Risk Consulting Industry –

A detailed assessment

February 2019

Akash Sehra I Abdul Manaf I Amit Meshram I Ratheesh Kumar

Agenda

Introduction to Risk Consulting

Nature and significance of risk consulting

Global Competitive Landscape

Industry/segment specific view

Key Trends & Developments

Agenda

Introduction to Risk Consulting

Nature and significance of risk consulting

Global Competitive Landscape

Industry/segment specific view

Key Trends & Developments

Risk Consulting has lately emerged to be a critical consulting service required by players
across the world

“Risk consulting refers to the provision of information, analysis and associated services in the field of politics, economics and technology,
with the aim of providing a better understanding of the risks and opportunities facing businesses, governments and other groups”

Market Size and Outlook How it helps an organization

+11%  To establish or enhance clarity of roles and

+11%
81
boundaries between the Board and Management
+6%
+9% 73  To advice on management performance and
66
57
62 accountability.
 To conduct strategic risk-testing and analyse level of
risk associated with selected strategies or options.
 To face a growing list of rules and regulation
compliance.
2016 2017 2018 2019F 2020F  To obtain reliable and available data for internal and
external reporting.
“The global market for consulting services in the area  To identify and address complaints and breaches of
of risk management will book double digit growth in legislation as well as internal processes.
the coming two years. This would see it surpass the $70  To relook at the design of your processes with a view
billion mark next year and even $80 billion by 2020” to enhance efficiencies whilst not compromising on
control effectiveness
Source: PWC report, KPMG 2016 CEO Outlook, Consultancy.org
Risk Consulting market is globally dominated by the Big 4 with the US market leading the
geographical share for risk consulting

Market Size and Outlook Major Players and Markets

+11%
+11%
+6% 81
+9% 73
66
62
57

2016 2017 2018 2019F 2020F

• Big 4 hold market share of almost two thirds (61%)

• Almost all sectors of the economy are seeing greater
“The global market for consulting services in the area demand for risk management services with largest
of risk management will book double digit growth in enjoyed by the financial services sector (owing the
the coming two years. This would see it surpass the $70 stringency post GFC 2008)
billion mark next year and even $80 billion by 2020” • US dominates the global risk services market, at ~$32B

Source: PWC report, KPMG 2016 CEO Outlook, Consultancy.org

Agenda

Introduction to Risk Consulting

Nature and significance of risk consulting

Global Competitive Landscape

Industry/segment specific view

Key Trends & Developments

Numerous significant risks are troubling CXOs globally in maintaining the growth and
survival of their organizations <1/3>

Top Risks concerning CXOs globally Cybersecurity Risks

• Data is the new oil for the Industries
• Risk of losing critical data from some sort of failure of
its IT systems or leakage ( e.g. WannaCry Ransomware)
• Critical role in the M&A due diligence
• Risk managers should work with their insurance
brokers to analyze the insurance policies and to
determine any potential gaps in existing coverage

Regulatory Risks
• “The cost of implementing the legislation, the most
expensive in the law's history” – KPMG Legal Advisory
• Companies have recognized that regulation is a
primary consideration in their business strategies.
• Rather than seeing it as a burden, they look at this risk
as an opportunity to create a competitive advantage
over their peers who do not manage this process
effectively
Source: KPMG 2016 Global CEO Study
Numerous significant risks are troubling CXOs globally in maintaining the growth and
survival of their organizations <2/3>

Top Risks concerning CXOs globally Technology & Innovation Risk

• Frequent failure in innovations and unable to sustain
new product performance puts companies at lot of
risk
• Firms can unleash the power of innovation by
recognizing and empowering the talent within which
would help them in fostering bottom up innovation
from the crowd instead of top down innovation

Geopolitical Risks
• Any significant event happening to the other side of
the world can have a direct impact on every
organization, whether a firm have an international
operations or not (e.g. Internal conflicts in ME
countries have an effect on global trade)
• International level disputes (e.g. US China Trade, US
Mexico Wall etc. have far reaching consequences on
business
Source: KPMG 2016 Global CEO Study
Numerous significant risks are troubling CXOs globally in maintaining the growth and
survival of their organizations <3/3>

Business Interruptions Reputation Risk

• Natural Disasters, Cyber attacks, terrorist attacks etc. • Reputational risk incidents often arrive with little or
could lead to loss of market share, reputational no warning and might cause equity loss for the
damages, declines in investor confidence, or share organisations.
price drop. • It is critical for companies to have a comprehensive
• Risk Manager has to build a fortified and robust reputation risk control strategy in place to preserve
business continuity plan to tackle such business consumer trust.
interruption

Retaining Top Talent

• Failure to attract and retain top talent

threatens to undermine future economic
productivity and jeopardizes a company's
competitiveness and profitability.
• Economic, Demographic, Political, Workplace
factors plays a major role in retaining the top
talent.
Source: KPMG 2016 Global CEO Study
The presence of a Chief Risk Officer is becoming indispensable for big organizations
globally

CRO – Brief Overview

• A CRO is an executive responsible for identifying, analyzing and
mitigating internal and external events that could threaten a
company
• CRO mainly reports to executive management committee and
the Board

Role played by CRO

• Evaluate the downside and the upside of the risk
• To ensure that the organization is in full compliance with
applicable regulations and to analyze all risk related issues
• Companies moving towards Merger, consult to CRO and the Risk
Management team for the business decisions
• Minimizing the ‘asymmetric information risk’ i.e. the over
reliance on a single source of information
• CROs need to balance risks with financial, investment, insurance,
personnel and inventory decisions to obtain an optimum level
for stakeholder
Source: Deloitte, KPMG Reports on Risk
Agenda

