Emergent AI start-up Iluminr has raised AU$4.2 million to expand its crisis management platform into the US market.
- Iluminr’s platform will use global insurance provider QBE’s investment to expand its crisis management software to the US market.
- Management of, and response to, crises is becoming increasingly important to business. Conflict, supply chain and extreme weather impacts, exacerbated by climate change, are resulting in billions in economic losses.
- As insurance companies become increasingly wary of climate-related losses, crisis management technologies could help companies ensure long-term business continuity through access to coverage and/or investment.
The Australian start-up’s latest funding round was led by the venture capital arm of global insurance provider QBE (ASX:QBE). It plans to use the investment to double the size of its team, open new distribution and sales channels, and to expand its crisis management platform into the US market.
Chief executive and co-founder Joshua Shields said: “We are bullish about the future. We believe the US offers significant upside for a business such as ours. And it’s not just the size of the market that is so appealing, it is also the fact that it is dominated by old legacy technology providers and outdated training approaches. Our business model deliberately challenges the status quo and is attracting significant attention.”
“Traditional training in crisis and resilience has not kept pace with today‘s demands, the changing workforce dynamics or the hybrid working environment, resulting in disengaged audiences from executive down. Combine that with growing compliance burdens and compounding threats, and organisations simply can’t keep up with the effects of disruptions and change”, adds fellow co-founder Marcus Vaughan.
Iluminr combines data management with simulations to build enterprise resilience
Iluminr’s software-as-a-service platform helps organisations to identify potential crises and develop their strategic responses. Its automated impact assessments monitor thousands of datasets in real-time to provide tailored alerts on relevant threats across global supply chains, with multi-channel communication features enabling users to coordinate the response of their suppliers, crisis management teams and other stakeholders.
It also offers 10-15 minute simulations of a range of different disasters, allowing its customers to test out their crisis response plans and engage employees in realistic, year-round training programmes.
The simulations available include severe weather events such as hurricanes or floods, wildfires, natural disasters, cyber threats, supply chain disruption and employee health and safety incidents.
Crisis events are on the rise, but companies are poorly prepared
Almost 60% of respondents to a 2018 Deloitte survey of over 500 crisis management, business continuity, and risk executives believed that crises were occurring more often than they had in the previous decade. In the two years before the study, as many as 80% of them had had to mobilise their crisis management teams at least once – during what many consider a relatively peaceful period.
More recently, a 2022 survey by Interos revealed that just three crisis events within the past year, not including the war in Ukraine, had caused $182 million in losses to the 1,500 companies it assessed.
Weather and climate-related events alone cost the global economy around $329 billion in 2021, according to AON (NYSE:AON). Its analysis shows that the frequency of large-scale crises was highly unusual in comparison to previous years, but that such events are likely to increase further due to the cascading risks of climate change.
Despite the rising threat level, Deloitte warns that the majority of companies are poorly prepared for dealing with crises. It says that confidence in organisational resilience strategies do not always match realistic levels of preparedness, but that participation in crisis simulations can help businesses to develop effective response strategies.
Insurance firms are increasingly focused on climate risk management
While the rise in global crises highlights the potential demand for solutions such as Illuminr’s, it is particularly notable that the start-up has been backed by an insurance firm. When insured companies or their assets are hit by crisis events, it is their insurers that must pay the price.
The physical risks associated with climate change have been of particular focus, with the Bank of England’s 2021 climate stress test warning that climate risks could increase the insurance industry’s annualised losses by up to 70% by 2050.
France’s central bank conducted similar climate stress tests in 2021, finding that natural-disaster related insurance claims could increase by up to five times in the nation’s most vulnerable regions.
According to Munich RE, natural disasters caused overall losses of over $65 billion, with just over half of those insured. The US had accounted for almost two-thirds of insured losses, at a staggering figure of $19 billion. In Australia, where both Iluminr and QBE are headquartered, disastrous floods at the beginning of 2022 resulted in AU$2 billion in pay-outs by insurers.
In response to these losses, over 20% of global insurers have started restricting their coverage of companies they consider to be unsustainable. This approach will make it near impossible for poorly prepared companies to obtain investment.
Emerging technologies enabling risk management
Technological solutions that improve crisis management could, therefore, be crucial to business’ long-term continuity. Such technologies can not only help them to enhance their immediate response strategies, but they could also aid in demonstrating eligibility for insurance and subsequent financial backing.
Iluminr appears to be aware of this, with Shields commenting that: “A critical success factor in the raise was that we had a strong strategic alignment with QBE Ventures who were able to take a global view of our opportunity and bring to the table an extensive network of customers and partners”.