This article was first published by Marsh here.
Understand how the reset in the technology industry with global economic challenges is shifting perspectives on risk management in our ninth edition of Marsh’s Global Technology Industry Risk Study. Learn about the top technology company risks and examine how leading organizations are rethinking their risk management strategies.
Global economies are slowing, and access to capital is pausing as investors assess the economic landscape. Supply chain issues are affecting hardware sales, and tech companies are announcing layoffs at levels not seen in 20 years. Our 2023 technology risk report surveyed over 300 risk management leaders from 29 countries across six continents to understand technology companies’ responses to global economic uncertainty.
20% of technology companies increasing investment in risk management
8% technology companies switching primary insurers
34% exploring integrated, structured or other alternative risk programs
The ever-increasing reliance on technology and connectivity has propelled tremendous growth in the tech industry. But as countries recovered from the COVID-19 pandemic, 2022 brought new challenges. Record rates of inflation, interest rate hikes, and the prospect of a global recession now threaten the tech industry’s continued growth. Global information technology spending is forecast to have grown less than 1% in 2022, down from 10.2% the previous year.
More than 80% of respondents indicated that their company is taking action to counter the effects of global economic uncertainty. Cost reduction initiatives, such as administrative and operational cuts, were the most common actions, taken by almost 70% of respondents. And close to half said their companies have implemented workforce reductions or slowed hiring. Both actions can have a significant impact on risk management and insurance budgets.
Despite potential staffing shortages and pressure to cut costs, technology companies are cognizant of the need to forge ahead with innovative product and service offerings to grow revenue. The vast majority of survey respondents said their companies are developing new products or developing new relationships to expand revenue. In the midst of our changing global economy and fast-changing technology trends, technology leaders are rethinking and reprioritizing their risk profiles.
The top three risks in this year’s report — data security and privacy, digital business interruption, and technology errors and omissions — have consistently ranked as top risks for all nine years of this report. IT resilience, which is closely linked to the top three risks, remained in the top 5, the same as last year.
But survey respondents have expressed a deepening worry about reputational risk. Ranked tenth in 2022, nearly half of respondents this year cited reputational risk as a major concern, pushing it up to the fourth spot. This could be a result of the growth of technology companies, many of which have become household names, which results in business practices or any mishaps being heavily publicized and scrutinized.
Explore more of our 2023 Global Technology Risk Study by downloading our report today with breakouts on new technologies, our takeaways, and recommendations based on what we heard from our technology leaders.