A new report from Marsh concludes that the senior management at “85 percent of Europe’s leading communications, media and technology (CMT) companies have indicated they are placing increased importance on risk management since the economic downturn.”
Marsh’s Report – New Risk Management Insights for Communications, Media and Technology Firms – “indicates that the economic downturn has prompted CMT companies to re-examine their approach to customer risk, credit, cost and supply-chain risk.
The research also reveals that dealing with the value chain is made more difficult by the industry’s severe competition and the threat of liquidity problems among customers.
Commenting on the research, Fredrik Motzfeldt, Marsh’s CMT Leader in Europe, the Middle East and Africa, stated: “The current global economic downturn challenges CMT companies to reduce their overall cost of doing business. This doesn’t just mean minimizing their total cost of risk, but also controlling the financial impact of surprises through effective insurance and risk management solutions.
“European communication, media and technology firms surveyed have low levels of confidence in their existing risk management procedures. Only 25 percent are very confident in the ability of their company’s processes to fully address the risks facing them. This means that these processes have to change.
“It is heartening to note that 85 percent of senior management has recognized the crucial role that risk management plays in the long-term success of their firms. The projected increase in budgets is consistent with the importance now attached to risk management and the low confidence in existing processes.”
The report reveals that European CMT companies are putting an increased focus on risk management. Over three-quarters of respondents said they had reviewed their approach to risk as a result of the recession. One-third expects their risk management budgets to increase over the next 18 months, while 55 percent expect it to remain the same.
When asked about the two or three risks that will be priorities over the next 18 months, participants mention bank solvency, foreign exchange risks, contractor risk and investments not performing. All of these issues are general business risks, strongly linked to the downturn and with a macroeconomic focus.
Motzfeldt added: “We are surprised at the absence of sector-specific risks, although they are multiplying by the day. For example, intellectual property is rated a significant risk by only 30 percent of participants. Each new line of business or new product launched brings with it new and unmapped risks. For example, the ability to make bill payments using a mobile phone means that an operator is open to new risk in the areas of fraud, reputation and errors and omissions. Companies need to plan how they manage these risks proactively from the outset.”
The study goes on to examine specific areas where the perception of risk has increased, and discusses measures that may be useful in addressing those risks.
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