Risk transformation

Organisations are facing a new and unprecedented variety of challenges both internally and externally, with new risks constantly emerging and often colliding. Internally, business models are being disintermediated and customer journeys digitised to meet the demand from consumers for speed and access to products anytime. Externally, the range of emerging risk ranges from political unrest, increased climate commitments and recession to intense regulatory change compounded by an ongoing war on talent.

Traditional risk management processes and functions are poorly equipped to add strategic value, being reactive is no longer adequate. There is a new wave of risk transformation underway, driven by the need for agile, sustainable and efficient risk management which:

• Neutralises risks before they materialise by anticipating and preventing emerging risks and subsequent losses before they occur.
• Targets the biggest threats by taking a proportionate approach and focussing resources on the risks posing the most pertinent threat to strategic goals.
• Enables strategic growth and innovation by facilitating measured risk taking.

The development of a robust and effective Enterprise Risk Management (ERM) framework and structure, as well as its operationalisation through the right Operating Model, accompanied by a strong risk culture, should be the top priority of the C-Suite and senior management.

Some key areas where our clients are finding the traditional approach to risk management incompatible with their future business models and current operating environment are:

• Single view of risk – risk processes are focussed on a vertical view of risk as opposed to whose which have a material impact across critical business activities and customer processes. The risks facing firms today are not mutually exclusive and dynamic risk assessments are required which take into consideration the interconnectivity of risks as well as the velocity with which they arise.  
• Slow decision making – there is a lack of clarity on accountability and individual authority which leads to slow and cumbersome decision making, with too many decisions being referred to committee. A more agile approach to governance is required so impactful decisions can be made in real time.
• Sub-optimal amount of risk taking – the first line is focussed on return, and the second line on risk, which leads to sub-optimal allocation of decisions and a lack of proportionality. A shift in focus is required to key risks where the cost of mitigation is proportionate to the level of risk being borne and its expected return.
• Risk activity is not optimised across the three lines – often activities are duplicated, and roles and responsibilities are not clear. A defined and embedded mandate for each business area, as well as a risk operating model that is understood across the board is required for efficient risk processes to operate.
• Poorly understood and fragmented end to end processes - Controls are manual and detective as opposed to automated and preventative. By taking a process-view and understanding where the risks lie in the most business-critical processes, more effective and preventative controls can be put in place, facilitating proactive risk management.
• Slow to innovate - inefficient and ineffective use of data, analytics and technology. Data analytics has been cited by our clients as the top skill they are seeking out for the ‘risk function of the future’ and is at the heart of creating a more agile and efficient risk function.
• Culture and operating model – the skills and mindset required for traditional risk management are not conducive to the role of Risk in the new world.  Organisations should consider the operating model, capabilities and behaviours in place across their whole enterprise in order to position risk management as a positive and important strategic tool to ensure the right risks are taken at the right time. 

We have delivered innovative transformation across all aspects of Risk Management and have significant expertise in this area. Our track record of delivery means we are more than just a sounding board and we have established a suite of tools and powered risk methodologies which combine technology and transformation techniques with our deep subject matter expertise to drive advancements in risk management and help achieve your organisational and strategic goals.

KPMG believes that through continuous evolution of risk functions, organisations are able to provide pioneering insights to help management and the board identify, avoid, and navigate future crises. KPMG’s future vision for Risk Functions is to become the proactive protector of a safe and trusted organisation by aligning risk and business strategy and integrating an awareness of risk at the enterprise level. This modern, dynamic approach to risk can generate trust, value and competitive edge.

KPMG therefore believes it is crucial for firms to seize this opportunity to advance in this way through integration of business and risk strategies.

We are experts in risk management innovation. We have a multi-disciplinary proposition bringing together the expertise required to tailor key enablers to address the challenges facing your business. We will look at your business activities, processes, risks, and controls holistically as well as your strategic priorities and organisational values to create a programme that supports delivery of your strategy, enables you to use risk as a competitive advantage in making strategic decisions:

• Streamlines and simplifies your processes
• Connects risk with strategy and performance
• Allows Board & Audit Committee to make assured decisions
• Driving Competitive advantage through risk management
• Aligning risk with strategy & performance

We will support your people through the change journey. It is not just about implementing new risk processes, operating models and systems, but providing support to ensure your whole organisation is taken on the transformation journey. We provide tailored capability and behavioural models, as well as change management to ensure your people are willing and able to adopt and embed change.

We will set you up for success. We work in partnership with our clients in planning and programme management. Collaborating with SMEs from your business, we will create and execute a realistic roadmap and implementation plan, aligned with your priorities. 

Financial Services: Justin Malta, Narinder Singh, Martin Douglas, Daniel Barry, Chaitali Roy

Private Sector: Amanda Stott, James Thompson, Daniel Barry, Chaitali Roy

Public Sector: Andy North

Organisations are looking to their leaders to build agile, forward-looking environments. These environments are expected to build risk management into everyday activities such as governance and routine business practices. With clear ownership and accountability across all business lines, they should ensure that risk appetite is defined and aligned to the business strategy to drive value. A differentiated market offering to disrupt, positioning new ideas and approaches for the future state risk operating model and framework to transform both business & risk capabilities in order to deliver an integrated and effective enterprise

It is multi-faceted and can arise from and become a core risk. Too many organisations are still trying to establish traditional enterprise risk management in a world where risks are adapting at a faster pace than ever.

KPMG’s risk framework provides the building blocks and operationalises how emerging risk is integrated into your organisation’s risk framework and governance model to drive better decision making and provide a more proactive response. Risk experts partner to design and implement a future risk operating model that embeds emerging risk management at the heart of it. By recognising and understanding what emerging risks are on the horizon, organisations can flex their business models to counteract further risks and seize the opportunities they provide.
 

We support board members drive better outcomes with a clear view of risk across the organisation. By establishing a risk agenda at the board and executive level as part of corporate governance, you can understand and challenge their risk appetite against risk reporting indicators/tolerances received. This drives value protection/value creation whilst challenging the level of transparency around how risks are reported, discussed and managed. We bring industry leading risk experts who understand how risk management needs to be embedded in the business across different industries to support the development of ‘guardrails’ to base strategic and operational decision making on.

To support and deliver on our risk approach we have a team of individuals with extensive risk, regulatory and transformation experience across all industries and sectors. We can assist you with:

• Risk frameworks
• Risk operating models
• Dynamic risk assessments
• Risk culture

Enabled by

• Risk maturity assessments
• Risk insights, including case studies
• Discovery phase, case for change and delivery roadmaps
• Leadership coaching
• Risk and controls SMEs
• Powered Risk (technology solutions)
• Business transformation
• Change management
• Project management office