TRANSPARENCY TO LIMIT VULNERABILITY 32 Wolfram Hedrich et al., Executive Director of the Asia Pacific Risk Center and Partner in Oliver Wyman’s Finance and Risk practice 12 ASEAN: THERE CAN BE NO DIGITAL ECONOMY WITHOUT SECURITY 36 Naveen Menon, President, ASEAN of Cisco Systems, Singapore 13 A GROWING CYBER VULNERABILITY: THE COMPETITION FOR TALENT 39 Tom Jacob et al., Senior Partner and Global Leader of Research & Insights in the Information Solutions group of Mercer’s Talent Division 14 ARE ASIAN SMEs PREPARED FOR GROWING CYBER THREAT? 42 Jaclyn Yeo et al., Senior Research Analyst at the Asia Pacific Risk Center ASIA IN FOCUS 15 CHALLENGES AROUND THE CYBERSECURITY REGULATORY ENVIRONMENT IN SOUTHEAST ASIA 46 Simon Piff, Vice President of IDC Asia/Pacific’s IT Security Practice Business 16 BANKING THE UNBANKED IN SOUTHEAST ASIA: HOW CAN DIGITAL FINANCE HELP? 49 Duncan Woods et al., Partner in the Retail & Business Banking Practice, Asia Pacific at Oliver Wyman 17 HERE’S HOW ASIA’S CITIES CAN BE SMART AND SUSTAINABLE 53 Todd Ashton, President of Ericsson Malaysia and Sri Lanka 18 ELECTRIFYING EMERGING ASEAN THROUGH OFF-GRID DISTRIBUTED RENEWABLE ENERGY SYSTEMS 56 Han Phoumin, Energy Economist at the Economic Research Institute for ASEAN and East Asia WHAT’S NEXT? 19 THE END-TO-END AUTONOMOUS SUPPLY CHAIN… IS HERE 58 Wolfgang Lehmacher, Head of Supply Chain and Transport Industries at World Economic Forum 20 FACTORIES OF THE PAST ARE THE DATA CENTERS OF THE FUTURE 61 Graham Pickren, Assistant Professor of Sustainability Studies at Roosevelt University 21 HOW DATA AND TECH WILL FUEL MEGACITIES OF THE FUTURE 64 Terry D. Bennett, Senior Industry Strategist for Civil Infrastructure at Autodesk INTRODUCTION Artificial intelligence, robotics, and the digital revolution are just some of the expanding scope for emerging technologies to drive productivity across sectors such as transportation, healthcare, financial services, and the energy industries, to name a few. While most businesses across industries are trying to master and deploy the disruptive technologies to enable economic benefits, they also present new hazards that exacerbate global risks, introducing opportunities as well as challenges across sectors. In particular, this disruption takes place against a backdrop of rising cyber threat landscape, a top risk concern for executives, including the more advanced economies in the Asia-Pacific region. The articles presented in this publication have been selected to illustrate the key technologies and applications relevant to Asia, the associated risks and rewards to ensure successful navigation and management of this unprecedented change we all face today. All articles first appeared on BRINK, the digital news service of Marsh & McLennan Companies’ Global Risk Center, managed by Atlantic Media Strategies, the digital consultancy of The Atlantic. BRINK gathers timely perspectives from exerts on risks and resilience around the world to inform business and policy decisions on critical challenges. 1 Marsh & McLennan Companies BRINK Perspective TECHNOLOGY TAKING CHARGE OF DISRUPTIVE TECHNOLOGY RISKS Brian C. Elowe Managing Director and US Client Executive Practice Leader at Marsh There’s a lot of talk these days about an established technology and alters using IoT technologies within disruptive technology – 3-D printing, an industry or way of doing business two or more years. Similarly, only autonomous vehicles, blockchain – including jobs – or a ground- 25 percent of our respondents said and more. It’s easy to find breathless breaking product that creates a their organization uses or plans descriptions of a world gone digital, completely new industry.” to use wearable technologies, be it the promise of connecting all while studies show 93 percent the world’s people to all the world’s For some companies, a lack of focus of companies across a range of knowledge or the perils of poorly on such risks will bring financial industries are already evaluating governed artificial intelligence difficulty; for those with foresight, or using them. running amok. a focus on the risks will enhance the opportunities. Such disconnects show a gap in Despite the abundance of understanding: Too many risk information on disruptive A surprising number of respondents executives don’t seem to realize the innovation, our research raises (24 percent) acknowledged that pervasiveness of these technologies. questions about the level of they do not use or plan to use any of Perhaps they are simply mesmerized discussion companies are having 13 common disruptive technologies; by the “gradual evolution rather about managing the risks of the numbers were even higher than radical change” with which disruptive technology. The 2017 around individual items. technology now disrupts the Excellence in Risk Management business world. But companies project from Marsh and RIMS, the For example, 48 percent of risk cannot afford to be surprised when Risk Management Society, looks at executives told us their organization technology fails or goes awry. an array of issues around disruptive doesn’t use or plan to use the technology risks. For this survey, Internet of Things (IoT); yet, Risk executives need to fortify their disruptive technology was defined according to many estimates, strategic role by understanding as “one that purposefully displaces 90 percent of companies will be how technologies impact not just 2 Marsh & McLennan Companies BRINK Perspective EXHIBIT 1 HOW MANY DISRUPTIVE TECHNOLOGIES IS YOUR ORGANIZATION USING OR PLANNING TO USE?* (Percent of respondents) Source: Marsh, RIMS; Excellence in Risk Management No disruptive technology use 24 Use 1 to 3 disruptive technologies 46 Use 4 to 6 disruptive technologies 22 Use 6 or more disruptive technologies 9 * Numbers add up to more than 100% due to rounding their own operations and business By definition, disruptive technologies What is coming? If our Excellence models but also the direction of can make or break a business. survey is any indication, this is a entire industries – both theirs and Assessment and analysis of the dangerous gap that needs to be related ones. risks need to be integrated into bridged by risk executives. existing business strategy decisions. ALIGN AND ASSESS Why, then, this lack of focus on The pace of innovation is truly assessing disruptive risks? “Other fascinating. As our colleagues at A primary responsibility for areas have greater priority,” was the Lippincott put it: “There is no more any risk executive is to ensure top answer when respondents were important question to answer than that new and emerging risks are asked about the biggest impediment ‘What is the big, unstated need of being identified and assessed. to understanding disruptive tomorrow?’ The answer is deep, Yet we found a significant number technology risks. constant, and insatiable inquiry.” (60 percent) of respondents saying Educate yourself on terminology, no risk assessment is being done for But today’s risk executives need on leading-edge innovations, about disruptive technologies. That should to develop insights that will hits and misses, emerging risks, and make people nervous given the help leadership prepare for the other disruptive technology topics, impact that disruptive technology unexpected. Disruption from especially for those your organization can have on an organization’s technology is an area that unexpected or industry is using or planning strategy. In fact, such lack of events will no doubt emanate from to use. attention to the risks should be and should be treated as a priority. viewed as unacceptable. In doing so, expand your network, the people and places you turn to From a liability standpoint alone TAKE CHARGE OF for answers and ideas. There may be these innovations may upend the DISRUPTIVE RISK other industry sectors with experts status quo. Look at a driverless car you don’t typically tap into that can or truck or train. When the vehicle The transformational changes that help you to better understand how of the not-so-distant