Investing in a business does not end with the initial outlay of capital expenses. As time progresses, owners need to invest more in order to accommodate the expansion of their businesses. However, a caveat: watch out for the risks.
One of the investments people venture into is new technologies. Nowadays, technology undoubtedly plays a vital role in the performance of a company. As such, budget is allocated for either upgrading existing technology or purchasing top-of-the-line technology. Similar to any business venture, however, investing in new technology should be preceded by a careful analysis of the possible risks.
The Risk of New Technologies
Computers, devices, software, and other forms of workplace technologies are aimed at helping achieve the target productivity of the company. It can speed up communication, allow for mobility, and improve efficiency, among other benefits.
However, technology is considered to be a high-risk investment. It is for this fact that companies need to study their investments and direct their budget towards the right kind of technology that will produce the right kind of results—a predictable and definable return of investment. Otherwise, these technologies and the company’s investments will only be put to waste.
If you are mulling over investing in this venture, here are three types of new technologies with their subsequent risks:
Green, Eco-Friendly, Renewable Energy Sources
In order to contribute to the campaign against global warming, businesses also invest on technologies intended to reduce their carbon footprint. Solar panels, wind mills and low-draw light bulbs are a few examples. However, these technologies are not foolproof against the following risks:
The sustainability of the technology.
- An activity is deemed “sustainable” if it does not harm its environment and affect the surrounding organisms. Debates ensue when it comes to green technology. According to experts, these technologies are actually made of elements that have detrimental effects to the environment in the long run (e.g. Arsenic, a potent poison used for insecticides and military chemical weapons). Instead of contributing to the idea of environmentalism, companies may risk damaging their surroundings all the more.
- Policies related to climate change. Green technology is, in fact, subject to the local government’s policies regarding climate change. A particular country’s policy or lack thereof carries the risk of mispricing these technologies. For instance, once a law regarding climate change is passed, the market price will also most likely move.
- Climate risks. The concept of climate change rose to popularity with Al Gore’s An Inconvenient Truth in 2006. Climate risks refer to the exposure of a technology to the physical impact of climate change. Although this is hard to measure, investing on green technology will open your company to the possibility that climate change may no longer affect the world in the future.
There are only a few companies today that can accomplish their tasks without the use of any software. PCs and Macs need software to operate fully. Investing in this technology carries the risks of:
- Software patents. The Internet makes it easier for individuals and companies to simply download any software that they need. However, this poses the potential of software copyright infringement, especially for companies, if the software provider decides to crack down on illegal use. With a disclosure on a company’s non-compliance, the integrity of the company is put at risk.
- Security. Unfortunately, a lot of companies are not prepared to combat possible security vulnerabilities through software. This puts every employee under the risk of losing sensitive information from someone who has malicious intent.
- Maintenance and upgrades. After purchasing software, businesses need to constantly upgrade their software either for maintenance or for the software’s additional features. With every upgrade, most software offer better protection against attacks (e.g. malware) or add a feature that was not in the previous version.
Gadgets and Devices
Gadgets and devices provide means to increase productivity for each employee. However, these also come with risks:
- Short product and market cycles. It seems as if gadget manufacturers update their products every other month. Investing today may mean that the product will be outdated in a matter of one year. Moreover, the new gadget may even include features that are better than the one you initially purchased. Companies who want to keep up with the short product and market cycles of technology may need to purchase gadgets and devices every year.
- Giving the wrong kind of machine to the employee. Some companies, to standardize their PCs and to save money, purchase the same device for each employee. This poses a problem, as each employee’s tasks are different from the other. For example, those who travel will benefit more with a notebook PC than a desktop PC. If the device does not match the needs of the employee, the company risks lower productivity and employee dissatisfaction.
- Hacking and privacy invasion. Even gadgets and devices are vulnerable to security attacks. Without the proper software to combat these threats, someone may succeed in stealing information that may bring the company legal actions from the customers and shareholders.
In this day and age, the key to rise above the competition is to be more productive and efficient. As such, it becomes crucial for companies to keep up with the changing tides of technology. With this in consideration, companies need to be more vigilant in studying the risks involved in investing in new technologies lest they gamble with their future revenues.
About the Author: Johann is a Marketing Consultant for Business Aid Centre, a small business grants and loans assistance provider. A company providing assistance for government grants and business loans for qualified individuals and companies. Follow him at twitter @johannrcarpio.