The Technology, Media and Telecommunications sector (TMT) is one where change is a constant, risk is embraced on a daily basis, and innovation is relentless. Endless improvement means taking on – and taking advantage – of risk. Firms in this sector are embedding, and effectively “owning,” more of the risks they face in their organizations by managing them better.
The Index: Megatrends and risks
It should come as little surprise then that the recently published TMT Risk Index found that companies have a good understanding of current risks, and how to manage them. Indeed some risks are increasing and changing: the TMT sector must look to continually adapt to remain competitive.
We wanted to really understand what the C-Suite executives of technology , media and telecommunications companies thought of the risks they were facing. We interviewed 350 senior leaders in a range of companies from publishing to services, and captured how these corporate leaders perceive risks now and where they saw opportunities in the future.
Top megatrend: Regulation and legal risk
Regulation and legal risk was found to be the most significant megatrend challenging companies. It is the theme with the greatest impact on the sector, but also the one TMT firms find hardest to manage.
Specifically, data protection fines and penalties is of greatest concern, followed by intellectual property and patent infringement, and competition or anti-trust law associated with M&A activity. As a set of risk factors largely driven by externalities – whether legal regulation, or illegal action – this is hardly a surprise.
Nor is it a surprise that the megatrend of business model and strategy pressures is shown to be the second-most concerning.
Any successful company needs to continually innovate, and adapt to new customer demands and shifting market conditions. And so expectedly, the threat from new and emerging competitors ranked highest in this megatrend and was the sixth greatest risk overall.
Unseen Cyber Dependencies
Outside the top two megatrends, the stand-out risk is cyber-attacks and hijacks: a commonly cited concern for senior leaders across the TMT sector. No doubt the heavy reliance on technology and intensive use of data contributes to this thinking.
Though we find it surprising that cyber-attacks and hijacks did not make it into the top three risks for the TMT industry overall—it was ranked first for the technology sector. The fact that cyber vulnerabilities can aggravate other risks—such as those leading to data protection fines and penalties—should not be overlooked.
Focus on talent
A curious revelation from the research was the limited importance attached to the rising skills crisis. Executives seemed less concerned than was anticipated.
The question of skills has been in the spotlight over the past few years, and it could be that the global talent and skills race is a challenge that businesses have already planned for. But, with the demand for skilled staff only set to rise, it is not an area to overlook.
The skills megatrend is considered as a higher priority ten years out. Technology firms in particular feel that the skills shortage is a problem that is growing.
But executives believe that it is the threat posed by digitalization and technological advances that will increase most in impact over the next decade.
This reflects the rapid pace of change that characterizes the industry, and the reality that, if companies are unable to deal with new and emerging technologies, their future prospects are less than rosy.
Innovation always brings risk: to continue managing and understanding risk effectively, investment in developing risk management skills and tools is crucial. Indeed, to fully realize potential, risk management tactics must be integrated within business models, and risk management strategies aligned with risk appetites.