Gearing/debt leverage is seen as the most significant risk by executives in the Technology, Media and Telecommunications (TMT) sector in the Middle East, a report said.

Companies in the region appear to feel that gearing/debt leverage is especially hard to manage, giving it a rating of 8.5 out of 10, explained the new study entitled “TMT Risk Index 2016” released by Willis Towers Watson, a leading global advisory, broking and solutions company.

Globally, regulatory fines and penalties arising from data protection breaches are among the biggest issues for TMT firms, the report said.

The top three risks are: data protection fines and penalties; intellectual property and patent infringement; and competition and anti-trust law scrutiny. In addition, data protection fines and penalties, and intellectual property and patent infringement were ranked as the top two risks facing the industry in the coming 12 months.

Fredrik Motzfeldt, European regional industry leader for Technology, Media and Telecommunications (TMT) at Willis stated: “Innovation is at the heart of the TMT sector, and innovation in TMT drives the pace of change across whole economies and markets. With the industries evolving significantly, it is crucial to identify the most likely risks and prepare accordingly. Companies in the TMT sector expect to see a modest increase in risks through operational complexity.”

In the region, some of the other risks identified are outdated legacy IT systems and infrastructure (Composite risk score (CRS) 47.9), shortage of components and raw materials (CRS 45.7), difficulty completing Mergers and acquisition activities (CRS 43.6), Intellectual property and patent breaches (CRS 43.2).

According to Willis Towers Watson, this focus on data protection and potential liabilities is aligned with a global trend for stricter privacy laws and tighter enforcement. The recent approval of the General Data Protection Regulation (GDPR) by the EU Parliament (in April 2016) – which significantly strengthens the penalties for data breaches and makes it easier for individuals to bring claims – highlights that companies must keep pace with new regulatory requirements.

Sara Benolken, head of TMT global industry at Willis Towers Watson said: “While it is understandable that regulatory change and legal risk are front of mind, none of the identified risks ranking lower down the scale should be ignored, given their potential to either harm or grow a business.”

While the threat posed by cyber-attacks did not make it into the top three risks for the TMT industry overall – it did rank number one for the Technology sector. Willis Towers Watson urges companies not to overlook the fact that cyber vulnerabilities can exacerbate other risks such as those leading to data protection fines and penalties. According to the Index, digitalization and technological advances is the megatrend most likely to grow its impact on the TMT industry over the next ten years.

The global research found startling differences between how TMT organizations in different regions of the world view risk, with the number one perceived risk varying significantly across the globe. North American TMT leaders are most preoccupied with the threat of consumer product legislation and lawsuits.

In Southern Europe, the threat from new and emerging competitors was highlighted as the principle concern in the minds of respondents. In the Indian subcontinent the top risk was seen to be outdated legacy IT systems and infrastructure. For Asia Pacific industry leaders identified the top risk as uncompetitive compensation and reward schemes.

Benolken said: “In an industry marked by exciting innovation and disruptive business strategies, it’s important to understand both a present-day view of the risks facing the Technology, Media and Telecommunications sector and gain foresight into the future.”

“For us and our clients, risk is a path to growth. It is through the proper identification and management of these risks that companies are able to take on more risk and ultimately realise new commercial opportunities. We trust the findings will enable TMT organizations to successfully acknowledge and address current challenges as well as prepare for the future,” Benolken added.

Willis Towers Watson’s TMT Risk Index 2016 was compiled with responses from 350 C-suite level executives across all three sectors, their respective subsectors, and 11 geographies.  – TradeArabia News Service