The COVID-19 pandemic has created a massive health crisis, devastated many parts of the economy, and created global turmoil and uncertainty. Technology companies, however, have been resilient. And as demands for a variety of technological solutions have increased amid the pandemic, many companies have benefited from new opportunities and the expansion of existing ones.
Despite the global disruptions it has caused, technology industry companies do not view the pandemic as their greatest business risk.
Fewer than half of all respondents to Marsh’s 2021 Global Technology Industry Risk Study identified pandemic risk as one of highest concern. While pandemic risk was eighth on technology companies’ list of risks of highest concern, 72% of respondents consider data security and privacy their most pressing risk, topping the list in our study for the sixth consecutive year.
To view the complete lists of key risks for technology companies, download the full report using the form on this page.
By and large, the most pressing risks for technology companies are those that they believe threaten their ability to keep systems up and running and secure. Digital business interruption and IT resilience, for example, rounded out the top three risks for the industry. And respondents don’t see these risks getting any easier in the future, with roughly equal shares anticipating that the top three risks will grow more significant over the next three to five years.
Still, technology companies are monitoring pandemic risk, which 42% of respondents expect will grow in the next three to five years. Beyond the health implications, COVID-19’s effects on global supply chains — both physical and digital — may also spark technology companies to address related exposures ahead of a future pandemic or epidemic. Such exposures include contingent business interruption risks, which jumped from 10th on the 2020 list of the industry’s top risks to fourth in 2021.
Satisfaction With Insurance Has Fallen in Last Year
While tech companies’ satisfaction with D&O coverage in particular has abruptly fallen in the last year, it’s not their only challenge. Since late 2019, the commercial insurance market has grown more difficult for many buyers. In 2020, D&O pricing for tech companies increased nearly 40%, while property pricing increased nearly 30%. Pricing for cyber, tech E&O and casualty coverage (excluding workers’ compensation) also rose. Beyond seeking pricing increases, insurers are also deploying capital more judiciously, narrowing terms and conditions, and applying greater underwriting scrutiny.
Learn more about how tech companies are changing their approach to risk management in light of changing marketing conditions by downloading the full report using the form on this page.
A Crisis of Confidence
In recent years, public trust in many institutions — including governments and news media — has fallen. Businesses, however, are perceived as both competent and ethical. Businesses are more trusted than governments in 18 of the 27 countries examined in the 2021 Edelman Trust Barometer.
Despite consumers’ trust in businesses as a whole increasing over the last decade, perceptions of individual industries vary. And while the technology sector is ahead of several other industries, the long-term trend is troubling: Trust in technology companies has fallen nine points in Edelman’s index since 2012.
Maintaining the public’s trust is central to technology companies’ success, arguably now more than ever. Recent high-profile data breaches and news reporting of their work with governments on surveillance tools have eroded tech companies’ reputations. Social media companies in particular have been in the spotlight, receiving criticism for their alleged censorship of political viewpoints, their failure to stem misinformation, and foreign meddling in social networks.
Technology industry companies surveyed by Marsh acknowledge the importance of public trust to their enterprises. Only 3% of respondents say “trust” is not discussed within their organizations, while more than a third say it’s either a critical component of environmental, social, and governance (ESG) initiatives or a lens through which they view many core activities and decisions.
When asked to identify what defines trust, the protection and appropriate use of data topped the list. Respondents also highlighted a number of issues that shareholder activists and others have focused on in recent years, including acting in a socially and environmentally responsible manner and not exploiting labor.
With trust and perceptions of tech companies — by consumers, employers, shareholders, regulators, and others — coming to the fore, tech companies will continue to focus on this issue. Among other actions, tech companies will increasingly seek to quantify or measure trust and the financial and operational implications of greater trust — or a lack of it. Risk professionals and others will also be challenged to use trust to their financial advantage, including potentially incorporating measures of trust in meetings with underwriters.
To learn more about how trust can contribute to lowering your total cost of risk download the full report using the form on this page. The report also includes six areas that risk managers should focus on in 2021 to stay ahead of new and evolving risks.
