Companies prepare for significant increase in risk

Risk management is becoming more complex and challenging with the pace of risk transformation escalating, according to KPMG International’s new Future of Risk report. The global survey, which polled 400 executives in February and March 2024, found that 61% of executives expect to see a significant increase in the level of risk they will be responsible for in the next three to five years.

The research found that risk management professionals are aware of the need to address challenges presented by a rapidly changing geopolitical and financial landscape. In fact, risk management professionals’ number one focus in the next one to three years is proactively adapting to new risk types such as AI, geopolitical, reputation, environmental, social and governance (ESG), IT and cyber risk. Interestingly, the second-biggest priority is to leverage advanced analytics and AI for risk management.

As risk functions grapple with rising external risks and internal challenges, professionals are expected to be more productive and effective. The survey found that the vast majority (90%) of respondents believe that the pace of risk management transformation, fuelled by technological disruptors, has increased, with 56% indicating that it has risen sharply.

Additionally, the survey found that risk management transformation professionals understand the need to address the changing face of risk. Over the next one to three years, executives have identified that their top priority is to adapt proactively to new risk types such as AI, geopolitical, reputation, ESG, IT and cyber risks. Their second-biggest priority is to adopt advanced analytics and AI for risk management.

In fact, 41% of executives expect to spend more than half of their risk management budget on technology in the next 12 months, compared with just 28% in the previous year.  

Survey respondents recognise the need for collaboration between the risk function and broader strategic, operational and financial functions of a business. Of those surveyed, 68% believe that integration and interconnection of risk management systems, domains and processes had a significant positive impact on the effectiveness of risk-related decision-making. However, only 46% of respondents rate the level of collaboration between risk domains as adequate.

In addition, a majority of CEOs and COOs (66%) and CROs and risk managers (57%) believe that cross-functional task forces, collaboration and communication are essential for better understanding the likelihood and impact of large-scale events and developing greater resilience and agility.

Technological advances are accelerating, which is enabling risk professionals to manage change better while at the same time bringing fresh risks. The study found that AI and generative AI are the most popular types of technology for managing additional risk responsibilities. It is also the most commonly identified solution that the risk function is planning to invest in over the next three to five years. According to the survey, this technology is allowing practitioners to enhance their ability to filter through data, spot trends and suggest solutions.

“This report makes clear the need for organisations to fundamentally alter their approach to risk by embracing risk as an enabler and an asset that drives stakeholder value,” said Nancy Chase, Global Risk Leader at KPMG International. “As our survey shows, executives are already aware of the scale of transformation required and are taking steps to address this. However, external challenges and the scale of transformation to come requires businesses to embrace a future where these risks are understood and harnessed. This report takes businesses one step closer to this, outlining the strategic imperatives for the risk function and ways executives can make managing risk less risky and seize the opportunity afforded by risk.”

 

GTreasury acquires CashAnalytics

GTreasury has announced the acquisition of CashAnalytics, a cash forecasting and AR/AP analytics solution. More than 1,000 business entities across more than 40 countries use CashAnalytics to analyse and optimise over US$100bn daily cash flow. 

In a statement, GTreasury said it believes in a modern and agile approach to treasury automation by offering best-in-class specialised, modular treasury solutions across cash, payments, and risk solutions. The acquisition of CashAnalytics enhances GTreasury’s suite of solutions with a critical first point of treasury automation that can be deployed in weeks as a single solution and with the added benefit of seamless data orchestration and user interface across GTreasury’s suite of digital treasury solutions. 

Cash forecasting is an accelerating concern for CFOs and treasury groups. In a recent market survey by Topline Strategy, 65% of treasury groups stated improvements in cash forecasting as their top priority, citing issues such as the inability to predictably monitor and change processes to impact DSO and DPO and adhering to debt covenants. 

CashAnalytics’ user interface and cash forecasting capabilities are comprehensive and include SmartLedger, offering deep insights into business working capital drivers. These insights include the payment behaviour of customers, which facilitates insights into actions that can improve free cash flow. Further, CashAnalytics can be deployed with API connectivity into banks, ERPs, and any legacy treasury management systems.

 

Brazil prepares second testing phase for Drex CBDC pilot

The Central Bank of Brazil (BCB) has announced a list of selected projects, developed in conjunction with the Securities and Exchange Commission (CVM), containing 13 themes for development in the second phase of testing for the Drex pilot CBDC platform, from a total of 42 proposed use cases submitted.

In the second testing phase, the infrastructure created for the pilot will begin testing the implementation of financial services, made available through smart contracts created and managed by third-party participants on the platform.

