Uncertain world forcing global technology leaders to rethink strategies, says new survey

BY Fraser Tennant

Unprecedented political and economic uncertainty across the globe is forcing technology leaders to rethink their strategies, according to a survey carried out by Harvey Nash and KPMG.

‘Navigating Uncertainty’ is the largest IT leadership survey ever undertaken and includes 4498 responses from chief information officers (CIOs) and technology executives across 86 countries. In the main, the survey finds that technology leaders believe that the level of change they are experiencing has reached unprecedented levels and is increasingly coming from unexpected corners.

That said, many technology executives are turning this uncertainty into opportunity and are helping their organisations to become more nimble and digital, a strategic rethink they feel will help them navigate through unpredictable change and thrive in an uncertain world.

“Few would have predicted the seismic shift caused by recent political change in many western countries”, wrote Albert Ellis, chief executive of Harvey Nash Group. “And few would have predicted the astonishing advances that have been made in data analytics, cloud, or – as this year’s survey reveals – automation."

The survey’s key findings include: (i) two-thirds of organisations are adapting their technology strategy because of unprecedented global political and economic uncertainty; (ii) 89 percent of organisations are maintaining or ramping up investment in innovation, including in digital labour; (iii) digital strategies have been embraced by businesses at an entirely new level; (iv) cyber security vulnerability is at an all-time high; (v) female CIOs are far more likely to have received a salary increase than male CIOs in the past year, although the number of women in IT leadership remains low at nine percent; and (vi) weak ownership, an overly optimistic approach and unclear objectives are the main reasons why IT projects fail.

The survey (now in its 19th year) also found a clear divergence between organisations that are effective at digital transformation and those that are not. CIOs at these ‘digital leader’ organisations are almost twice as likely to be leading innovation across the business and their organisations are investing in cognitive automation at four times the rate of others.

“Whilst the future might be difficult to predict, what is very clear is that many technology executives are turning this uncertainty into opportunity”, wrote Lisa Heneghan, global head of technology at KPMG. “They are helping their organisations become more nimble and digital, to navigate through unpredictable change and thrive in an uncertain world.”

Report: Navigating Uncertainty

IoT breaches hit US firms

BY Richard Summerfield

Nearly half of all companies in the US using an Internet of Things (IoT) network have been the victims of recent security breaches, according to a new survey from Altman Vilandrie & Company.

The survey, ‘Are your company’s IoT devices secure?’, which included nearly 400 organisations, notes that security systems protecting 48 percent of organisations’ IoT networks have been breached at least once in the last two years. Overall, the cost of the IoT security breaches represented 13.4 percent of smaller companies’ annual total revenues. For larger companies – those with annual revenues in excess of $5m – the cost of a breach can run into the tens of millions.

“While traditional cybersecurity has grabbed the nation’s attention, IoT security has been somewhat under the radar, even for some companies that have a lot to lose through a breach,” said Altman Vilandrie & Company director Stefan Bewley, who co-directed the survey. “IoT attacks expose companies to the loss of data and services and can render connected devices dangerous to customers, employees and the public at large. The potential vulnerabilities for firms of all sizes will continue to grow as more devices become Internet dependent.”

The survey also highlights a connection between the amount companies spend on IoT security and the likelihood that they endure a breach. Typically, those companies that have not been breached have invested as much as 65 percent more in IoT security than their counterparts. Preparedness is key, though the risks for companies of all size, and at all levels of preparedness, will continue to grow as more devices become internet-dependent.

“We see it being critical for security providers to build a strong brand and reputation in the IoT security space. There are lots of providers developing innovative solutions, but when it comes to purchasing decisions, buyers are looking for a brand and product they trust,” said Ryan Dean, a principal at Altman Vilandrie & Company, who co-directed the survey. “Price is a secondary concern that buyers tend to evaluate after they have narrowed their options down to a few strong security solutions.”

Report: Are your company’s IoT devices secure?

Divestments set to soar across the globe, suggests new study

BY James Williams

Geopolitical disruptions such as a volatile business landscape and regulatory upheavals are driving companies to pursue divestments in ever-increasing numbers, according to EY’s ‘2017 Global Corporate Divestment Study’.

The study, based on a survey of more than 900 corporate executives worldwide, notes that the uptick in divestments is very much being driven by geographical footprints, with companies in Europe, the Middle East and Africa (EMEA) reporting that regional political instability (cited by 81 percent) and Brexit (cited by 73 percent) among the top issues.

Across the globe, 57 percent of multinationals in the Americas have indicated that their divestment decisions are motivated by technological change, with 84 percent also focused on regulatory changes. Globally, 56 percent of all survey respondents said they are more likely to divest as a result of an unpredictable landscape.

Further EY findings include: (i) 82 percent of companies said that macroeconomic volatility will increase the likelihood of them divesting over the next year; (ii) 48 percent of companies believe that tax-related divestment challenges have increased in the last 12 months; and (iii) 88 percent of companies have indicated that advanced analytics would help them make faster and better divestment decisions.

“In many cases, we are observing impulsive divestment decisions by companies feeling pressured by external factors to take quick action, often at the cost of realising maximum value," said Steve Krouskos, EY Global Vice Chair – Transaction Advisory Services. “The impact of too much speed on sale price is significant, and should motivate companies to be strategic and measured by prioritising value when navigating a sale process.”

