Today the focus on risk management issues has increased perceptibly in Kazakhstan. Many companies have implemented risk management systems; economic and political instability globally, however, requires the constant improvement and optimization of these systems and processes.
KPMG conducted a study of current risk management practices and approaches at leading companies on the market in Kazakhstan, which made it possible to assess the current status of risk management issues and prospects for the further development of risk management in Kazakhstan. The data were compared with the results of the study “Expectations of Risk Management Outpacing Capabilities - It's Time For Action” conducted in December 2012 by the Economist Intelligence Unit for KPMG International, which facilitated a more accurate identification of risk management development trends in Kazakhstan.
The study analyzed the survey results of the 97 largest companies in Kazakhstan. Risk management experts were asked to complete a questionnaire on applicable risk management methods and practices and factors affecting the effectiveness of these methods and practices.
Companies globally and in Kazakhstan in particular, face certain obstacles in building an effective risk management system. According to our respondents, the three most significant barriers to effective risk management in the current year included poor communications between business units (65%), the lack of a corporate risk management culture (63%) and an inability to obtain an accurate assessment of company risks (50%).
Other significant barriers to effective risk management in the current year relate to the low effectiveness of the tools used and techniques for identifying risks (31%), and the low quality of risk information (25% of respondents).
In general, the following key issues arise at Kazakh and foreign companies during the implementation of risk management practices and approaches:
- Inadequate use or mistakes made during the application of risk-based tools.
- Incorrect assessment of risks and uncertainties.
- Low level of sharing of risk information between structural units.
- Lack of incentives to motivate management and employees to apply the risk-based approach.
Saken Zhumashev, Partner, Management Consulting, KPMG in Kazakhstan and Central Asia, said: “When building and improving their risk management systems, companies face a number of challenges and barriers that hinder the effective functioning of these processes. In our opinion, this study could prove useful for Kazakh companies, as it constitutes a comprehensive and independent analysis of the current state of risk management in the country”.
In general, the study showed that many companies perceive risk management as the need to comply with regulatory requirements. This formal approach affects negatively the effectiveness of the risk management system. The successful operation of such systems optimizes the potential of risk management systems, implies a clear understanding of risk management goals and operating mechanisms, and also an individual approach to integrate the system in a company.