Main threats, causes of losses and growth factors for the TMT sector

With its promise of ultra-high speeds, low latency and high bandwidth, 5G is set to revolutionise industries such as healthcare, manufacturing and entertainment.

In healthcare, for example, 5G-based telemedicine services can provide remote patient monitoring and enable real-time consultations between healthcare professionals and patients, improving access to care and treatment outcomes.

In the manufacturing sector, smart factories using 5G can enhance automation, improve operational efficiency and enable real-time data analysis for predictive maintenance and quality control.

Additionally, in the entertainment industry, 5G networks can support immersive experiences such as augmented reality (AR) and virtual reality (VR) gaming, as well as high-definition streaming and content delivery.

Applications of artificial intelligence (AI) bring the following benefits:

• increased efficiency
• new products and
• less repetitive tasks.

The metaverse—the space where physical and virtual realities intersect—has the long-term potential to deliver experiences unavailable in the real world, leading to a flourishing virtual economy.

Since the AI-powered tool’s prototype went public in late 2023, ChatGPT has been disrupting customer interactions.

Long-term forecasts for the future are positive, but such a rapid pace of change is associated with:

• new risks
• complexity
• increased regulatory control and
• increasingly global exposure.

The TMT sector is not immune to the macroeconomic challenges faced by other sectors.

Geopolitical tensions include:

• war in Ukraine, Middle East and Sudan
• supply chain disruption
• inflation and
• further tightening of monetary policy.

As in other sectors, sustainability challenges are ongoing – whether it’s TMT companies minimising their environmental impact or helping others achieve net zero emissions.

Cyberattacks, business interruptions and critical infrastructure failures are considered major threats to the industry

Every year, our annual Allianz Risk Barometer asks risk management experts – from the TMT sector and many other industries – to assess their biggest risks for the coming year.

In 2024, the highest rated challenges are:

• cyber incidents (55%)
• business interruption (33%) and
• macroeconomic development (21%).

Given that TMT companies store huge amounts of personal data that can become a prime target for criminals and can be sold on the dark web or used to scam or extort ransom from victims, it is not surprising that cyber incidents are a major problem.

In addition, there is a high risk of service interruption and data loss due to a cyberattack, such as ransomware or wiperware.

The latter, also known as “pseudo-ransomware,” emerged in parallel with the war in Ukraine. It is often used as part of advanced persistent threat (APT) attacks against critical infrastructure, with the primary goal of causing destruction or havoc, rather than extorting money.

Business interruption (BI) is the primary cost driver for more than 50% of cyber claims worldwide and has been a significant factor in the increasing severity of claims in recent years.

Given the large number of devices connected to a company’s network, ensuring adequate protection can be a daunting task – especially for smaller businesses – and requires in-depth expertise and a tailored approach.

Cyber ​​incidents and natural disasters are the top two BI threats that companies fear, followed by fire and machine/equipment failure or damage. However, almost any threat can cause disruption.

Business risk is closely linked to many of the other key global risks highlighted in this year’s Allianz Risk Barometer, including:

• climate change (seventh)
• Political risk and violence (eighth place)
• Skills shortages (rank 10)^t)
• energy crisis (11th place)^t), and
• the impact of new technologies (12th place)^t).

The TMT industry is subject to various macroeconomic development risks. These risks can impact consumer spending, advertising budgets and investments in technology infrastructure.

But they also offer opportunities for innovation and growth, especially in areas such as digital transformation, cloud computing and streaming services.

Mitigation strategies for TMT companies include diversifying revenue streams, maintaining agility in response to market changes, and investing in scalable technologies. TMT companies can mitigate macroeconomic risks by focusing on digital transformation initiatives and adapting business models to changing consumer demands.

For example, in times of economic crisis, TMT companies may offer low-cost subscription services to attract and retain customers, thereby compensating for the decline in advertising revenues.

Risk management preparation

The greatest threats to the TMT sector reveal the extent to which these risks are interconnected and cumulative in the networked world in which we live and work.

Of course, businesses can never be fully prepared for everything, but a good start is to constantly monitor geopolitical issues, properly analyze risks and consult with experts, both locally and globally, where possible.

Faced with domino-like loss scenarios, businesses need robust, resilient operational processes to secure their operations, supply chains and ensure business continuity.

Business continuity planning reviews are essential and must be regularly updated. Cyber ​​protection should include:

• regular backups
• data segmentation
• detecting the correct endpoint and
• multi-factor authentication.

Insurers such as Allianz Commercial can leverage company data to facilitate personalized risk assessments and help develop personalized mitigation strategies. All organizations should also implement their response to regulations and privacy laws in relevant jurisdictions.

If the risk situation changes, businesses need to be aware of the impact on their business and take steps to protect their assets.

For more information, visit www.commercial.allianz.com.

*Photo courtesy of the author