Canadian Tech Companies Worry More About Talent Than the Economy - BDO Report

- Talent Concerns Escalate Over the Past Year –

TORONTO, Nov. 24, 2015 /CNW/ - Finding and keeping key talent is a growing concern in the Canadian technology sector, according to the second annual BDO Canada Technology RiskFactor Report. This year's study found that 85 per cent of companies worry about their ability to attract or retain key personnel, up from 77 per cent last year. In comparison — and despite a sluggish Canadian economy — general economic conditions ranked sixth on companies' list of concerns.

The report, which examines the risk factors listed in the most recent annual financial statements of Canada's publicly traded technology companies, found that talent concerns and the competitive environment ranked equal as the most frequently cited risks this year. This was closely followed by firms' ability to develop or market new products and services, a risk noted more often in companies' financial statements than fears about the economy, financial stability or Canada's regulatory environment. The success of homegrown companies like Shopify and Hootsuite in recent years has highlighted the importance of innovation to the Canadian tech sector, so it is no surprise that companies remain concerned about staying ahead of the curve.

"The Canadian tech industry has had some notable wins over the past few years and is emerging as an important engine for Canada's economy," said Scott Rodie, partner and leader of the Technology & Life Sciences practice at BDO Canada. "However, as the industry grows, competing to find and keep the right talent has become increasingly challenging. The next big question for Canadian tech firms hoping to maintain their success is determining how to address this talent gap."

The following chart highlights the top 25 risk factors cited by public technology companies in Canada:

2015 Rank	Risk Factors (descending in order of frequency)	2015	2014
#1	Competition in the tech industry, pricing pressures	85%	83%
#1t	Ability to attract or retain key personnel	85%	77%
#3	Failure to develop or market new products or services	80%	79%
#4	Foreign currency fluctuations	76%	77%
#4t	Inability to acquire capital or inadequate liquidity	76%	64%
#6	General economic conditions	72%	70%
#6t	Intellectual property infringement	72%	70%
#8	Cyclical revenue and stock fluctuations	63%	53%
#8t	Risks related to suppliers or third-party vendors	63%	74%
#10	Federal or local regulations	61%	62%
#10t	Threats to international operations and sales	61%	58%
#12	Legal proceedings	59%	58%
#13	Predicting customer demand and interest	56%	53%
#14	Equipment failure and product liability	54%	51%
#15	Credit worthiness of a customer, partner, vendor or supplier	48%	51%
#16	Quarterly results fluctuation	46%	49%
#17	Failure to execute corporate strategy	44%	64%
#17t	Management of current and future M&A and divestitures	44%	47%
#19	Loss of a major customer	39%	36%
#20	Labour concerns	33%	40%
#21	Natural disasters, war, conflicts and terrorist attacks	31%	30%
#22	Cost and availability of raw materials and commodities	30%	23%
#22t	Ability to maintain or implement operational infrastructure	30%	28%
#22t	Breaches of technology security or privacy	30%	32%
#25	Insurance costs and potential uninsured liabilities	28%	36%
#25t	Environmental or health compliance and liability	28%	26%
#25t	Indebtedness	28%	34%
#25t	Accounting, internal controls and compliance standards	28%	34%

*t indicates a tie in the risk factor ranking

Additional findings from the 2015 BDO Canada Technology RiskFactor Report include:

• Economic Woes: The slump in oil prices hit Canada's economy hard, with 72 per cent of companies citing economic conditions as a concern in their financial statements this year. In addition, nearly one-third specifically point to commodity prices as a risk, a 30 per cent change from last year. Capital market risks have also elevated over the last year, with 76 per cent of companies expressing concern about their ability to access capital in the coming year.
• Deal Deliberations: Amid a difficult economy and facing persistent pressure to keep up with evolving customer needs, many technology companies may look to M&A to acquire much-needed capabilities and resources. BDO Canada's Q3 2015 analysis of transactions in the technology, media and telecommunications space shows a steady increase in closed M&A deals this year — 155 transactions over the first three quarters — with indications that the pace will continue this quarter as well. As a result, companies appear acutely aware of the associated risks, such as failure to identify and act on acquisition targets or difficulty integrating businesses, with 44 per cent citing risks related to M&A activity this year.
• Security Fears: Rising global interest in networked and cloud services may also be highlighting potential security threats. Nearly one-third of companies this year express concerns about avoiding cybersecurity breaches, and another 30 per cent worry about their ability to maintain the integrity of their IT systems and infrastructure.
  
  

About BDO's Technology & Life Sciences practice
BDO's dedicated team of professionals serving the Technology and Life Sciences sectors brings you broad-based experience, in-depth knowledge and business savvy that can be critical to your success. Our professionals propose solutions to your challenges and support every phase of your growth from start-up to listed public company. The BDO T&LS team, comprised of leaders in 7 Centres of Excellence across Canada, brings together the resources of our global network of over 1,300 offices in more than 150 countries around the world. We are entrepreneurial, we understand your issues, and we are focused on providing you with exceptional client service.

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SOURCE BDO Canada LLP

Talha Wasti, Environics Communications, 416-969-2658, [email protected]