The risk landscape for the tech sector in 2023

We, BDO, recently published the eighth edition of the Global Risk Landscape Report. The report is based on a global survey of 500 C-suite executives. The report examines both developments in risk management and specific risks faced by businesses around the world. The report has a number of revelations and insights that will be of interest to tech and media businesses. In this article, I outline some of those key points. I would also encourage you to explore the data using our data visulation tool below download and read the full report.

The risk multiplier effect

The ‘big idea’ to emerge from the report is the “risk multiplier effect”. This represents a paradigm shift for risk management; it describes the way different risks intersect and amplify each other. The risk multiplier effect means businesses are facing more existential risks than before. The challenge for business leaders is to move away from a preventative approach in order to focus on mitigating those inevitable risk combinations.

Responses from business leaders in the tech, media and telecoms sector suggest that the sector has not grasped or understood the ‘risk multiplier effect’. Only 21% strongly agree that risks are becoming increasingly interconnected and complex and only a quarter of respondents from the sector strongly believe that the global risk landscape is characterised more by the relationships between risks than by the risks themselves. This contrasts with the attitudes prevalent in other sectors.

 

“It is not clear why Tech & media businesses have such a different attitude to risk multipliers and combined risks compared to industries. I do wonder whether many technology firms had ‘successful’ pandemics from a business point of view and so have not had to radically reconsider their approach to risk and risk multipliers.”  Ian McBane, Partner, TMT.

It remains to be seen whether technology businesses will adopt a less siloed approach to risks over time and as businesses in other sectors lead the way.

Ultimate risk multipliers

Ultimate risk multipliers are the connected risk pairings, or even triple or quadruple threats, that have the potential to become existential threats for businesses. Business interruption × capital/funding was ranked as the most powerful risk combination by respondents in the Tech & Media sector.

Business interruption is the singular risk that the sector felt most unprepared for. This is surprising because Technology businesses, specifically their products and services, were at the forefront of keeping economies and individual businesses up and running during the COVID-19 pandemic. On the other hand, any business interruption combined with a lack of cash through investment or lending would be fatal for almost any business.

Despite the lack understanding of the ‘risk multiplier effect’, Tech and Media businesses should be aware of the most common risk multipliers and dangerous risk pairs that could affect them. This will help them develop the right strategies to protect themselves from financial, environmental, reputational and workforce damage.
 

Chaos as a ladder

Proactive, risk-welcoming management teams are better able to manage and mitigate risk multipliers, and crucially turn risks into opportunities. Our research discovered that companies with a risk officer in the C-Suite are 7.25 times more likely to be risk-welcoming and 2.1 times more likely to take a proactive approach to risk than those without one. This approach involves proactive planning and embracing the opportunities that can arise from chaos.

Industry is a driving factor of whether a company employs a Chief Risk Officer. 60% of respondents from the tech, media and telecoms industry have a risk officer in a C-Suite position. Companies in the sector are also 2.6x more likely to be risk welcoming than other sectors surveyed.

I would encourage anyone leading a tech and media business or with an interest in risk management to explore the full Global Landscape Report. If you would like to discuss the risks facing your business and how to manage them, please get in touch.