Industry Views

Telecom, Media and Entertainment

Key Issues for the Industry Currently Reflected in the Risk Selection

Cyber attacks and data breaches are a top risk for the industry. These encompass phishing via email, voicemail and SMS; hacking attempts targeting digital vulnerabilities; and ransomware attacks, which require companies to recover data from backup systems or rebuild data sets at great cost. Media and entertainment organizations drive customer engagement via advertising and subscription revenues, so they have collected large volumes of personal data that are vulnerable to data breaches.

Cyber events typically have huge costs in the form of both revenue hits and damage to client relationships and reputation. Global cyber crime costs are expected to grow 15 percent a year over the next five years, reaching $10.5 trillion annually by 2025. In an industry that considers itself digitally advanced, these losses are alarming — and they point to a need for increased cyber vigilance.

As cyber losses have grown, so too have the expertise and capabilities needed to address the challenges. Unprepared companies may be absorbing a higher proportion of the damage, while cyber-savvy organizations are using their knowledge as a distinct market advantage. Many have gone so far as to recruit well-known cyber-security experts to their boards. These companies are also more likely to have developed comprehensive cyber policies, further boosting their resilience.

Surprises in the Top 10 Risks Selected

Business interruption ranks high on the list (number two), primarily as a consequence of the business shutdowns caused by the global pandemic. Disruption to the supply chain and staff shortages have had the most obvious and immediate impact, but cancellations of sports games and other major events affected commercial broadcast networks. Many companies rely on production and inputs from China and Southeast Asia for their consumer-electronics products and services, making the extended shutdown an unprecedented challenge. As a result, the number of disputes around contract breach and termination, export bans, state aid issues and insurance coverage is expected to rise.

Most Underrated Risks

Intellectual property (IP) is an underrated risk, falling outside the top 10. IP theft in areas related to software piracy, trade secret theft and theft of non-tangible goods is estimated to cost well over $600 billion globally. This includes the transfer and licensing of software and AI technologies as well as e-commerce solutions and blockchain networks. Organizations need to better understand their use of shared services, global ICT platforms and cloud services covering licensing and commercialization of trademarks, domain names, trade secrets, copyrights, designs and patents. With increased M&A activity in this sector due to consolidations and business failures, due diligence around IP on protection and value of nonphysical assets as part of an M&A deal is critical. Organizations need to ensure that accurate assessments, quantifications and insurance coverage are in place.

Challenges the Industry Will Face in the Next 3 Years and What Organizations Can Do to Address Them

Organizations need to become more knowledgeable and better equipped to address the challenges facing them in the future. Cyber security will remain a top risk and the biggest “hidden” threat due to the amount of damage it can do in very little time. Companies will have to undertake regular financial benchmarking to identify cost and efficiency opportunities as well as to understand workforce needs and skills shortages. They also need to demonstrate their cultural diversity, equality and inclusion policies and their evolving ESG and climate change strategies.

How New Challenges Will Require Companies to Change Their Approaches to Risk Management and Mitigation

The COVID-19 pandemic has accelerated digital transformation in the industry and is likely to lead to a wave of consolidations and M&A activity. Media and entertainment continues to be among the most severely affected segments, with cinemas, theaters and concert venues confronting the impact of prolonged closures and traditional advertising being replaced by online digital advertising and social media.

Shifts in consumer preferences for on-demand channels are reflected in stock prices globally, with big tech companies registering strong gains in market capitalization. The situation is more complicated for tech start-ups, with many confronting cash flow and liquidity challenges.

In an era of unprecedented volatility, economic, demographic and geopolitical trends are converging to create a challenging but exciting new operating environment. Companies with high-growth potential but a weak financial situation should focus on managing cash, securing external financing and reviewing cost savings. Those with weak financial situations and low growth may have to find new ways to survive, whether via turnaround strategies, rapid cost reduction, ensuring the support of a strategic partner or selling out. Those with both strong finances and high growth potential can look for expansion opportunities to secure missing capabilities while seizing the best talent on the market.

Current Top 10 Risks

Predicted Future Risks

By 2024

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