Critical Events Are Costly And On The Rise

The economic damage of critical events

Critical events cause damages totaling hundreds of billions of dollars globally. Direct costs, e.g. the destruction of assets after a tornado, easily come to mind. But indirect costs, e.g. the loss of employee wages due to suspension of operations and the loss of revenues for the suppliers, are often more significant.

• The higher the direct costs, the higher the indirect costs (ripple effect).
• The economic growth of a US county is reduced by 0.79% if it is struck by at least one hurricane over a year.

CEM systems are necessary to mitigate costs not covered by insurance

Most people and organizations are not insured against critical events. Premiums seem too expensive for risks that appear to be remote or even unlikely to happen. Policies available in the market never cover all incurred costs, even beyond the loss of lives or strategic assets.

• Of $150bn losses from natural disasters in 2019, only about one third were covered by insurances.

A growing market

CEM systems, as per their multi-threat capabilities, are a natural extension of incident management systems used in IT. Market is quickly growing as risk managers and operations executives wish to better protect their organizations.

• The critical event management and mass notifications market is expected to grow at a CAGR of 19% from 2020 to 2025 and reach $29bn.

CEM Systems Offer A Concentrate Of Technology

Innovate to better identify and communicate threats

The first warning systems relied on SMS but are now outdated due to the poor scalability of the technology. Current platforms are multi-channel and cover different threats. CEM systems are coded to integrate today’s means of communication and to adapt to future technology and changes in habits.

• 5G will offer better signal, bandwidth, and location data.
• Machine learning and AI find patterns in data, make predictions, and help people and organizations make the right decision.

Leverage geolocation data

Whether an event impacts a single room or an entire region, the platform should automatically be able to send appropriate messages to different stakeholders: helpers, those directly impacted or at risk, and those who must know about the incident. Geolocation data is key to inform about dangers and give directions.

• Geolocation data can be obtained through different sources: GPS, WiFi, Bluetooth, or cell phone towers from telecom providers.
• CEM systems aim to differentiate static locations (where people live or work), from last known location and expected location leveraging AI algorithms.

IoT is extending the range of possibilities

IoT will have a major impact on mass notification and critical event systems. The next wave of connected devices represents additional means of communications to alert about issues. Moreover, these devices and their sensors will generate new types of data to gather information and help identify potential threats.

• IoT devices will increase from 27bn units in 2017 to well over 100bn in 2030.

A Young Industry Full Of Potential

An industry that benefits from more regulations

A global regulatory wave for improved risk management practices is supporting the CEM industry. Real-time monitoring of critical events is becoming an essential element of continuity plans also on the public side. Countries want to be able to communicate important messages to the population using the latest technology.

• All EU member states must adopt a public warning system by June 2022.
• India is working on an alert system to reduce cyclone impact on coastal states.

Managing a population or a workforce during the COVID-19 outbreak

CEM systems help communities and large organizations navigate the COVID-19 pandemic. They provide information about local regulations and restrictions. The software help monitor clusters and cases within supply chains, and check transport availability. Operations can be maintained, and back-to-work plans orchestrated.

• Norway sent 5.4mn COVID-19 messages in April. For foreigners, the system detected the language without the need to provide any personal information.

Subscription-based revenue model

Although smaller players offer pay-per-use packages, market leaders generate revenues with multi-year contracts billed periodically. The invoice is a function of the number of people in the network and the number of critical events to be identified. Recurring revenues offer better visibility and stability for a firm's financials;, as long as the clients stay on board.

• Markets leaders exhibit high retention rate – e.g. 95% at Everbridge.

Catalysts

• Business continuity plan awareness. The COVID-19 crisis demonstrated the importance of business continuity plans. As firms around the world are reviewing their response to such event, the CEM industry is likely to attract new clients.
• Major critical event. Entities tend to react to problems rather than anticipating them. Each new critical event is an opportunity for the CEM industry to show its added value.
• 5G. Low-latency, high speed internet will pave the way for the next wave of technology innovation, including new means of communication and data collection – both used in CEM systems.

Risks

• Data monetization. Data is the new gold. Some companies may be tempted to use the contact details of the millions of users for other purposes than mass notification, causing reputation risk to the whole industry.
• Earnings. Pure players are on the road to profitability. To sustain revenue growth, they invest heavily in their platforms to get a competitive edge vs the behemoth like Cisco, Honeywell, or Siemens.
• Inefficient platforms. France launched its first alert system in 2016. It was terminated in May 2018, because it was useless – e.g. alerts delayed or simply skipped. People’s trust in such software will only be achieved if the platforms work flawlessly