Rapid technological changes and an increase in business velocity have already made a profound impact on how we work and live. With the introduction of 5G, quantum computing,and further development of IoT, Blockchain, and Industry 4.0,the effect is undoubtedly going to continue at the accelerated pace. As part of these transformations, mitigation of Credit and Market Risk has been perfected to reflect any harmfulexposures in real or near-real-time. Unfortunately, this is not the case with the operational risk, which is still subject to “scheduled reviews and audits” and therefore appears elusivefor organizations and regulators alike. I say,‘appear,’ because a number ofsensiblesolutions have been already invented and partially deployed,but for some strangereason,these are not mainstreamyet. The inability or unwillingness to accept the new reality is producing unmonitored or less-understood exposures that are causing long-term economic and reputational losses across industry sectors. More importantly, there has been a noticeable erosion of trust between large corporate clients and insurers. While some industries have become unrecognizable in comparison to the last decade of the 20th century, Insurance and Reinsurance sectors have remained relatively unchanged.At the same time, protection-gaphas not been reduced, but in certain segments, it has even increased. Thecause of this widening discrepancy(or misalignment of insurance policies) is not only the slow adoption of technology within the insurance sector but also the rapidly changing the structure of company assets. Namely, in 1975,the percentage of intangible assets relative to total assets ratio of the S&P 500 was only 17 percent; while today, this is staggering 87 percent. The real question is how much was the finance and insurance industry able to adjust to these changes and more importantly—track the matters that matter?Conventional modellingusing the actuarial and accounting (2D) approach hasprovenuseful in Natural Catastrophes (NatCat) causes, but it does not workfor an emerging risksuch as cyber and behavioral changes.This is certainly one of the reasons why the media have continued to report aboutmultiplehigh-profile disputes emerged between clients and insurance companies that have either denied or reduced the claim payouts. There are examples where the insurer duly paid all the claims, but then were forced to unwind the operation in a particular country or an industry segment.The digital transformation has created some serious treats but also opened incredible new opportunities. Due to the lower complexity of the retail insurance sector and better risk distribution, incumbents have shown more flexibility in adopting new technologies and establishing cooperation with InsurTech and RegTech companies operating in that domain. Unfortunately,the level of cooperation in large corporate, especially ininsurance and risk-transfer area,remain relatively low. This represents a challenge, but also once in a lifetime opportunity. It would be interesting to see how the industry will look ten years from now, say in 2030? Would there be any Kodak and Nokia’s moments and how many new entrants would emerge from nowhere? Possible entrants are GAAFA platforms (Google, Amazon, Apple, Facebook, and Alibaba). There is evidence that some other, less-prominentparticipants are still operating in a semi-stealth mode and may enter the market with brute force."A number of sensiblesolutions have been already invented and partially deployed,but for some strange reason, these are not mainstream yet"According to the Bank of America's latest report,more than US$500bn has been wiped outamong the major companies in the USdue to ESG and CSR reporting issues and failures in regulatory/prudential compliance over the last five years. Considering that the Operational Risk is oftentheleadingcause of these failures, the Insurance and Reinsurance industry should be focusing on these issues as a matter of priorityData quality and the integrity of reporting are still causing problems; however, the good news is that these issues are being alleviated atrapid speed, thanks to the latest technology that monitors the risk at its origin. This providesthe most meaningful assistance to underwritersthat can finally start tracking the Operational Risk in a dynamic or 4D manner.These new developments will not only reverse the erosion of trust but also help the insurance providers (incumbent or alternative entrants) to obtain a market position they deserve. Knowing that the truth is always the most crucialingredient of trust,today’s digital transformation cannot succeed withoutaccurateand believable data, which has a clear audittrail. We should have reasonable confidence in saying that the new era has arrived and that the new data-integrity will enable the truth toprevail finally.I am referring to the elimination of “guesswork,” often called “modelling.”Sound data quality and real-time processing havealready unleashed the power of AI in other industries and the insurance and reinsurance industries will be equally successful. The dynamically priced insurance policies and agile underwriting using blockchain will improve customer centricity too, given that these policies will be tailor-made. Best of all, new strategies are automatically adjustable to changing customer needs and allow better capital management, balance sheet optimization through risk transfer instruments, such as Insurance-linked Securities (ILS and ILW). Improved level of transparency and data granularity is also greatly assisting market regulators and government agencies that will be able to move from 2D to 4D type reporting

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