The economic environment, cybersecurity and financial risks are among the top five
risks in 2017 facing executives of Hong Kong-listed companies, according to a jointsurvey by KPMG and The Hong Kong Institute of Chartered Secretaries (HKICS).
The report, titled Risk Management: navigating change in Hong Kong, focuses on the impact of new corporate governance requirements on risk management for Hong Kong-listed companies. It surveyed 197 Hong Kong-based senior executives, assessing the extent to which they have embedded risk management in their businesses. It finds that the economic environment, cybersecurity and financial risks are among the top five risks in 2017 facing executives of Hong Kong-listed companies.
Compared to a previous survey conducted by KPMG and HKICS in 2015, the economic environment remains the top risk concern for Hong Kong-based senior management, while cybersecurity has emerged as one of the top five risks. Financial risk was cited as the second-highest concern in 2017, up from fifth place in 2015.
Jyoti Vazirani, Partner, Head of Financial Risk Management, KPMG China, says: “Businesses continue to experience an escalating pace of change as a result of disruptive technologies, innovative business models, new forms of competition and a shifting geopolitical landscape.”
“For companies listed in Hong Kong, business and regulatory imperatives have prompted many leaders to implement or enhance their existing enterprise wide risk management programmes. However, many of the programmes tend to focus on complying with current requirements, rather than serving as a strategic tool that adds value and supports growth. As a result, some companies may not be able to realise and unlock the true benefits of robust risk management,” adds Vazirani.
Overall, the survey finds that the new corporate governance code – which took effect on 1 January 2016 – has had a positive impact on promoting greater oversight of risks facing the business, and that the management of risk is increasingly starting to form part of executive management and board sub-committee agendas.
Nevertheless, many businesses have not fully integrated risk management into their decision-making process, and building up a holistic view of risk remains a key challenge. Forty-six percent of the respondents find it challenging to understand the risk exposure across all business units, while more than a third of respondents are unsure of how risks impact the top strategic objectives.
Ivan Tam, President, HKICS, says: “The key themes emerging from the survey indicate that businesses need to refocus their risk resources in a more effective manner, and adopt a holistic and integrated approach to managing risk.”
In addition, the survey results note that both board director and executive management groups view the economic environment, financial risks and regulatory uncertainty as the top risks facing their organisations. Beyond the top three, there is a slight divergence between the board and executives on risk priorities. Board directors are more likely to be concerned about the impact of an uncertain political environment on the long-term success of the business, as well as the adequacy of internal controls to protect against fraudulent or unethical behaviour. On the other hand, executives are focusing on cyber threats, the management of talent and their ability to deal with crisis scenarios.
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