12/10/2021 · 8 minute read
From cyber threats to intellectual property theft, loss of reputation to fraud, the risks to fintech companies are as complex as they are varied.
Fintech companies are subject to some of the same consumer and investor protection regulations as traditional financial institutions, but must balance compliance requirements with the need to innovate, grow, and develop new products. Meanwhile, privacy risks and ever-growing cyber challenges can contribute to significant economic loss and reputational damage, straining fintech’s day-to-day operations and threatening the assets of both companies and executives.
As the risks for fintech companies continue to evolve, those that are unable to adapt may face obstacles in their business models. Marsh can help you identify your most pressing challenges and determine the most effective strategy to mitigate and manage your risks.
While technology can reduce the frequency of various risks, it can also exacerbate severity as fintechs rely more on technology and data to deliver products and services previously provided by traditional financial services firms. As they merge financial and technology opportunities, fintech companies also face new risks, including:
More than other industries, individual fintechs differ extensively depending on their subsector, and require innovative solutions to address their unique risk profiles. For example, a payments platform and a neobank touch different types of customers, hold different amounts of personally identifiable information, and are subject to different regulatory oversight; these distinctions drive varying risk transfer decisions.
Thoroughly understanding the individual circumstances of each fintech company is crucial to the development of a suitable risk management and insurance program. An experienced risk advisor can help build a long-term and sustainable risk management program that includes risk mitigation and management actions that are supplemented by risk transfer solutions.
Further, a broker with a solid understanding of a fintech’s unique risk profile can recommend appropriate insurance solutions and connect fintechs with the carriers most likely to provide comprehensive and stable coverage. An experienced broker can also help showcase risk management strategy during carrier meetings, which could help you secure the most suitable coverage.
Risk starts the minute a company is launched, irrespective of its size or its location. A single lawsuit or other unforeseen event can stall innovation and derail growth.
The right risk transfer solutions can help organizations protect against litigation and other risks. And purchasing insurance early in a company’s financing cycle can help build strong, longterm relationships with insurers. Over time, that can help you secure properly structured and broader coverage, reduce costs, and help maximize claim recoveries.
Purchasing insurance can also:
Securing coverage early can help protect your company in the event of a future transaction (such as, an IPO, merger, or acquisition).
Fintech companies’ needs differ extensively, requiring a tailored approach.
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