I really like this idea of the “see-through economy”. It is the idea that the ever-faster paced age of transparency has given consumers and investors the power to impact a company’s reputation in meaningful ways.
‘Meaningful’ can mean many things but the see-through economy matters so much because so many organizations have failed absolutely because of their failure to manage risk in the see-through economy. Many more organizations fail to meet core objectives for the same reason.
The idea of a see-through economy dovetails neatly with work Jeama is doing now to help its clients manage sexual abuse risk and sexual abuse credibility risk. Sexual abuse risk (SML or SAM in insurance speak) is the risk that a child may be sexually abused. This risk used to be managed poorly but is generally managed much better today. Sexual abuse credibility risk is the risk that an organization isn’t trusted today because of how it managed abuse risk in the past. There is still lots to learn about this risk.
Failure to manage abuse risk has caused some organizations to fail. More organizations are currently failing to meet their objectives, and some will likely fail absolutely, because of abuse credibility risk. The problem we are working to help clients solve is that these 2 risks are currently managed separately, to the extent abuse credibility risk is managed at all, even though they drive each other in a vicious cycle.
In the cycle, new revelations of past bad practices drive social inflation, which drives current claim frequency and severity, increasing the cost of abuse risk. Higher claim frequency and severity in turn drive plaintiffs’ attorneys and Attorneys General to investigate more, which drives more revelations, increasing the cost of abuse credibility risk. And so on…
The advent of the see-through economy has made risks like sexual abuse risk and sexual abuse credibility risk much harder to manage. And if these risks weren’t already important, complex, and hard enough to manage, it is no longer enough just to manage them well. They must also demonstrably be managed well, while maintaining appropriate privacy.
The work we are doing with clients now is to develop a tool to help them break the cycle by enabling them to manage all forms of abuse risk well and to demonstrate this. We agree with Logic Manager, who coined the idea of the see-through economy, that ERM is central to this process. Both forms of abuse risk need to be managed with a view to meeting objectives, not just with a view to preventing negative events, which is the more traditional focus of risk management, including abuse risk management. But we think of ERM as just one of the tools organizations need in a broad tool set.
We think the most exciting aspect of what we are doing is that insurance – though in a far from traditional shape and form – is another tool in a set where the coordination of tools allows each separate tool to do more and so be more valuable than they are on their own. The tool’s purpose is to help organizations achieve their objectives – and maybe even aim for more ambitious objectives – by managing a complex, existential risk like abuse risk to the high and transparent standards demanded by the see-through economy, yet with the privacy required by the organizations themselves.
We are working with a group of potential users now but would like to talk to more. Please get in touch if you would like to know more.