In the face of great economic uncertainty, the technology sector in Britain continues to not only thrive, but to grow. Unfortunately, the success of these businesses is also connected to an increase in their risk exposure.
In an uncertain economic climate, the one sector that is bucking the trend is technology. In fact British tech is growing more than 150% faster than the rest of the economy¹. The recent coronavirus pandemic illustrated the crucial role technology plays in keeping us connected, to both work and family.
However, the innovation and connectivity in the tech space means it is not a silo but a dominant force across the sector spectrum, as it forms part of a complex network.
So far, the technology sector appears to be immune to the economic impact of the pandemic that has left so many sectors struggling for their survival. However, this does not mean that it will emerge from this period unscathed. The technology industry might have avoided the pressures that are facing hospitality and the arts, but there are still some concerns that businesses should be aware of.
Prior to the pandemic Hiscox data suggests 65% of the claims they handle for tech companies was as a result of breach of contract².
The worry is that this trend may continue as clients of tech companies are unable to pay for work completed due to their own financial instability, so breach the contract payment terms or falsely claim a breach of contract against the tech company to avoid paying.
Adam Jeffs, account director at Marsh Commercial, explained: “While the tech sector is in a relatively strong position – others aren’t. Our concern is that when looking to reduce costs, companies may start trying to look for ways to claim breach of contract to avoid payment. This could have a particular impact on smaller start-ups and curb innovation in the sector.”
The good news is that this is a risk which can be mitigated.
And the first step to managing your risk is to understand it. You should review and check your contracts, so you know exactly where your liabilities lie. It’s also worth checking your insurance policy to ensure that if the worst happens and a claim is made, you have the appropriate protection for your business.
Jeffs added: “Technology is incredibly interconnected. The industry has extended supply chains and as large brands continue to contract work out to smaller firms and specialist freelancers, the ecosystem becomes increasingly complex. This can make it hard to identify exactly where liabilities lie. I would always recommend reviewing both the contract and your insurance before commencing a new project, to ensure you understand the liabilities involved and the level of protection your insurance offers.”
Innovating while managing risk is a balancing act. With reward comes risks. It is a sign of a successful business that your risk management solutions need to constantly evolve, as your business expands and develops.
Marsh Commercial are experts in risk management support and consulting, risk transfer and liability insurance (including cyber risk) and much more.
To find out more about how Marsh Commercial can support the technology sector, or be able to help your business, click here.
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