The selected themes are expected to be developed in the coming weeks. Within a discussion environment dedicated to each theme, regulators and participants can discuss the best implementation strategy, the governance of new services, and the interaction of available privacy solutions with the implementation of the proposed theme.

The Drex pilot currently includes 16 consortia or companies directly engaged in testing and developing the resources necessary for the platform's operation. These include several commercial Brazilian banks, Mastercard and Visa, and Google and Microsoft on the tech side.

Given the overlap in the proposals' scope, the Drex Pilot's Executive Management Committee (CEG) decided to group the use cases into 13 themes. Eleven of these themes fall under the BCB’s jurisdiction, while the remaining two are under the CVM's.

The BCB will open a call for new proposals during the third quarter of 2024 from entities interested in participating in the Drex Pilot. Those selected will be expected to test the implementation of smart contracts by the end of the first half of 2025.

 

Canadian businesses experience higher level of payment fraud than consumers

Canadian businesses have a higher rate of payment fraud compared to the nation’s consumers at 20% versus 13%, respectively, according to a study from Payments Canada. However, the types of fraud were similar for both segments. Impersonator fraud, originating from a phone call, message or email that appears to be from a trusted business source (25%) intercepted business e-transfers (22%), and credit card fraud (20%) were the most common types of fraud. The amount lost was CA$3,000 or less for the majority of these businesses (63%).

The rate of payment fraud remained consistent from 2023 at 19%, despite 63% of businesses reporting that they feel confident in knowing how to protect themselves against payment fraud and cybercrime, and 61% who said they are more aware of how to recognise potential threats.

The study reveals that while businesses of all sizes are vulnerable to payment fraud scams, larger-scale commercial businesses experienced the highest rate of fraud at 26%, compared to large (23%) and small (16%) businesses.

While impersonator fraud was most common, businesses experienced a diverse mix of fraud scams. The most common type of payment fraud is an impersonator making contact by either email, phone, call, text or social media to request money (25%). 

Nearly half (45%) of businesses have noticed an increase in fraudulent, cybercrime or suspicious activity directed at them through email over the last 12 months. Businesses also noticed an increase in activity directed at them via their smartphone (42%), social media platforms (39%) and retail merchant sites, including e-commerce sites or apps (34%). 

Close to seven in 10 businesses (69%) indicate that they usually limit the amount of sensitive information about the business they share online and only provide it when required. Over two-thirds of businesses (67%) make the effort to check the safety of an e-commerce site and go with trusted sites only when buying online. Some 65% of businesses enable two-step authentication for accessing their accounts whenever it is available.

 

UK salary pressures continue to ease in August

The KPMG and REC UK Report on Jobs survey, compiled by S&P Global, signalled a softening of UK labour market conditions during August. Latest data showed that permanent placements continued to fall, and at an accelerated pace, amid reports of reduced demand amongst companies for new staff. Temp billings also declined over the month, albeit only marginally.

Permanent salaries meanwhile continued to rise, but at the weakest pace since March and at a rate well below the survey's historical trend. Concurrently, temp pay increased at the weakest pace for three-and-a-half years.

Reduced placements and slower pay growth occurred as recruitment consultants registered a fall in vacancies for a tenth successive month. Staff availability also rose amid some reports of increased redundancies.

August’s survey showed another reduction in permanent staff placements, extending the current downturn to 23 months. Moreover, the rate of contraction was the steepest since March amid reports of lower demand from clients and a lack of workplace vacancies. Temp billings also fell for similar reasons, although the rate of contraction was again only marginal, and little changed since July.

Permanent staff salaries increased again in August, in line with a trend that stretches back three-and-a-half years. Starting pay was generally raised to attract candidates, especially for positions where supply was limited. However, the increase in permanent pay levels was the weakest since March and well below the survey’s historical average. Moreover, temp pay rose only slightly and to the weakest degree for three-and-a-half years.

The latest vacancy data signalled a marginal decline in vacancy numbers during August. It was the tenth month in a row that demand for staff has fallen, with slight declines seen for both permanent and temporary workers. Notably, August marked the first fall in temporary staff demand since April. Staff availability continued to increase in August, both for permanent and temporary workers. Although similar, growth was the strongest in four months for temp workers but the slowest since February for perm staff. A mixture of redundancies and lower placement volumes reportedly led to the rise in availability.

Once again, half of the sectors covered by the survey registered a decline in permanent vacancies. The steepest drop was for IT & Computing. Conversely, of those categories that experienced growth, the fastest increase was seen for Nursing & Medical Care. Temp vacancies declined across seven sectors in August, with the steepest reduction seen for Executive & Professional. IT & Computing also recorded a noticeable fall. The strongest growth was for Blue Collar.