The entertainment industry has long been a bastion of creativity and expression, but it is also an industry with a great deal of risk. The recent announcement of Disney’s looming layoffs has sparked a discussion among risk professionals about the risk appetite of the company and how it fits into the larger risk management framework.
Through a series of mergers and acquisitions, Disney has grown into a behemoth with competing organizations within itself and dozens of marketing and growth subsidiaries designed to keep the company ahead of its brand and brand perception. So why is it so risky and why has their risk appetite gone down?
A looming recession and fears of having “grown too fast and too quickly” have definitely played a contributing factor in Disney’s pending layoff announcements at a number of their subsidiaries. Ahead of a downturn, they’re looking inward to ensure that they weather the storm with ease. Let’s uncover some basics about risk appetite and how Disney is beginning to measure that risk.
What is Risk Appetite?
Risk appetite is a measure of the amount of risk a company is willing to take on in order to pursue its goals. It is an important concept for risk professionals, as understanding a company’s risk appetite will help them better conduct their risk assessments and ensure the company is taking on an appropriate amount of risk. Risk appetite is typically expressed in terms of the maximum amount of losses a company is willing to accept in pursuit of its goals.
Disney’s Risk Appetite
Disney’s recent layoffs indicate a shift in the company’s risk appetite. The company is no longer willing to accept the same level of risk it once was and is looking to reduce costs and limit its exposure to potential losses. This shift in attitude is likely due to the economic uncertainty caused by the pandemic, as well as the company’s desire to remain profitable in the face of increasing competition.
Deadline reports that Disney is contemplating how it might consolidate a number of its different TV production arms, as well as merge its marketing departments as part of a larger initiative to get on top of the company’s accounting concerns. Disney’s also reportedly moving forward with its plan to dissolve its Disney Media and Entertainment Distribution division (DMED) — which oversees Disney’s ad tech, content operations / platforms, and other core parts of its streaming business — following Iger’s move to fire its former chief exec Kareem Daniel last fall.
This shift in risk appetite is a prudent move, as it ensures the company is limiting its exposure to potential losses by consolidating existing business entities. It also allows the company to focus its resources on more profitable ventures and reduce its reliance on risky investments. This is an important step for Disney, as it helps to ensure the company is making informed and wise decisions when it comes to risk.
It’s also not clear exactly how Disney might streamline Disney Television Studios, which consists of 20th Television, 20th Television Animation, ABC Signature, FX Productions, Searchlight Television, and Walt Disney Television Alternative. Any move to bring the TV arms even closer together would likely mean more layoffs at Disney, an unfortunate consequence of the company’s focus on cutting costs and trying to bolster the strength of its stock.
The Implications for Risk Professionals
The implications of a company’s shift in risk appetite are far-reaching for risk professionals. It is important for risk professionals to understand a company’s risk appetite and how it fits into the larger risk management framework. By understanding a company’s risk appetite, risk professionals can better assess and manage the risks associated with the company, as well as identify potential opportunities for the company to reduce its risk exposure. This is an important step for risk professionals, as it helps to ensure the company is taking on an appropriate amount of risk and is ready to face any potential losses.
Disney’s recent layoffs are a clear indication of the company’s shift in risk appetite. It is an important step for the company, as it helps to ensure the company is taking on an appropriate amount of risk and limiting its exposure to potential losses.
