European technology and communications companies are continuing
to invest in
risk management despite the economic downturn.
A survey of more than 100 communication, media and technology
(CMT) companies by insurance broking and risk advice firm,
Marsh, shows that 85% are placing increased importance on
managing risk. And more than a third are stepping up spending on
risk management.
Technology companies, in particular, understand that in an
aggressively competitive market, customers are particularly
sensitive to risk, says Marsh.
Organisations want to know IT companies can deliver on projects
and are demanding that suppliers prove they are able to mitigate
the risk of delays or failures.
But many companies are stepping up their risk management because
of concerns about general business risks in the downturn, rather
than the specific technology risks they face.
Technology companies, for example, may be pre-occupied with
basic business issues such as credit risk to the exclusion of more
industry-specific risks such as
intellectual property disputes, says Fredrik Motzfeldt, CMT
leader at Marsh.
Technology companies are at risk from disputes over the use of
open source code in commercial products. Another increasingly
common area of dispute is over the terms and conditions of
outsourcing contracts, as a larger number of companies turn to this
business model to reduce cost.
New lines of business can also bring new risks. For example, the
ability to pay bills through mobile phones, can expose telecoms
operator to the risk of fraud, reputational damage, and liability
through errors and omissions, says Motzfeldt.
Technology companies will pay more attention to these industry
specific risks as they re-assess risk management processes, he
says.
In fact, some 71% of survey respondents said the economic crisis
has prompted their organisation to review their approach to risk.
This rises to 92% among the top third of companies with the biggest
turnover.
"It will be interesting to repeat the survey in six months to
see if the increased investment in risk assessment is translating
into the most appropriate areas of attention for the sector," says
Motzfeldt.
Risk management is often an organisation's last line of defence
against the unexpected and getting it right is more important
during an economic downturn than at any other time, he says.
Key findings
85% of firms placing more importance on risk management
36% said their risk management budgets would increase
55% says their risk management budgets would not be cut in
2009
30% rate intellectual property as a significant risk