Japanese companies and enterprise risk management

The economic figures show that different economies around the globe are making a comeback. One of the lessons learned was the importance of risk management in the financial sector, which kept the world from an even greater disaster. Also companies operating outside the financial sector realised throughout the crisis what role risk management should have in the decision-making process, whether it is a divestment of a business unit or whether it is implementing a cost saving scheme. The question is whether the boost of risk management attention is lasting? Often Japanese companies have showed that they are first movers. Therefore, we have set out a survey on risk management to Japanese companies based in the Benelux.

Our findings show that the majority of Japanese companies in the Benelux actively pursue risk management namely because of ‘continuity in case of incidents’. Two other major factors are J-Sox and to enhance Corporate Governance. The risk horizon of the companies represented in the survey is in line with what we would expect of operational companies; economic downturn such as the one we have experienced affects turnover, currency fluctuation, regulatory risk, safety risk, credit risk and low-cost competition and product liability. We also concluded from the survey that the economic crisis has not directly influenced the need for risk management. Majority of the respondents have no intention to increase their efforts in risk management. In combination with the perception of the respondents that their companies are not state of the art in the risk management process, seems to indicate that the economic crisis has not had a lasting effect yet.

New risk management insights in the power and utilities sector

The current downturn in the global economy has been swift and severe. It raises important questions about how organisations conduct their business – and particularly about how they assess and manage risk. It also poses two fundamental and interconnected threats for the power and utilities industry.

The first is a short-term decline in demand driven by falling industrial activity across the region. While the power and utilities industry customer base is spread across all industries, smoothing and diluting some immediate recessionary risks, it is heavily regulated, a public service industry in effect, with statutory obligations preventing many companies from withdrawing their service or supply in the event of non-payment.

The second fundamental threat of the downturn is the lack of available investment capital, a symptom of this bank-led recession, and a reluctance on the part of many project developers and operators to incur more debt at this time. Not only can this delay power projects in the near-term, it can also have significant bearing on the long-term outlook for the industry, namely its ability to meet long-term demand expectations while reducing CO2 emissions, increasing energy efficiency levels, and investing in renewable energy and clean technologies as set by the European Union’s 2020 targets.

To examine how organisations are responding to the downturn, Marsh commissioned the independent research agency Ipsos to conduct a survey of changing attitudes to risk management across European organisations. Over 700 organisations were interviewed across 12 countries and 7 industry sectors; of these, 56 are in the power and utilities sector. This comprehensive study of the European power and utilities sector examines the industry’s immediate risk management concerns, its confidence in its ability to manage these, and reviews how power and utility companies plan to address risk management in the coming months.