And the No. 1 hidden risk most companies face
A recent Travelers Insurance survey brought to light the top 4 risks technology CFOs need to address. The risks listed here are thought to be red zone risks or risks that 48% of participants to the survey felt required their immediate action.
Not surprisingly many of the participants felt most uncomfortable about risks for which they cannot prepare. But with the correct knowledge, most technology CFOs can mitigate, manage, or eliminate these top 4 technology industry risks.
Risk 1: Business decline due to economic conditions
Fifty-nine percent of the participants admitted their companies are not adequately prepared. Technology companies can be hit hard by a weak economy. Pressure builds when customers push to lower prices yet continue to have high expectations of excellent service. There is no clear answer on how to best evade this type of risk, but preparation and having a plan of action can help.
Risk 2: Performance failure of vendors and suppliers.
Because technology companies are continually changing, it is extremely important to stay up to date with new products and upgrades. Having a smooth supply chain is a major part of any technology company. Many CFO’s felt they had mitigated this risk by having two suppliers, but this is not a long-term solution. Several tech companies found this out first hand during the 2011 flooding in Thailand, which resulted in a worldwide hard drive shortage. “This was a wake-up call for companies that do business in this part of the world,” said Mike Thoma, of Travelers Global Technology Group.
Risk 3: The ability to hire and retain quality employees.
Hiring and retaining quality employees is a pain felt by all businesses, but the technology industry in particular relies heavily on their highly trained employees. With many CFOs looking for qualified employees not just locally but internationally, attracting and retaining skilled individuals becomes a top priority. Unfortunately, the hiring process can be slow and finding talented employees becomes difficult in a sea of applicants.
Risk 4: Failure to meet targets for business/customer growth.
Again, this is something all business operators can relate too. In an ever-changing business world, it’is becoming more difficult for tech CFOs to differentiate and grow their businesses. The leaders in this industry agree that by recognizing the risks and giving more attention to prevention and disaster recovery, they would be better prepared and more likely to succeed.
Hidden Risk Alert: A false sense of security when it comes to preparedness for cyber-related risks.
Seventy percent of the technology CFOs who participated in this survey said they had prepared adequately for any potential attacks against the security of their customers’ private information. The truth is that four million records were comprised in 2010, and 174 million in 2011. Cyber-related theft is predicted to increase and most tech companies’ false sense of security will hurt them in the long run.
Protect yourself from these risks
Fortunately, there are protections and coverages for all of the risks listed above. Travelers Insurance has created a product that covers a wide variety of situations that involve almost all tech cyber risks. To learn more on how you can protect your company from these red zone risks, call Sadler Insurance at 800-622-7370.
Source: Tech Company CFOs Look Beyond Numbers, Travelers Provides insight into risks in the technology sector, by Michael J. Moody, MBA, ARM, January 2013