|
Getting your Trinity Audio player ready...
|
Foreign Exchange (FX) Risk remains the top most risk exposure for organisations in 2018 despite exiting its worst hit recession in 2017 amidst monetary and fiscal measures put in place to stabilize the economy.
The Nigerian economy is still faced with the uncertainty arising from the post-recession era and financial crisis, the latest risks survey report by KPMG showed.
The Top 10 Business Risks for 2018/19, a Risk Management survey conducted by the Risk Consulting practice of KPMG Nigeria, which was launched in Lagos on Tuesday was based on aggregated perspectives of 94 business executive directors and senior management staff, aimed at identifying the key risks that Executives believe will impact their organisations.
Presenting the survey report Olumide Olayinka, Partner and Head of Risk Consulting, KPMG Nigeria, said the study took an in-depth look into the risk landscape and that the scope of the survey was increased to cover financial services sector, to deepen the depth of the analysis and the overall quality of the report.
“Macroeconomic risk assessed in 2016 was split into its individual components to afford respondents the opportunity to evaluate its elements, such as foreign exchange, fiscal and monetary policy, crude oil price, interest rate, amongst others,”
Tomi Adepoju, Partner, Risk Consulting, KPMG Nigeria said risk assessed had an aggregate score of 3.12, which depicts a ‘medium risk’ environment for Nigeria Businesses in 2018 based on KPMG rating methodology. According to Adepoju, it is an upward shift in the respondents’ aggregate risk score from 2.77 in 2016 to 3.12 in 2018.
She stated that 31 risks were assessed by C-Suite officers, of which 5 were rated high, 23 as medium, and 3 as low. Furthermore, Adepoju noted that FX remains the number one risk organisations are facing in 2018, arising from the magnitude of the exchange rate in the FX market.
The risk management survey showed that uncertainties arising from the prior recession and financial crisis remain the number one factor influencing the risk profile of the Nigerian economy over the last one year. While other factors that have contributed include the pressure from regulators and regulatory compliance couple with the unstable geo-political environment.
Overall, the business environment continues to show encouraging signs of improving business climate as exhibited by robust economic growth, resurgence in consumer confidence, moderating inflation, and improved macro-economic factors.
The survey findings show that the business environment is rapidly evolving, thereby creating new opportunities for diverse range of businesses and industries. However, the survey found that uncertainty in fiscal and monetary policies, regulatory complexity and uncertainties, crude oil price volatility, foreign exchange volatility, and the loss of reputation or brand value, alongside other significant drivers of risk, vividly illustrate the realities of the types of risks that organisations within the Nigerian environment are faced with.
However, two risks which did not make the top 10 risks made the top 5 at industry level; the risks are Supply Chain Disruption Risk in the manufacturing industry and Cyber-Security Risk in the financial services sector.
Following the external nature of some of the highly rated risks, KPMG opined that some of the nation’s economic challenge are multi-faceted and require strategic regulatory interventions. Therefore, the survey recommendation among others urged policy makers, regulators and capital market operators to support the private sector and Capital Market to continue to embrace carefully coordinated initiatives for sustainable economic growth.
HOPE MOSES-ASHIKE, SEYI JOHN SALAU
