20 risk
Pace of change makes risk harder to manage
Companies need to be more agile to keep up with the new risk landscape, according to Ian Wishart, office senior partner at PwC in Southampton
Businesses in the South East have to consider risk and resilience issues in a changing climate. “Today’s fast-changing world creates more uncertainty for organisations and makes it harder for them to understand where new risks are coming from,“ said Ian Wishart, office senior partner at PwC in Southampton.
“Our recent CEO survey, Dealing with Disruption – Adapting to Survive and Thrive, highlighted to us that CEOs are already actively reshaping their businesses for this, with three- quarters anticipating changes in their company’s organisational structure during the coming year.“ Add that to the economic downturn impacting trading and the availability of finance as well as raising the propensity for fraud, and it is clear why developing the right corporate governance frameworks is so topical.
A recent PwC survey found that only 45% of companies are comfortable with how well their most critical risks are being managed
“Boards need to understand the principles of good risk management to ensure that all risks are effectively identified, managed and assessed. It’s particularly relevant because of the sheer pace of change, globalisation and the speed of sharing views and opinions. Getting the right balance of simplicity and rigour in managing and indeed embracing risk is an issue for all companies.“
A recent PwC survey found that only 45% of companies are comfortable with how well their most critical risks are being managed. “Companies need to be confident that they have identified and responded to known risks, be they financial, operational or strategic, and ensure that management responsibility
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in a world where social media has spread comment and opinion 24/7, customer relationships have to be managed in the Twittersphere, where reputation can be destroyed by ’digital wildfire’. Trial by hashtag can, however, present an opportunity for an organisation to manage a crisis well, putting itself ahead of the game through swift updates or responses to a situation or complaints.
’Boards should also be reflecting on their risk appetite and whether there are risks they are not taking that they would be comfortable with, including exploring new geographical markets and products’
for each aspect of risk is clearly understood. This can frequently be unclear at a board level in respect of technology, where responsibility can fall on the finance function by default. The risk of cyber attack is one of the most common concerns for our clients, so a clear accountability is critical.“
Planned responses to risk really do need to be realistic and robust, but business continuity plans, for example, are not always tested or updated. Wishart cites an example of a firm which, on checking its data storage backup tapes for the first time, found all were blank, wiped by security on exiting the building each evening.
Another key risk in taking a business forward is an inability to attract and retain talent, and this is a concern PwC hears from many of its local clients. “The issue of talent is a frequent hot topic,“ says Wishart. “While the South East has historically had a good supply, sectors such as engineering in particular are continually having to consider how they can remain attractive as employment and career choices. Reward strategies need to be relevant and creative, with factors such as flexibility, work/life balance and mobility becoming increasingly popular.“ Nonetheless, the PwC survey suggests that UK companies are relatively well-prepared for the
future in this regard, with 84% having a succession plan in place compared with only 57% globally.
“This is encouraging, but I suspect that the percentage typically falls in smaller businesses, and the issue of succession can of course be especially personal for family businesses.“
’The risk of cyber attack is one of the most common concerns for our clients, so a clear accountability is critical’
Wishart stresses that governance and risk management is not just about minimizing or avoiding risk. “Boards should also be reflecting on their risk appetite and whether there are risks they are not taking that they would be comfortable with, including exploring new geographical markets and products. Interestingly, our survey suggested that UK companies are less likely to enter new overseas markets than continental peers, and there also appears to be a notably lower emphasis on R&D, with only 17% of UK CEOs surveyed seeing this as a priority compared with 41% in western Europe“
Risk systems are ultimately only as good as the people involved and
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – MARCH 2013
In conclusion, Wishart advises: “Cover the basics and challenge yourself regarding having an appropriate understanding of known risks – are the right people responsible? Can your company articulate its risk appetite and how it is communicated?
“Then think creatively and see if you have minimised the impact of events outside your control, hazard factors like volcanic air space disruption. Think the unthinkable.
“And finally, don’t forget that you are exposed to others’ vulnerability – key suppliers, your customers or a competitor tarnishing the image of your industry.
“A comprehensive risk and resilience strategy makes companies distinctive, more appealing to prospective customers, employees and investors and gives a competitive edge. If businesses can communicate their advantages it inspires stakeholder confidence at a time when it has never been more of an issue to safeguard a business.“
Details: Ian Wishart 023-8083-5164
ian.wishart@uk.pwc.com
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