#Japan #Tokyo #risk management #Trust Issues #Telecom Sector

EY's Latest Insights on Telecom Sector Risks

The telecommunications industry is at a pivotal juncture as it grapples with a broadening array of risks impacting its operations. An annual report by EY, known as the "Top 10 Risks Facing Telecoms," highlights that trust, talent management, and transformation effectiveness are emerging as the major vulnerabilities as we progress toward 2025. With both the global landscape and the Japanese market displaying unique challenges, it is imperative for telecom operators to address these issues head-on.

Cybersecurity and Trust at the Forefront

The foremost risk facing telecommunications providers is the attention given to critical shifts in privacy, security, and trust. According to EY's comprehensive global survey, a notable trend has emerged: consumers are increasingly cautious about the role artificial intelligence (AI) plays in their interactions with service providers. A staggering two-thirds of consumers demand clear explanations from telecom operators on how AI is employed in their services.

As concerns regarding cybersecurity escalate, a significant volume of distributed denial-of-service (DDoS) attacks has been directed at telecoms, accounting for 57% of all such incidents in the first half of 2024. With the rapid advancement of AI, the increase in cyber threats, including sophisticated phishing attacks, poses an immediate danger to customer data and overall network integrity.

Talent Challenges and the Need for Reskilling

Alongside technological threats, the management of human resources and corporate culture emerges as the second critical risk. EY's "Telco of Tomorrow" survey revealed that an overwhelming 73% of telecom leaders prioritize talent acquisition and retention. However, despite recognizing the importance of addressing workforce culture, only 10% of leaders categorized it as critical.

In Japan, the telecom sector faces unique challenges, such as demographic decline and rural depopulation, which complicate the maintenance of profitable infrastructure. As companies work on enhancing their digital skillsets, they must also foster a robust environment for talent acquisition and employee development. Reskilling initiatives are becoming increasingly crucial to sustain a competitive edge in the evolving market.

Ineffective Transformations Adding Pressure

A newly identified risk has emerged this year, revealing that ineffective transformation programs are not yielding the desired results. As technological innovations reshape the telecommunications landscape, operators must navigate the complexities of integrating new technologies. EY’s examination into the utility of software-based networks and process automation highlights a gap between implementation and actual improvement.

Moreover, the expectation that AI will enhance operational efficiencies in the next five years is not universally shared. A significant debate exists around the metrics for evaluating technological transformations. Considering 75% of CEOs surveyed believe that legacy IT systems hinder organizational agility, establishing effective performance indicators is essential.

Disruption within the Value Chain

Another significant risk identified in the report is the disruption within the value chain of the telecom sector. Threats originating from outside the traditional telecom space are increasingly notable concerns. Then, as telecom leaders adjust their strategies, there's an indication that hyper-scalers and satellite operators could disrupt the existing competitive landscape.

Cédric Foray, EY's Global Telecommunications Leader, stresses the importance for operators to remain aware of new threats while evaluating the impacts of incumbent risks. An integrated approach that tackles these evolving threats collaboratively may lead to successful risk mitigation.

The Call for Robust Security Measures

In conclusion, with risks ranging from privacy concerns to the management of technological changes and workforce engagement, telecom operators must take action. As the Japanese market faces challenges similar to those abroad, implementing robust security protocols and sustainable business structures is crucial for future success. The comprehensive insights presented by EY serve as a compelling call to action for telecommunications providers globally to reassess their strategies and effectively manage the risks head of them.

For detailed findings, you can access the full report, "Top 10 Risks Facing Telecoms."