The study also reveals that the current dealmaking is leading to senior executives craving “an information advantage”, with those not planning to divest in the next two years now looking to “evaluate their portfolios more rigorously”. Furthermore, 53 percent of executives made clear that understanding the business impact of new disruptive forces is among their “key portfolio review challenges”, and some even said it is “their biggest challenge”.

Paul Hammes, EY’s Global Divestment Leader, concluded: “We are seeing companies flee geographies because of short-term fears and wind up with suboptimal valuations on their business. Our survey finds that nearly half of companies plan to divest in the next two years. A divestment can empower a company to put capital to better use, enable a leaner operating model and enhance shareholder value.”

Report: Can divesting help you capitalize on disruption? – Global Corporate Divestment Study 2017

Executive pay crackdown announced by May

BY Fraser Tennant

Tighter controls on executive pay designed to curb the excesses of the “privileged few” have been proposed by UK prime minister Theresa May this week as part of an anti-elitism drive to regulate company behaviour and create a more equal country.

The proposals contained in the ‘Corporate Governance Reform’ Green paper are part of Ms May’s attempt to restore public trust in business practices and close the gap between those at either end of the corporate ladder (an increase in inequality being one of the main reasons for Brexit).  

In a statement outlining its intent, the UK government stated that it would bring to an end the behaviour of "an irresponsible minority of privately-held companies acting carelessly – which left employees, customers and pension fund beneficiaries to suffer when things go wrong".

Ms May’s drive to tackle unsavoury corporate behaviour focuses on five specific areas: shareholder voting and other rights; shareholder engagement on pay; the role of remuneration committees; pay disclosure; and long-term pay incentives. One of the main components of the prime minister’s plans is the question of whether a new pay ratio requirement should be introduced.

However, a proposal to have workers represented on company boards has already been sidelined. Business minister Greg Clark indicating that the government was unlikely to change the unitary boards system currently in place.

Providing a stark illustration of the disparity between pay in the boardroom as opposed to the shop floor, is a TUC study (September 2016) which found that, in 2015, the average FTSE 100 boss earned 123 times the average full-time salary. Furthermore, the median total pay (excluding pensions) of top FTSE 100 directors increased by 47 percent between 2010 and 2015, to £3.4m. In contrast, the average wages for workers were found to have risen by only 7 percent over the same period.

The TUC research also found that those companies with high pay inequality between bosses and workers tended to perform less well overall.

“Two thirds of people think executive pay is too high, so we support the Government’s intent to help rebuild trust and strengthen accountability in this area,” said Fiona Camenzuli, a partner in PwC’s Reward & Employment team. “Enhanced shareholder powers and engagement, greater focus by boards on pay fairness, appropriate employee and stakeholder voice in the boardroom, and making pay plans simpler and longer term can all contribute to making pay work better to support the long-term performance of UK companies. The Green Paper presents a wide range of sensible options and we encourage a robust debate, based on evidence, to determine the right policy proposals.”

Following consultations on the Green Paper, a White paper is expected in early 2017. “It will be a consultation that will deliver results,” said Ms May.

News: ‘Corporate Governance Reform’ Green paper

Advancing technology impacting CFO reporting - EY

BY Fraser Tennant

An increase in data caused by advancing technology is adversely impacting the ability of chief financial officers (CFOs) to deliver effective corporate reporting, according to an EY report published this week.

The report, ‘How can reporting catch up with an accelerating world?’, which is based on a survey of more than 1000 CFOs and heads of reporting of large organisations across 25 countries, reveals that 66 percent of respondents consider technological advances – such as cloud-based systems, data analytics, robotic process automation (RPA) and artificial intelligence (AI) – to be their number one external reporting challenge – up from 57 percent in 2015.

Additionally, almost one third (32 percent) of the CFOs surveyed ranked their current reporting operating model as “average”, with 56 percent stating that transforming their model – perhaps striking a balance between central control and devolved reporting attuned to local needs – is now a major focus.

“CFOs worldwide are struggling to make the most of the increased volume and speed of data available to them,” said Peter Wollmert, EY global and EMEIA Financial Accounting and Advisory Services (FAAS) leader. “Many are encumbered by legacy systems that do not allow reporting teams to extract forward-looking insight from large, fast-changing data sets. The result is an increasing expectation gap between what boards now look for from corporate reporting, and what CFOs can deliver. Until reporting catches up with technological advancements it will continue to be compromised.”

The report also advances some bold strategies to deal with the corporate reporting issue, including increasing the use of: (i) outsourcing; (ii) managed services; (ii) captive shared services centres – onshore or near-shore; (iv) captive shared services centres – offshore; and (v) centralised centres of excellence.

That said, the report does indicate a preference among CFOs for moving towards a model in which control resides with a head office but with significant responsibilities being assigned to local markets. Twenty-nine percent of survey respondents saw this as the future model, while only 24 percent currently operate a system such as this.

Whatever model is eventually established, CFOs hope that the new reporting arrangements will increase the accuracy and effectiveness of reporting, improve data analytics in reporting to drive forward-looking strategic insight, and provide a more flexible and agile reporting function.

Mr Wollmert concluded: “CFOs are mapping how they see the future of reporting. However, unless decisive action is taken quickly to define a bold strategy and vision for advancing the reporting process, they will continue to fall behind the pace of technology. For CFOs contemplating this journey, the mantras for their reporting function need to be responsive and streamlined.”

Report: How can reporting catch up with an accelerating world?