Business Pulse

Sustainable stakeholder relationships

Stakeholder confidence

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The ongoing global economic crisis has hit the size of mature markets hard.

But it has also raised questions over the role of companies in society and led to increasingly tough regulation as governments seek to avoid another crisis down the line.

Broader considerations than shareholder value are emerging.  Our research highlights that companies are increasingly aware of issues such as the environment and corporate social responsibility (CSR), as well as of immediate problems such as tightening regulation. Post crisis, they will find themselves needing to listen and engage with a wider field of stakeholders than their shareholders alone.

The increasing role of government in business is now cited as the sixth-biggest risk, driven in part by tightening regulation. But it is also because governments, especially in rapid-growth markets, are taking an increasingly active role in a host of sectors.

Government policy, and maintaining good relations with government, is increasingly important for businesses.

Regulation and compliance is the seventh-biggest risk facing companies. Leveraging CSR and public confidence, a new entry to the list, is ranked eighth overall.

Companies also see excellence in investor relations as a top 10 opportunity, highlighting the importance of a broad funding base in today’s relatively tight-credit world. Certainly, institutional investors now demand greater transparency over areas such as environmental and social issues, which can impact a long-term investment’s viability.

What it all means for businesses

Government involvement in business, particularly with regard to regulation and compliance, is expanding. Organizations must be seen to comply with increasingly onerous regulation and take interest in social and environmental issues, not only to avoid penalties from regulators but to accrue crucial advantages in stakeholder and public perception.

To mitigate the risks and enable opportunities companies could:


Performance 

  • Assess the effectiveness of the current regulatory compliance system, and consider the ability to manage the anticipated future regulatory environment.
  • Assess the risks and costs in entering a new market from an operational perspective.
  • Identify opportunities for using environmental and ethical requirements to their advantage for new product and market opportunities.
  • Assess the effectiveness of the current regulatory compliance system, and consider the ability to manage the anticipated future regulatory environment.

Risk 

  • Execute enterprise risk management frameworks focused on credit risk, market risk, operational risk and regulatory compliance.
  • Integrate and centralize system for efficiently monitoring and promoting compliance to government regulations.
  • Identify the most significant individuals at shareholder and target shareholder institutions and make best use of time spent on investor relations.
  • Identify optimal level of funding based on short-term cost of technology deployment and long-term cash flows and liabilities.

IT and information security risks

  • Make public communication about their risks, control measures (including information security) and compliance an integral part of their risk strategy.
  • Put a regulatory intelligence and reporting system in place to monitor compliance with all applicable requirements.
  • Make IT and information security a regular agenda item in the boardroom and make it part of all their transformation efforts.
  • Make sure their compliance function is aligned with their risk functions to avoid overlap.
  • Make sure that they are focused on the right controls and implement continuous controls monitoring to reduce costs of compliance further.
 

Download the report for more information and self-assessment questions.

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