infoTECH Feature

May 16, 2011

BDO Study Analyzes Top Risks to U.S. Tech Companies

A recent study conducted by BDO USA, an accounting and consulting organization, finds that supply chain issues represent one of the most prominent risks to U.S. technology companies.

The study, “2011 BDO RiskFactor Report for Technology Businesses,” was conducted on 100 largest publicly traded technology companies. Of them, 86 percent said supply chain concerns including supplier relations, distribution and material costs are the top risk factors. This number represents an approximate 15 percent rise over the previous year.

The survey also found that majority of technology companies (93 percent) are more preoccupied with the inability to properly execute their corporate strategy this year. The top two risks cited this year include industry competition (97 percent) and economic conditions (96 percent).

“Concerns over the ability to execute corporate strategy have more than tripled in the past two years as companies are under pressure to get back into the game and stay ahead of the competition,” said Aftab Jamil, partner and National Director of the Technology & Life Sciences Practice at BDO USA, in a statement.

“Still, executives are approaching growth initiatives with a ‘lessons learned’ attitude and honing in on the supply chain to safeguard against operational pitfalls that could lead to business interruptions or delays,” Jamil added.

Other top risk factors cited by the 100 largest U.S. Technology companies in the order of their severity include federal, state or local regulations (96 percent), failure to properly execute corporate strategy, failure to develop or market new products or services and legal proceedings.

As technology companies seek to secure business strategy goals, logistical interruptions or delays are seen as a major threat. According to 75 percent of respondents, equipment failure and delays are other risks to their business. Also, potential disruption to factories and distribution channels as a result of natural disasters and geopolitical issues is considered as heightened concern for 81 percent of survey participants, an increase of 26 percent from last year.

Other major concerns of U.S technology companies include price, availability of raw materials and balanced inventory. Companies’ concern over IP protection is also on the rise (79 percent). IP risks also factor into escalating concerns over legal proceedings as well as rising concerns over innovation and new product development, the survey said.

Sixty eight percent of the survey participants had concerns over the ability to maintain operational infrastructure. Security breaches are a main cause for anxiety with 57 percent of companies citing it as a risk, the report said.

A significant number of respondents (85 percent) expressed concerns over M&A risks. They are concerned about the inability to successfully complete M&A transactions and other divestures.

In another recent survey, BDO USA found that nearly half (46 percent) of top U.S. technology companies surveyed plan to increase employee headcount in 2011. Only 7 percent of the surveyed companies expect headcount to decrease, marking a significant sign of confidence in the sector.

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Rajani Baburajan is a contributing editor for TMCnet. To read more of Rajani's articles, please visit her columnist page.

Edited by Carrie Schmelkin

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