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71% Waking up to risk
But this doesn’t mean that consumer companies are dead to the issue. Far from it, I think that what we are seeing is an awakening, a realisation that there is work to do and that the industry needs to catch up.
For a start, regulatory scrutiny is growing. No industry is simply ‘unregulated’ any more. Product safety, cyber, supply chain integrity, data security and protection – all of these are live issues for consumer goods organisations and areas in which regulators are upping the pressure.
Furthermore, the rise of consumer activism has placed risk management much more at the forefront of Boards’ thinking. Our research showed that half of organisations attribute the success of effectively communicating risk issues to the increasing appreciation of risk issues at Board level. In an age where consumers have so much power, through social media, to target a brand and stoke up anti-big business sentiment, consumer companies have realised that they have to engage at a much earlier stage. They have been investing in sentiment analysis and other techniques in order to pinpoint where negativity may be growing and to tackle it quickly.
Chart 9: How does the level of investment in risk management (as a percentage of revenues) at your organization today compare to three years ago?
of companies said they were planning to increase their investment in risk management over the next three years
So in that sense, consumer products organisations have made signifi cant progress.
You can’t manage what you don’t know 29% 4% 2% 18%
However, there remains much to do. While, an encouraging, 71 percent of companies said they were planning to increase their risk management investment over the next three years, nearly four in ten admitted that they have no mechanism to measure the return on investment of their risk efforts. And nearly half have no risk appetite statements, or have not yet completed any. If you don’t know what your appetite for risk is, how can you manage it?
47%
Chart 10: How do you anticipate the level of investment in risk management (as a percentage of revenues) will change at your organization over the next three years?
In common with most sectors, consumer goods companies are also struggling with the issue of linking risk management to executive remuneration. This is a diffi cult area, but obviously one where there is scope to make a large impact if you get it right. A consumer goods company could introduce a scheme based on the number of product recalls perhaps, or a supply chain, sourcing, or compliance metric.
30% 3% 1% 15% } © 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved. Two thirds of respondents expect an 51% © 2013 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with wh
Will substantially increase Will slightly increase Will stay the same Will slightly decrease Will substantially decrease
47%
Chart 10: How do you anticipate the level of investment in risk management ( at your organization over the next three years?
How do you anticipate the level of investment in risk management will change at your organization over the next three years?
Substantially higher Slightly higher No change Slightly lower Substantially lower
Two thirds of respondents globally indicate that the share of revenues invested in risk management is higher today than three years ago
30% 3% 1% 15%
29%
4% 2%
18% BACK TO CONTENTS FOCUS 25
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MANAGEMENT RISK
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