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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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?’.

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

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).

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

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

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

© 2016 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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