The tech industry is stepping up to help the world manage the pandemic, but tech businesses should be conscious of their own risks and exposures
COVID-19 shifted the tech sector’s focus. Where once tech prided itself on “disrupting” other industries, it now offers the means to stabilize them. Effectively deploying technology solutions in the areas of data analytics, communications, cloud storage and customer interface may mean the difference between economic survival or significant market loss. The rapid adaptations we’ve all been forced to make rely in unprecedented ways on technology to keep us productive, connected and, as much as possible, sane.
We have needed a robust and functional tech sector to get us through these challenging times, which means we need tech companies themselves to stay smart and proactively overcome their own difficulties as we wade through the COVID-19 crisis. As Aon’s recently published decision making framework – Decision Making In Complex & Volatile Times: Keys to Managing COVID-19 – says, “The world as we know it is being completely reshaped by the pandemic. No country or company will simply bounce back or rebound to the way they were before.” The tech sector is not immune whether operating in areas like cloud services, the sharing economy or some of the more traditional areas of tech.
Cloud services in demand
The cloud is being relied upon – and tested – like never before. Millions of jobs have been saved by the ability to work remotely. While not all jobs will remain remote after the shutdowns end, we expect and have started to see more companies adapt to agile working environments. This could mean both a short-term and long-term increase in demand for remote connectivity, like VPNs and related services. As these services are increasingly utilized by organizations, companies must be careful when configuring setting/features and training colleagues in their use; forgetting to disable certain settings could provide an easy access point for malicious actors.
Cloud companies should also anticipate an increase in hacking activity. While some are already regular targets, companies seeing a large uptake in service offerings may find themselves as attractive targets. Cyber security protocols should be adhered to despite the need to ramp up quickly to meet demand. It’s important that cloud companies stay on top of their cyber and technology professional indemnity insurance policies and are prepared for greater underwriting scrutiny at insurance renewal. Companies using captives may be in a better position to approach the insurance markets and optimize their risk transfer post-pandemic.
Delivering the sharing economy
Delivery services have been in huge demand due to lockdowns across the country. The companies addressing this need face a number of challenges. These include keeping their customers and workers safe in an uncertain environment, while the demand surge means they had to expand their services to serve new customers and on-board new contractors rapidly.
Other parts of the sharing economy, such as short-term rentals and ride shares, are not doing so well and taking a large hit. While the demand for these services is sure to resume once travel and heath restrictions lift, how well each company can weather this storm may depend on their balance sheet strength, access to capital, and ability to maintain host and customer loyalty during the transition. Companies in this space have historically not had strong balance sheets or even been profitable but got by on their ability to raise capital. It is likely that the pandemic will test that business model. Agile companies that can pivot and diversify quickly will have a strong advantage.
While this health crisis has been hard for some parts of the sharing economy, ride sharing, and micro-mobility may see an uptick in use in regions more dependent on mass transit. When people do have to head back to the office, they might feel safer with a ride share or micro-mobility option. Ride sharing companies in parts of the world already opening, such as Didi in China, have seen increases in rides inching them closer to pre-pandemic numbers. Of course, there will be different challenges in every region, so what has worked for companies in one region, may not work everywhere.
Mixed picture for Traditional Tech
Software companies, especially those who already had a functional remote work setup for employees, are primarily vulnerable to lost sales due to the general economic downturn. In contrast, certain types of software, such as security systems, will probably see increased demand, while anything “optional” is likely to be deferred until economic stability returns.
Hardware companies face similar market challenges and must also deal with the issue of accelerated global supply chain disruption as we have found that efficiency in the supply chain does not always come with resiliency. With border closures, regional shutdowns, and political conflict around the globe, essential components may not be available for many months. Tech depends upon tech, so these delays could have significant repercussions. Many companies are revisiting their supply chain strategy and that will bring different benefits as well as different risks.
As companies look under every rock to find cash to keep the doors open, have likely found that their insurance isn’t responding as they initially thought it would. Companies are finding that they do not have insurance coverage for a business interruption event like COVID-19 and if they do have coverage, it likely requires actual presence of COVID-19 on the premises. Even with COVID-19 on the premises, most policies do not consider it a covered peril. Sorting out a business interruption claim will require additional claim advocacy. In the future, companies may have to turn to captives or other alternatives, such as parametric coverage, to support this largely uncovered peril rather than rely on the traditional insurance market.
Tech can save the day
We are already seeing myriad ways in which tech has stepped up to help people and industries survive an otherwise catastrophic situation. Jobs are being saved thanks to remote working. Human connection continues thanks to video chat. Doctors and mental health professionals can virtually (and safely) continue some of their crucial services. Even personal trainers are able to keep their clients healthy and active thanks to the tech sector. However fast the virus may spread, information and hope spreads faster thanks to our technologically-enabled world.
For more help and advice on how to respond to the COVID-19 crisis, download Aon’s Decision Making In Complex & Volatile Times: Keys to Managing COVID-19 – a comprehensive framework to help organisations make the right decisions at the right time.
The information contained in this document is intended to assist readers understand COVID 19 issues and is for general guidance only.
This document is neither intended to address the specifics of your situation nor is it intended to provide medical, legal or specific risk advice. You should review the information in the context of your own circumstances (including further safety or medical information from credible sources) and develop an appropriate response. Each insurance policy must be specifically reviewed to determine the extent, if any, of coverage for COVID-19 noting that coverage may vary depending on jurisdiction and circumstances.
Whilst care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.