Operational and reputational risk top CEOs’ worry list

Operational and reputational risk top CEOs’ worry list

Operational and reputational risk top CEOs’ worry list

The FINANCIAL -- KPMG interviewed 151 UK CEOs about their investment plans for the future and the issues affecting their business.

Operational and reputational risk were named by CEOs as the biggest concerns they are facing. This is a significant shift from last year when neither category featured in their top 10 list of challenges, and reflects the heightened scrutiny of business practices by government and the public, according to KPMG.

Business leaders also admitted they are hiring experts to help them understand geopolitical risk. Seven out of 10 revealed they had already recruited new specialists into their management teams to help them plan for the future, and mitigate political risk.

Bill Michael, Chair-Elect at KPMG in the UK, said: “Fuelled by global and domestic uncertainty and the increased threats to firms on multiple levels, the business landscape has become incredibly complex. Yet, the CEOs who have ridden the storms facing their sectors over recent years have become more agile, constantly aware of the importance and the fragility of their brands, and doing their utmost to protect them. This has also brought new demands for the CEO: they must be emotionally intelligent to navigate this change and guide and inspire their people through it.”

CEOs confirmed they are investing time to improve their own knowledge of the new pressures facing their business, such as cyber security. 80 percent of those surveyed had attended a course within the last 12 months to help them meet the challenges of their role.

However, a significant number are not extending the same opportunity to their staff: 42 percent stated they had no plans to invest in new workforce training over the next three years, except to maintain current business needs.

Bill Michael, Chair-Elect at KPMG in the UK, said: “Closing the book on new staff training while future growth is uncertain may seem sensible, but it risks throwing future opportunities away.

“The recent election result in the UK, combined with ongoing uncertainty over the implementation of Brexit, means CEOs must invest now to have the skills they need for the future. Leaders must equip their colleagues with the right training, confidence and resilience to enable them to quickly adapt as political events unfold.”

The survey also revealed a wider absence of investment by British business. One in two CEOs said they had made no new investment in innovation over the last 12 months, which KPMG defined as developing new products or services and ways of doing business. Meanwhile 60 percent of CEOs said they had not invested in emerging technology over the last 12 months and have no plans to do so over the next three years.

Bill Michael, Chair-Elect at KPMG in the UK, said: “Although the UK stock market has reached an all-time high and economic growth is picking up, companies are still resistant to open up their cheque books. The financial crisis was a chastening experience for many and has left some business leaders inherently risk averse and unwilling to invest in anything but the tried and tested products and technology.

“However, this cautious approach could see British businesses risk missing out on new opportunities, which will instead be seized by their international counterparts who are investing now.”

Other key findings from the report:

• The majority of UK business leaders surveyed were subdued about growth prospects over the next 3 years. One in two CEOs (54 percent) believed their business would grow just 0.01-1.99 percent per annum over the time period and 74 percent warned that increases in inflation meant they would have to pass on increased costs to their customers.

• UK CEOs said they were most concerned about operational risk (35 percent); reputational risk (34 percent) and the risks presented by emerging technology (32 percent).

• 79 percent of UK CEOs are spending more time scenario planning as a result of the uncertain geopolitical climate.

• 58 percent said they would not make any new investment in innovation over the next three years, including new products or services and ways of doing business.

• Only one in ten UK CEOs listed the development of talent as a priority for their business over the next three years, despite the impact Brexit could have on their talent pools.

• The survey highlighted concerns about the future diversity of those leading UK business. 95 percent of UK CEOs surveyed believe their successor will be a man.