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Building a Case for PESTLE Risk Monitoring— How to anticipate Technological Disruptions

November 03rd, 2017 - Posted by Mark Dunn in Procurement And Supply Chain

Our series on PESTLE risk monitoring continues with a deeper look at "T"—Technological risk—and how it can impact organisations enterprise-wide.

The World Economic Forum, in their Global Risks Report 2017 have stated that: "The deep interconnectedness of global risks means that technological transitions can exert a multiplier effect on the risk landscape". In fact, technological risks relating to Artificial Intelligence (AI), cyber-attacks, and data fraud featured heavily in risks identified by the top 100 business leaders around the world – highlighting a growing concern over the rise of the so called ‘Fourth Industrial Revolution’.

Technological factors that can affect how businesses function, and how sustainable they are in the future, relate to existing technology as well as the development of emerging technologies. We only have to look at the huge progressions in the last few years to understand the speed at which these developments are happening, for example, the rise of hybrid and electric vehicles, the ease of contactless payments, and the importance of online social media in influencing our daily lives.

This rapid development of technology requires quick reaction by businesses in order to keep up with new trends and innovations, survive in a competitive corporate environment and increase visibility to enable more proactive, data-driven decisions.

Technological factors affecting businesses

Disruptive digital technology

  • Risks: Technological implementations can pose an operational risk and strategic risk, disruption that puts business growth at risk, i.e., Uber’s meteoric growth (enabled by technology) took traditional ride services by storm, resulting in loss of business.
  • Opportunities: Disruptive digital technology has had a significant impact on media organisations because viewing options have widened; streaming has taken a chunk out of traditional broadcast networks’ viewership, providing an opportunity in targeting streaming, less expensive media and greater outreach to businesses and consumers.

Organisational processes

  • Risks: Many technological risks relate to data security and cyber-crime. Recent examples such as the hacking of the entire UK NHS admin system show the devastating impact of a security breach on business continuity and stakeholder trust. Another risk is that of technology failure such as the failure of air bags to deploy that has had a serious impact on the automobile industry, or weaknesses in the innovative technology such as the phone batteries that overheated causing a serious fire risk. All of which can result in regulatory risks such as fines, and negatively affect profits, reputation, and overall business growth. Disruptive technology can also affect business growth, for example, if a competitor pioneers a new technology and appeals to a larger proportion of the shared customer base.
  • Opportunities: Integrating modern technology, when the business requirements, objectives, and strategic goals are kept in mind, can greatly benefit companies and their customers, and provide a Sustainable Competitive Advantage (SCA). Effective monitoring is key, as it helps organisations spot new technology that could signal market disruption and respond proactively, and also enables organisations to see potential red flags when technology fails. A good example of this is the increasing use of Blockchain/virtual currencies which are becoming the focus of regulators, increasing regulatory risk.

Expenditure

  • Risks: Investing in brand-new technology can be a huge expense for any business, from changing entire fleets to electric vehicles, to smaller scale changes such as providing employees with the equipment for video calls. Without an in-depth assessment of how an investment could impact your business, it is easy to invest too much in technology, or to invest in the wrong type.
  • Opportunities: The businesses that view technology as a way to gain competitive advantage and have a well-developed strategy attached, could benefit immensely, and could see large and rapid returns on investment and cost savings.

Employment

  • Risks: Any conversation around technology is likely to include a debate around employment. AI and automation has already resulted in a loss of more ‘traditional’ career roles, for example, the rise of brick-laying robots. This trend is projected to continue in a study by the International Labor Organization, up to 50% of the total workforce in Asia are at risk of displacement by robots. Also there may be difficulties in finding staff to maintain equipment in countries with less stable infrastructure, disrupting supply chain disruption and associated financial and reputational damage.
  • Opportunities: If impacts are monitored throughout the supply chain, technology is likely to increase opportunities for skilled work in repair, programming, and coding – which could be an opportunity for businesses to attract a younger generation of workers.

Technological risk and the impact on supply chains

Technological factors are one of many external factors that can affect businesses in a negative way, and are an integral part of PESTLE analysis. As well as the above risks there are additional technological risks associated with supply chains such as unstable technology base, for example; when operations are in countries with less stable infrastructures can face challenges in powering/maintaining technology. Power disruptions can damage costly equipment, it may be difficult to find staff to maintain equipment, causing supply chain disruption, with associated financial and reputational damage. Increasing real-time awareness into technological and market trends allows you to respond proactively. How can you achieve better visibility into technological risk? Ensure you have a risk monitoring solution to rely on.

Designed as a cost-effective, off-the-shelf solution, LexisNexis Entity Insight helps organisations implement third-party monitoring— tailored to their specific risk considerations—to identify technological and other PESTLE risk factors across global news and market intelligence.

3 ways to apply this information:

1. Watch for the next blog in our PESTLE risk monitoring series—Legislation

2. Arrange for a trial of our PESTLE risk monitoring solution, LexisNexis® Entity Insight

3. Share this blog post with your colleagues on LinkedIn.

What do you think?