Introduction to Risk Consulting

Nature and significance of risk consulting

Global Competitive Landscape

Industry/segment specific view

Key Trends & Developments

Numerous research agencies rank Big 4 to be the leaders in risk consulting globally – with
Deloitte Risk Advisory leading the charts

Study by IDC Marketplace in 2018 Study by ALM Intelligence in 2018

Source: IDC Marketscape, ALM Intelligence
Numerous research agencies rank Big 4 to be the leaders in risk consulting
globally – with Deloitte Risk Advisory leading the charts

Overview on Risk Offerings

• Revenues from risk and advisory in 2017-18 7% of total (Up from 4% in 2013-14) ; 40% growth in cyber risk consulting
• Deloitte has gained reputation across sectors (e.g. Healthcare clients value Deloitte for exceptional risk competencies
and enterprise wide risk management overall

Source: Company Website

Numerous research agencies rank Big 4 to be the leaders in risk consulting
globally – with PWC aggressively expanding its capabilities

Overview on Risk Offerings

• Leading the development of COSO’s revision in 2016: ERM Enterprise Risk Management – Aligning Risk with Strategy
and Performance
• Rated as a Vanguard Leader by ALM intelligence for ERM, Corporate finance and Treasury management and Regulations
and compliance advisory
• Kind of offerings –

o IT risk assurance
o Performance assurance
o Business advisory
o Business resilience
o Internal audit
o Cyber security
o Enterprise risk management

Source: Company Webiste

Agenda

Introduction to Risk Consulting

Nature and significance of risk consulting

Global Competitive Landscape

Industry/segment specific view

Key Trends & Developments

Major Risks in the IT / ITES industry

• Automation – Lost jobs, Changing landscape

• Political and regulatory risk – New laws, taxes
• Skill shortage risk – AI and Cloud in high demand
• Cyber security risk – Data breaches

Bloomberg.com

Source: The ALM Vanguard Strategic Risk Management Consulting 2018, Emerging Trends in Risk Management - KPMG
Major Risks in the Logistics industry

• Infrastructure – connectivity, roads, ports

• Skilled labour – Low technology adoption
• Theft / Damage
• Technological disruption – Drones, Blockchain

Source: The ALM Vanguard Strategic Risk Management Consulting 2018

Major Risks in the Automotive industry

• Technology risk – Self driving cars / Electric vehicles

• Geopolitical and economic – Tariffs, Price pressure
• Competition – Consolidation, JVs
• Diesel fuel – Newer regulations, R&D sunk costs
• Regulatory risk – Environmental, Tax related

Source: The ALM Vanguard Strategic Risk Management Consulting 2018

Agenda

Introduction to Risk Consulting

Nature and significance of risk consulting

Global Competitive Landscape

Industry/segment specific view

Key Trends & Developments

Key Trends in the Risk Consulting Space

Stringency in Owing to the Global Financial Crisis 2008, most sectors and industries have increased their
1 Regulations regulatory requirements for running the business (e.g. Sarbanes Oxley Act in US for FSI). With the
requirement to update and add new laws related to digital risks, regulations pose as a major
threat to every organization in today’s world

Collective risk Businesses and other organizations are more connected to one another. They share data,
2 management technology, and much more. As a result, they also share more risks. Businesses operating as
networked ecosystems are leading to more dependence on external stakeholders

In today’s hyper-connected world dominated by mobile devices, social media, and evolving
Amplification of expectations from society, information can spread like wildfire. This convergence of mobile and
3 Reputation Risks social media is intensifying the impact of reputation risks for organizations and is driving them to
fundamentally rethink their approaches to risk management and proactively address these
accelerated, amplified risks.

Cybersecurity has grown to the biggest risk management service, estimated at $15 billion.
Rising Consultants specialised in cybersecurity help clients with developing a frontier that makes them
4 prominence of stronger in battling attacks (e.g. improving IT infrastructure, embedding security across all
Cybersecurity processes & changing culture internally that makes cyber vulnerability lower – several studies
show that cybercriminals capitalise on errors made by internals).
Source: KPMG 2016 Global CEO Study
Key Trends in the Risk Management Space – Deloitte Survey 2018

Key Findings
of organisations have a full-time Chief Risk
Officer (CRO), either as a part of their
61% Leadership team (40%) or directly reporting
to the Leadership team (21%)

of the companies with a turnover in excess

of INR 2,000 crores have 12 or more
47% personnel in risk team

of the respondents indicated that they

44% harnessed risk to find future opportunities
for the organisation and drive returns.

indicated that their purpose of risk

36% management was to remain compliant with
regulations and prevent losses.

Source: KPMG 2016 Global CEO Study

An overview of current & proposed strategy for Risk Management

• There is a need for organisations to hire a full-time CRO

who will work in conjunction with the CEO so that risk
considerations are embedded in the strategy and
monitored closely.

• Organisations must consider hiring high-skilled

professionals with diverse portfolios and also upskill the
existing employees to augment risk related capabilities.

• Organisations also need to invest in advanced tools and

technologies to better capture the data generated and
churn meaningful insights from it.

• A holistic culture should be fostered to be risk-aware and

predict upcoming risks to create value.

Source: Deloitte Risk Survey 2018

Thank You !