Anything that might be called a threat to the business could just as well be called a risk to the business – we know it might hurt the business, but we are not sure if it will or how much. Faced with competitive threats, risk managers sometimes dive under cover, letting somebody else step up to appraise the severity of the risk. That is the wrong attitude. There is no point complaining about lack of executive sponsorship if your approach is based on ignoring the top risks because you lack the confidence to respond to them. One old mantra tells us to turn threats into opportunities. Competitive threats are an opportunity for risk managers to demonstrate how they can add value to the business in ways that matter most. With this in mind, I took a look at some new research by Dan Baker, top industry analyst. His new survey identified the top competitive threats to communications providers. The top two threats were new infrastructure providers and over-the-top content providers. Of particular interest was how the threat perception depended on the size of the telco. Tier 1 players were most worried about infrastructure rivals, whilst smaller telcos were most worried about over-the-top content. You should read Dan’s blog to see more of his analysis, but I will briefly comment on how ERM practitioners should respond to these threats, if they really want to deal with the big risks.
- Be strategic. Do not spend the next week examining detailed operational data for some particular process when you know that even the most severe operational risks are dwarfed by these outside threats. Get out from behind a computer and make sure you engage the strategy and marketing functions in a proper analysis of how great the risk is and what the business will do to respond in the long run. Bring governance to where it is most needed, by assuring the data and methods they use, and by ensuring the business has a clear idea of how it intends to deal with disruptive rivals. When it comes to alternative business models, you will either beat ’em or join ’em… or risk disappearing completely if they prove successful.
- Think ahead. Do not wait for data to come in that shows there is a problem. That is issue management, not risk management. Look at the long-range forecasts for the company and determine if the business needs to invest now to avoid deteriorating returns later. If the long-range forecasts completely fail to factor in the impact of disruptive competition, then there is something wrong with those forecasts – and it is your job to make that clear to everyone.
- Be objective. Your business does not need another person spouting ill-informed opinion, no matter how hard it is to judge the scale of the threat. Get useful information and use it well, whilst being realistic about how reliable that information is. If you cannot work out how to get information… you are in the wrong job. After all, I just pointed you at a survey that tells us what other telcos think are the top threats ;) Identify varied sources of risk intelligence, and avoid the trap of only recycling what people in the business already told you.