Five critical risks TMT companies must tackle now

Environmental, social, and governance (ESG) issues are now a top priority for TMT leaders. Global organizations are under increasing pressure from all stakeholders—customers, investors, and regulators—to disclose more about their ESG impacts, risks, and opportunities. US companies also must comply with the SEC’s climate rule, which mandates more comprehensive sustainability disclosures.

According to the KPMG ESG Organization Survey, 94 percent of TMT companies plan to increase their ESG investment over the next three years. Top areas of investment include data collection and management, ESG software solutions, and employee training.

However, the 550 leaders we surveyed also expressed concern about implementing these innovations. A surprising 38 percent still rely on spreadsheets to manage ESG data, and 72 percent expect to outsource some, if not all, ESG reporting within the next few years.

New accounting standards are coming to TMT companies with the goal of—you guessed it—enhanced transparency. The Accounting Standards Update (ASU) 2023-07, which went into effect in December 2023, requires companies to disclose significant segment expenses and extends certain annual disclosure requirements to interim periods.

Compliance with these changes is essential for TMT companies looking to provide stakeholders with clear, relevant information. To meet the new requirements, TMT organizations are reassessing data collection processes and enlisting external experts to ensure accurate, timely compliance.

What keeps chief risk officers up at night? According to our latest Chief Risk Officer Survey, nearly half of these leaders (49 percent) view cybersecurity and data breaches as their No. 1 challenge over the next two to five years.

And while 95 percent believe they are well prepared to tackle these threats, only 68 percent feel ready for the regulatory and compliance changes that come with them.

To address these growing threats, companies are investing in artificial intelligence (AI) and machine learning to anticipate and mitigate risks. Seventy-eight percent of TMT organizations are leveraging AI to enhance their cybersecurity strategies, with many implementing predictive modeling and other technologies to bolster defenses.

It’s been a slow year for mergers and acquisitions (M&A) activity and initial public offerings (IPOs) for TMT companies. The good news: Evidence suggests the malaise may be lifting. Still, buyers and sellers alike will want to proceed with caution.

TMT companies considering IPOs will need to demonstrate strong financial fundamentals, while those exploring M&A opportunities must focus on both revenue growth and cost-cutting potential. Due diligence will be critical, and companies must stay informed about regulatory changes to avoid disruptions.

A cautious approach is warranted, as there’s still uncertainty about how persistently temperamental macroeconomic factors will impact dealmaking in the coming quarters.

Advancements in AI, generative AI (GenAI), and other technologies are enabling TMT companies to cut costs, enhance performance, and deliver more personalized experiences for their customers.

These tools drive automation, streamline workflows, and improve decision-making. AI-powered solutions specifically can streamline internal processes, leading to significant operational efficiencies and cost reductions.

But proper implementation is no small task. According to the new KPMG GenAI Survey, while companies are making progress on navigating the technology’s risks, gaps in capabilities, regulatory uncertainty, and data security, challenges remain significant obstacles. To move faster, many companies are working with external partners and solutions—but this approach also brings with it a new set of risk-management considerations around third-party monitoring.