Resilience the watchword South West

The backdrop driving resilience

The year to date has been something of a rollercoaster, with a series of geopolitical tensions culminating in the conflict in Iran. This has been coupled by domestic upheaval as a new Prime Minister takes up the reins.

At the same time, the UK’s economy has been in low-growth mode. Geopolitical events have driven up fuel and energy costs, and inflation has moved on an upward path again – although that will hopefully begin to ease off. A higher cost based combined with increased employment costs means that many businesses face squeezed margins.

David Williams

Office Senior Partner, South West and Wales Region

KPMG in the UK

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Resilience: a boardroom topic

It hasn’t been an easy environment to operate in – and this has put organisational resilience right to the fore. It is something we saw already at the end of last year when the KPMG Private Enterprise Barometer found that half of executives believe the risk environment is getting harder. Risk management and resilience has increasingly become boardroom topic. I am seeing growing numbers of CEOs take an active interest in risk management, something that used to largely be the preserve of the CFO: it’s a sign of the times.

Bolstering resilience across the business

Good resilience comes from a combination of measures. It’s about looking across front, middle and back office operations, and across physical, operational and technology/cybersecurity domains. It means rigorously managing, monitoring and improving the aspects that are under your control, such as your own systems, platforms and processes; influencing what you can’t directly control, such as the resilience measures in your supply chain; and being aware of wider factors beyond your sphere so you can prepare as far as possible, such as geopolitical events, foreign exchange rates, and tax and regulatory developments.

Another useful approach that we support clients with is to think in terms of your ‘Minimum Viable Company’ (MVC). The example I have linked to focuses on consumer and retail businesses, but it applies to any sector. The MVC concept involves drilling down to identify the most essential parts of your company that are critical to your survival and success in the event of a major incident. This helps businesses focus on what really matters and take targeted steps to strengthen defences and resilience.

We also help many clients boost a specific kind of resilience – financial resilience – through our Cognitive Contract Management solution. This is an AI-powered capability that KPMG has developed which analyses unstructured data such as contracts and invoices to identify potential revenue leakage, offering a more comprehensive approach than traditional sample checking.

Cyber imperative

Resilience is important across the piece and must be viewed as holistically as possible. That said, there is no doubt that cybersecurity resilience is of particular importance right now. No one needs reminding of the rash of serious cyber incidents that affected major corporates in the UK last year, with ripple effects through the supply chain. In our KPE Barometer, 70% of leaders said that cyber risks have increased. The government is taking action to bolster corporate cybersecurity through its Cyber Security and Resilience Act which is now working its way through Parliament into law. This will bring a wider range of organisations into regulatory scope, reflecting the evolving threat landscape. It will lead to big players across key sectors including energy, transport, water and healthcare placing more scrutiny on the organisations in their supply chain to ensure that they have robust cybersecurity measures in place. In that way, the effects of the Act will cascade into the mid-market.

If cybersecurity is a threat, it can also generate economic opportunity. For example, here in the South West the £1bn Golden Valley cyber corridor development around GCHQ in Cheltenham is expected to create 12,000 new jobs and 3,700 new houses, boosting the local economy.

Opportunity in the South West

As I wrote about before, the South West is a dynamic and diverse region, with a lot to be proud about, and indeed shout about. The South West has been widely projected to grow economically over the next three years, outstripping many other parts of the UK. There is much to be positive about, and many opportunities to grasp in our rapidly developing world where new tech, green energy and aerospace & defence are set to boom. This is especially true in the South West which contributes heavily to the resilience of the UK as a whole, in terms of defence and food security.

In the South West, resilience has a high profile given the key infrastructure that resides in the region (Hinkley Point power station; the £4.4bn development of Plymouth’s Devonport Royal Dockyard; the UK’s largest battery factory which is being built in Bridgwater in Somerset). Generating some £5.6bn in Gross Value Added from food production each year, food security is another key issue in the region. Organisations need resilience both within their own operations and across their supply chains.

Underpinning it all, though, must be resilience – and that is why I encourage business leaders to make it a continuing focus through good times and difficult times alike.