Executive Vice President, Willis Towers Watson TMT Global Industry Practice Leader
Technology, media and telecommunications (TMT) companies have faced an extraordinary range of risk and uncertainty in recent years. Risks emerging from shifts in technology have been compounded by rising geopolitical tensions, regulatory complexity and a never-ending talent shortage.
Without a doubt, COVID-19 has been a major factor affecting all five TMT risk megatrends. It has radically accelerated digital transformation as companies strive to serve homebound consumers with new products and new forms of entertainment. Business models have been tossed out the window due to operational complexity and vulnerability risks have grown and taken new forms.
The pandemic has also transformed the workplace with consequences affecting companies, employees, investors and other stakeholders. A global talent and skills race – already a big concern a few years ago – has become more of a “war” than a race, as one TMT executive told us. It is a war with no immediate end in sight.
Overall, TMT industry leaders receive high overall marks for dealing with these and other risks; however, they should consider some basic questions as part of their future risk management strategy:
Could we have better anticipated, evaded or mitigated major risks, including a global pandemic?
What risks should we most worry about in the future in order to protect our business?
Do we have the optimal business model, strategy and talent to deal with new and evolving risks?
To shed light on these and other issues, Willis Towers Watson examined the TMT risk environment through our partnership with Mack Institute’s Collaborative Innovation Program (CIP) at the Wharton School, University of Pennsylvania to create the Willis Towers Watson Technology, Media and Telecommunications Futures Report.
In this report, you will find TMT concerns around many familiar risks, not the least of which is the pace of digital and technological change. Based on our latest research, it’s clear that the risk environment is shifting and will continue to dramatically shift at an increasing pace.
It would be a mistake to see COVID-19 as the only or even primary catalyst for the disruptive changes sweeping much of the TMT industry. As Willis Towers Watson and other companies have said, the pandemic accelerated a number of trends that were well underway before the virus emerged in early 2020.
Digital transformation isn’t new. Its disruptive power has been evident at least since Kodak passed on a chance in the 1980s to develop a digital camera. But if the Kodak experience was the first ripple, we’re now seeing a tidal wave of disruption with artificial intelligence, the internet of things, 5G and a flurry of other digital and technological innovations.
This study also examines the impact of the current geopolitical environment, which has cast a shadow over global trading arrangements, in particular, TMT supply chains. TMT executives have pushed supply chain risks up their list of concerns in light of nationalistic and domestic security concerns that are spreading from the U.S. and Europe to other countries and regions.
Issues around operational complexity and vulnerability also remain major sources of risk and uncertainty. The reliability of outsourcing partners and suppliers is more pronounced and closely associated with the need to rebuild or modify supply chains. Component shortages – as recently reported with microchip production – pose enhanced risks, too.
We also find that corporate finance-related concerns are growing. As I write this, there is renewed talk of inflation and global stock markets are showing fresh volatility. Many companies are concerned about funding, liquidity and credit risk, gearing and debt.
Regulation and legal risks continue to grow, too. The industry has distinctive risks in the areas of privacy, for example, or data protection. But new risks are anticipated as regulations tighten or take new forms around environmental, social and governance (ESG) priorities.
Where appropriate, this report will include observations and recommendations that have been shaped by our work with TMT companies around the world. For example, with the rise of new supply chain risks, we see an alarming disconnect at times between procurement and risk management. Failure to embed risk managers in supply chain design can be problematic.
Our research and TMT interviews reveal interesting twists. Disruptive technology, which once literally kept some executives up at night, is now seen by risk managers and other business leaders as risks that can be more effectively identified and mitigated. There is a level of managerial confidence within some companies that can be expressed this way: “Change? Bring it on!”
We are grateful to the TMT executives who shared their thinking with us and grateful to the students who worked with us via the Mack Institute. I believe the combination of sound research and business insights will help guide your decisions in the new TMT risk landscape.
Natural Disasters, Armed Conflicts and Epidemics
In 2016 TMT put these risks at the bottom of their list of concerns. In lieu of what has happened since then, there is therefore no surprise that these risks now dominate many a Board Room Agenda. Covid-19 has changed the way we work, and the implications are likely to be lasting.
Disruptive Technologies & Business Models
Disruptive technology, which once literally kept some executives up at night, is now seen by risk managers and other business leaders as risks that can be more effectively identified and mitigated. Cyber risks continue to be a major concern with no signs of abating and threats from emerging business models is continuing to feature high on the list of risks.
Environmental, Social & Governance
5 years ago, Intrusive Environmental Regulations was on the bottom of lists of Executives‘ concern. In 2021, ESG related risks, and particularly Climate, have moved way up on the list of concerns and new risks are anticipated as regulations tighten or take new forms. I&D has also shot up on the priority lists following disruptive events around gender and race that shook society as well as the corporate world.
Uncompetitive Compensation, How We Work & Unmanageable Speed of Skills Changes
The pandemic has transformed the workplace with consequences affecting companies, employees, investors and other stakeholders. A global talent and skills race – already a big concern a few years ago – has become more of a “war” than a race, as one TMT executive told us. A lack of adequate talent has long plagued the technology, media and telecom industry, but the problem has become more acute. Even as the demand for talent soars, too few TMT companies have embraced effective action plans for recruiting, engaging and retaining the talent and skills they need to gain competitive advantage. TMT respondents are redefining “compensation” risks to include a widespread lack of lifestyle choices, and in-house development programs to engage and retain vital digital talent. This was closely related to risks associated with key talent attrition and increased talent mobility.
