Protiviti and North Carolina State University’s ERM Initiative teamed at the end of last year to survey directors and executives across a wide spectrum of industries for our fourth annual Executive Perspectives on Top Risks report. We are drilling down, over a series of blog posts, to provide insight into these executive perspectives within key industries and how these risks may have evolved since the survey was conducted. This post focuses on technology, media and communications.
“Only the paranoid survive.” – Andy Grove, former Intel CEO
Companies in all industries face a number of risks these days, ranging from volatility in equity markets, falling oil prices, global terrorism, expanding regulation and oversight, and technological disruption. The technology, media and communications (TMC) industry is no exception to these trends. But while TMC leaders remain concerned, they appear to be less so than they were last year – with one exception.
While it appears surprising, at first, that TMC respondents were somewhat less concerned than they were last year about four of the top five risks identified in the survey, on further thought, it makes sense: The intrinsic technological nature of these companies requires them to stay ahead of the curve, and many have made serious efforts, after recognizing the risks back in 2014, to address them, including cyber threats, disruptive innovations and privacy concerns. They are also less worried about economic conditions restricting their growth.
I found it really interesting that the one risk that keeps technology leaders awake at night this year more than last is their concern that resistance to change in their companies may be standing in the way of necessary adjustments to their business models.
What to make of this? The survey did not delve into precisely why leaders were feeling differently, but it does stand to reason that with the speed of technological disruption, they are becoming more aware of the need to keep up by being agile and open-minded. I’ve heard it said that disruption is great – if you happen to be the one disrupting. It’s obviously less advantageous when you are the one being disrupted – and the finding underscores this awareness.
Case in point is the industry’s grand exodus from the old world of packaged software and hardware to the new world of software/platform/infrastructure as a service (S/P/IaaS). If you are an established player, the migration from the box to the cloud means fundamentally changing your entire business model.
These days, the threat to established technology companies – and there are many – comes from newer companies that were “born” in the cloud, so to speak – companies for which migration was never an issue. And while some, like Amazon and Microsoft, have demonstrated their ability to not just adapt but reaffirm their market dominance, others are still in the process of getting there – and they worry they may not get there fast enough if their organizational mindset lags behind.
Managing the risk that comes with change in business model is a concern too. A cloud provider, for example, assumes the cybersecurity risk on behalf of its customers. If you are a born-in-the-cloud company, you likely have the effective organizational mindset and the resources to address this risk. Others will need considerably more preparation in that regard – and may worry that resistance from the inside may hinder the imperative to innovate.
What’s the takeaway point? Companies in the technology sector must stay on top of their enterprise risk management (ERM) planning. They want to have access to the right information about emerging risk from their risk committees and management teams, so they can adjust quickly. These are things that should not be left to chance.
It’s important to remember that risk is a moving target. Executives are going to react differently at different times, depending on what’s going on in their markets and with their customers. But self-examination and honesty are hallmarks of this industry – and rest assured, industry leaders are continually examining their businesses and striving to ensure they have the best practices with which to face change. Let’s just call it healthy paranoia.