Risk 10: Inadequate Operating Models to Maximize Value Creation
In the current landscape of telecommunications, the focus is shifting sharply towards asset-light strategies. Operators are increasingly carving out or spinning off vital components such as tower, fiber, and data center assets. According to recent EY research, a staggering 72% of telco CEOs anticipate that carve-outs and divestitures will become more prevalent in their regions over the next year. Looking ahead, 44% of telco leaders predict a bifurcation within the industry, leading to a split between retail-focused “servcos” and wholesale-oriented “netcos” within the next five years.
While asset-light mergers and acquisitions (M&A) offer financial benefits, many executives recognize a significant oversight. Instead of merely focusing on cost elimination during divestitures, they see untapped opportunities to reconfigure operating models to better leverage the remaining business assets. This shift necessitates a careful reevaluation of business strategies to unlock potential value beyond mere financial transactions.
Actions for Telecommunications Operators to Manage Risk Mitigation
Given the current challenges, telecommunications operators must take a proactive stance in managing risks. Several overarching actions can help navigate the complexities involved.
1. Identify Emerging Threats Affecting the Ecosystem
As connectivity becomes increasingly integral to digitization efforts, telcos must stay vigilant about potential risks emerging beyond their own organization. This includes vigilant monitoring of supply chains, the competitive landscape, and the evolving policy and regulatory environment. Emerging threats relate particularly to cybersecurity and regulatory changes, which demand continuous attention and adaptation. A proactive stance in monitoring these aspects can empower operators to act decisively against emergent risks.
2. Focus on the Impacts of People and Technology Transformation
As operators embrace new technologies, the significance of human capital becomes paramount. The demand for skilled personnel who can harness these frontier technologies is rapidly increasing. Transformation driven by technology should not be a mere adoption of new tools; it requires a robust organization-wide commitment to talent acquisition, reskilling, and overall purpose. Aligning technological transitions with a clear organizational vision, combined with stringent risk protection and stable governance, will enhance business resilience throughout transformation initiatives.
3. Ensure End-to-End Risk Management
A holistic and structured approach to risk management is crucial for telcos. This involves establishing a robust framework to identify, evaluate, and manage risks across all levels of the organization. Engaging executive risk owners to work alongside cross-functional teams is essential in tracking risks and assessing their impacts effectively. Regular reviews of risk containment strategies and controls can enhance the overall risk management efficacy. Above all, cultivating a risk-aware culture within the organization is vital. A culture that encourages adaptability in the face of evolving risks enables a more agile response to changes as they occur.
In summary, telcos have a unique opportunity to rethink their operating models and risk management strategies in a rapidly evolving landscape. By identifying emerging threats, focusing on human capital and technology, and implementing a comprehensive risk management framework, they can position themselves for sustained value creation in the long term.