Companies’ Interest on Risk Management Grows: KPMG

In the current interconnected world, with technological, social, environmental and health aspects jointly impacting the business risk landscape, companies must get actively involved in business risk management to anticipate and mitigate risks that affect their strategic wellbeing, said KPMG experts.

"A risk assessment has to trigger actions within organizations due to the potential impacts that these risks can have on the company," said Juan Carlos Reséndiz, Lead Partner of Corporate Governance, Risk and Compliance Advisory, KPMG.

Risks tend to change due to the circumstances lived every year, from macroeconomic aspects to health or security issues. Currently, the main risks threatening Mexican companies according to over 100 of the country’s top executives are cyberattacks, shortages of key supplies, insecurity, lack of rule of law, increased cost of financing and lack of liquidity, according to a recent study carried out by KPMG.

The study surveyed over 100 top executives in Mexico to learn their perspectives regarding risk management, explained José Carlos Ortiz, Partner of Corporate Governance, Risk and Compliance Advisory, KPMG. Those surveyed included company presidents, vice presidents, board members, directors, deputy directors and managers across the financial, manufacturing, construction, food and beverage, software, automotive, real estate, telecommunications and retail sectors.

Ninety percent of the interviewed executives believe that the risks that currently threaten their business strategy will continue or increase in the next three years, according to the study. Over 57 percent of them have already implemented a risk assessment, monitoring and management process, while 10 percent have already designed a risk assessment process but will implement it later. Only 8 percent of total respondents said that their companies already receive external advice to implement a process of evaluation, monitoring and management of strategic risks.

The fact that over 57 percent of the companies have already implemented a risk management process is a positive sign, said Ortiz: “Currently, consciousness has grown. Companies now design programs to identify risks that threaten business continuity and strategy, at least to identify them and do something to manage them.”

If business risks materialize, organizations would be affected in their liquidity and working capital. They could also see the loss of clients, changes in the organizational structure, reduction of investment and even the reconfiguration of the company’s business model, according to the study.

Risks can also become business opportunities, said Reséndiz: “It is likely that the reconfiguration is related to taking advantage of the opportunities that the market is giving [businesses].”

Technological Tools for Risk Assessment

Risk assessment, monitoring and management processes are carried out differently across companies, the study revealed. Of those surveyed, 34 percent use technological risk management tools, from which 70 percent run automated solutions. Meanwhile, 24 percent of companies do not use any technological tool but are planning to invest in one, but 42 percent of organizations do not have plans to invest in this regard.

The COVID-19 pandemic, in addition to the digitization of processes across all industries, has triggered many companies’ interest on risk management, said Ortiz: “Having a robust enterprise risk management process has become increasingly relevant for organizations in Mexico that seek to anticipate relevant challenges proactively and not once have they materialized.”