Outsourcing has been a secure, cost-effective tool for businesses to get the data they need to make strategic business decisions. However, the impact of COVID-19 is changing things considerably, according to Scott Quiana, Head of Products, Marketing and Partnerships at Quantemplate.
Digital Journal: How deeply is the novel coronavirus disrupting business operations?
Scott Quiana: Coronavirus has created a substantial impact on the global supply chain, disrupting multiple industries including airlines, petroleum, retail, food and beverage, and more by forcing temporary shutdowns and reducing production operations. To put it into perspective, approximately 94% of Fortune 1000 companies are seeing supply chain disruptions from the COVID-19 outbreak. Following the conclusion of the pandemic, it will likely take months for us to see the full global impact, but companies are already feeling the pressure to compensate for these disruptions. From moving select operations offshore to making spot buying decisions to meet customer demands, companies now have to recalibrate and develop strategies to quickly reduce costs and ramp up operations.
The efforts to compensate for these disruptions, specifically in the insurance industry, have to take into account two new considerations that are unique to insurers. The first is an uptick in business interruption coverage directly related to COVID-19. In the U.S. several states require insurers to pay business interruption claims to eligible small companies without property damage but if supply chain disruptions continue, there’s a chance that regulatory response could be expanded.
The second is a re-evaluation and shift from offshore, outsourced data processing operations. With countries across the globe closing down and requiring people to stay at home, companies have had to take a closer look at and in some cases relax the BCP, SLAs and security requirements already in place with outsourcers in order to continue operations through remote channels.
DJ: What are the risks if companies are driven to relax SLAs and privacy rules?
Quiana: When it comes to data processing, relaxing SLAs, changing current security measures and allowing people to work from home through VPNs can put a company at risk for data breaches, loss of quality control, hacking exposure and more. Beyond the privacy and security concerns, these changes can create additional issues with other departments such as compliance, legal and operations. Both parties need to fully understand the true implication and nature of the changes to determine if it’s worth the risk.
The risks vary from company to company but are often dependent on whether data is outsourced to the back or front end of the business and what the current SLA looks like. Some changes to an agreement could have the potential to affect liability insurance coverage, impact corporate controls that are subject to audit and reporting like Sarbanes-Oxley Act, and jeopardize security through reconfigured agreements with third parties that grant permissions and access.
DJ: To what extent is the COVID-19 pandemic is creating a new processing and risk paradigm around outsourced data preparation?
Quiana: The COVID-19 pandemic is changing the paradigm for how insurance and reinsurance companies think about the intersection of people, technology and outsourcing. (Re)insurers cannot and should not be forced to compromise between data security in the present and access to analytics for the future, but this is now the new normal for insurers that rely on traditional outsourcers.
The new data processing and risk paradigm requires companies to reevaluate this intersection and pushes for a heavier reliance on cloud-based machine learning technologies, both from outsourcing companies and internally by insurers. Using these technologies, (re)insurers can ensure consistency, security and business continuity in the wake of new risk paradigm events like the COVID-19 pandemic.
DJ: How can security best be maintained?
Quiana: It really depends on the each and every outsourcing situation. There are some industries and business processes where the security requirements are not as significant as others, so it falls on the individual company to determine which processes are critical and what is best way to proceed for each process. Some companies are allowing a part of the work force to work from home on company issued equipment, others are deploying VPN solutions, while others are providing their critical work force with transportation to and from the certified center each day. Industries with significant regulatory oversight that do not allow for remote work of any kind, however, will need to repatriate certain activities or relocate those activities to be completed within another certified center.
DJ: How can cloud-based platforms with automation and machine learning help to secure data processing?
Quiana: If you think about this with the backdrop of the COVID-19 there are many variations of offshore outsourcing and technologies that can support operations without putting workers at risk. A great example of this is robotic process automation (RPA). RPA uses bots or artificial intelligence (AI), a form of cognitive computing and machine learning (ML). These bots operate on a user interface in the same way a human worker would.
When the COVID-19 outbreak hit a number of countries where business process outsourcing is performed, transportation shutdowns and stay at home mandates for non-essential workers made it difficult for operations to continue as usual. More concerning, it created an unknown around when operations would return to normal. In an RPA environment companies get a greater level of certainty and operations can continue as bots are not exposed transportation or government shutdowns, SLA’s do not need to be altered and data, security and privacy remain in place. Employees still have to run and oversee the RPA but this can typically occur from anywhere around the world.
DJ: How will data processing and analytics and insights help industries rebuild in the aftermath of COVID-19?
Quiana: Companies are already changing how they operate to adapt to the current restrictions created by COVID-19, but many will seek new ways to prepare for and minimize the risks from these types of black swan events in the future. Automated data processing will likely become a staple solution because it is consistent and reliable, even when disruptions impact human labor capabilities. Security and operational compromises do not have to be made when workers must shift to remote operations, allowing companies to continue to meet SLAs and maintain profitability.
For (re)insurers specifically, being able to automatically process data with AI and machine learning technologies will also support business continuity. Automated data processing will allow these companies to achieve a significant operational lift and gain important insights pertaining to COVID-19. This data will help feed the analytics needed to drive decision-making surrounding clash, underwriting, and more, all of which will be necessary for recovery efforts once we are through this pandemic.
