Balancing opportunity with risk | KPMG | CA
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Balancing opportunity with risk

Balancing opportunity with risk

Canadian companies will be taking on new challenges in the coming years: new markets, new acquisitions, new market segments, new technologies and new customer demands will all create massive opportunities – and significant risk. Are Canadian CEOs ready?

According to our survey, Canadian CEOs will be busy over the next few years. As noted in our previous chapter, many will be wrapped up trying to integrate new acquisitions and deliver organic growth at home. But a significant number of them will also be looking to break into or expand in foreign markets in order to drive above-average growth.


Our survey shows that Canadian CEOs are particularly focused on the emerging markets – 72 percent of our respondents said they would prioritize expansion into emerging markets over developed markets – and Central and South America in particular. In fact, 56 percent of those CEOs who prioritized the emerging markets also said their top priority region would be Central and South America.

Greatest Threats to Growth

This is probably not surprising. Most of the big Canadian banks already have a strong presence in these markets which facilitates the flow of capital and revenues between the North and South and adds a level of confidence for investors. Canadian companies, particularly in the resources sector, are already fairly familiar with the Central and South American regions and have developed a reasonable network of contacts and contracts. While there is still much progress to be made – many of the traditionally riskier markets in the region have made great strides in creating personal and financial security for citizens and foreign investors. Particularly in some of the smaller markets, geopolitical stability has strengthened, thereby creating a much more attractive risk/reward equation. It only makes sense that Canadian companies make the most of their existing advantages in this region.

What is leveling the playing field is that it's not just the emerging markets that carry geopolitical risk these days; so, too, do many developed markets. Perhaps indicative of the trade saber-rattling around NAFTA, Canadian CEOs suggest they are also exploring plans for expansion into other developed markets. Interestingly, Europe, Japan, Hong Kong, Singapore, and Australasia all drew an equal amount of attention from our CEOs.

The challenge with executing a market entry strategy in any new market, of course, is understanding the local context. And that has become much more difficult as geopolitical risk rises. Countries that were once loyal trading partners are raising new tariffs, almost overnight. Nationalistic parties are gaining popularity in developed and emerging markets. Tax regimes are changing (even here at home). The need for CEOs to have a global perspective – supported by rigorous due diligence, robust controls, tailored local entry strategies and exceptional risk management – has never been higher.

While it may not be every CEOs primary growth strategy, our survey suggests that Canadian companies will also be engaging in partnerships, strategic alliances and outsourcing agreements in order to drive their growth objectives. This, of course, raises the level of concern around a number of risks – cyber security and disruptive technology among them. In a digital, data-driven, customer-first business environment, no company can risk taking a relaxed approach to either of these two risks.

Are Canadian CEOs ready to manage the multiple opportunities and risks that growth will bring? They certainly think so. According to our survey, 84 percent of Canadian CEOs believe they are ready to lead their organization through a radical transformation of its operating model to maintain competitiveness.

The challenge is that you don't know what you don't know. So our advice is simple – continue to seek insights into your business, markets and capabilities – while considering all the different scenarios that may arise. And, if you think you are not yet fully ready, here are five tips to help you balance opportunity with risk:

  1. Broaden your risk visibility. You can no longer protect your company by focusing purely on operational risks. Take time to assess – and then plan for – the risk of potential changes in the geopolitical environment, technological disruption and the rapidly changing models to source human capital, both at home and overseas. These factors are relevant for every CEO today.
  2. Don't lose sight of your operations. While expanding into new markets and segments is exciting, make sure you continuously focus on improving your core operations and delighting your existing customers. Operational risks are more common than CEOs want to believe but can yield significant returns if managed properly. Today, the customer experience is directly tied to the effectiveness of the operations.
  3. Develop your people strategy. Changing the business model, entering into new markets and adopting new technologies requires a significant change in workforce capabilities and the way in which your future workforce wants to engage with your business. Don't wait until it is too late to start updating your workforce and people strategies. 
  4. Be smart but also be bold. Make sure your risk management and governance frameworks are robust and practical enough to manage key risks. But don't allow them to create barriers to growth, innovation and partnerships for the organization. 
  5. Keep embracing change. The more CEOs understand and participate in the change going on around them, the more comfortable they will be with managing the risks. Canadian CEOs should continue to push their organizations for change and transformation, and continue to explore the risk environment.

Canadian CEOs have big plans for growth and there are many reasons to believe they will be successful in achieving it. Growth brings with it inherent risks and, ultimately, it is the CEO that must identify, manage and contain the risks associated with his or her growth plan. Bringing a balanced perspective to the growth and risk equation should be a top priority for any CEO as new markets and opportunities emerge.

*All statistics result from the 2018 Canadian CEO Survey.