Risk and Regulation – Energy - KPMG Global
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Risk and Regulation – Energy

Risk and Regulation – Energy

The research was conducted with participation of 163 global Energy CEOs from Australia, China, India, Italy, Germany, Japan, France, Spain, UK and US.

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UK Lead Partner, Risk in the Boardroom and Global Lead, Energy Risk

KPMG in the UK

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There is no doubt that executives are aware of the need to manage risk; it is clearly seen as a high priority within energy companies. However now, more than ever, CEOs need to be equipped with greater insight and specificity as to how much risk their companies are taking overall and how much more capacity remains to take on additional risk.Thirty-nine percent of energy CEOs feel their organizations are not taking enough risk with their growth strategy, but how will they really know when they are?

Only a small minority of energy companies have a clear articulation of their overall risk capacity and appetite for risk. Those that do often characterize appetite in terms of general statements (e.g., we have a low risk appetite for compliance risk) to communicate levels of risk-taking that they have agreed with their board that they will not go beyond. Very few have connected risk appetite with the objectives at risk in their strategy to use it not only as a decision-making tool, but one that answers: ‘Are we taking enough risk?’.

Which of the following risks are you most concerned about? Talent risk; Supply chain risk; Market/treasury risk; Third party risk; Operational risk; Regulatory risk; Emerging technology risk; Information security risk (cyber); Geopolitical risk; Conduct risk (fraud); Environmental risk; Strategic risk

CEOs are concerned most about operational risk at 53 percent and least about fraud at 9 percent.

Which of the following areas of regulation are you most concerned? Environmental regulations; Corporate tax regulations; Corporate financial reporting; Labor regulations; Trade regulations; Privacy regulations

Energy CEOs are not surprisingly most concerned about environmental regulations (51 percent). Of lowest concern for energy CEOs is labor regulations (7 percent), trade regulations (6 percent) and privacy regulations (3 percent).

Which statement best describes your risk profile as it relates to your growth strategy? We are not taking enough risk; We are taking the right amount of risk; We are taking too much risk;

CEOs are taking the right amount of risk at 56 percent best describes their risk profile as it relates to their growth strategy.

How would you characterize your current approach to acquisitions in terms of risk taking? Focused on taking less risk; Risk level has not changed; Willing to take on more risk

Sixty-two percent of CEOs are focused on taking less risk while 6 percent are willing to take on more risk.

Why are you willing to take more risk with acquisitions? Robust cash availability to deploy; Confidence in the economy; Confidence in structuring of deal terms; Inexpensive debt markets; Confidence that deal value will be realized post-integration; In the new normal we need to look at riskier targets; Today’s environment calls for quicker action and with it an increasing degree of risk

CEOs consider confident that deal value will be realized post – integration and robust cash availability to deploy as equal at 67 percent each.

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