Although risk management is a top agenda item for most CEOs, risk is not driving strategy change, according to analysis from PwC’s 14th annual CEO survey.
As part of the global CEO Survey, PwC conducted interviews with 201 CEOs in Sub-Saharan Africa, including 31 CEO interviews in Kenya.
According to the report titled The Africa Business Agenda: Opportunities aligned showing the results and insights from the survey, an overwhelming 91% of the 31 CEOs surveyed in Kenya anticipate changes to their approach to managing risk over the next 12 months, compared to 88% of the 1200 CEOs surveyed globally. The top-ranked priority is managing talent, with 93% of Kenya CEOs anticipating changes in this area—compared to 83% of global CEOs. Last year, risk management was the number one priority for 84% of CEOs globally.
Even so, attitudes towards risk are driving and influencing strategy change for just 33% of CEOs in Kenya. This response is roughly on par with CEOs Africa-wide and among CEOs surveyed globally; 35% of Africa CEOs cited attitudes towards risk as influencing strategy change compared to 41% of CEOs globally. Top drivers of strategy change are industry dynamics for 67% of Kenya CEOs and economic uncertainty, cited by 50% of CEOs.
Kuria Muchiru, Country Senior Partner, PwC Kenya, says:
“CEOs in Kenya are very confident of revenue prospects over the next 12 months and three years. But as they work towards meeting these targets and addressing challenges along the way, they are not very focused on risk management strategies. Kenya CEOs are not alone—across Africa and globally, CEOs are telling us that the global environment is affecting approaches to risk but actual strategising is lagging behind.”
A similar number (73%) of CEOs in Kenya are focused on allocating senior staff to risk management as compared to Africa and global averages, but many fewer CEOs in Kenya report deeper incorporation of risk management into their strategic planning and top-level management priorities. For example,
“CEOs are allocating senior staff to risk management, but not board-level attention or executive-level responsibility. They are not increasing the authority of risk executives or focusing on risk management in their strategic planning, either. This seems to indicate a lack of focus on integrated risk management—as if CEOs are delegating risk management to middle-managers who perhaps do not have the authority to implement integrated risk management solutions. The trend is worrisome as risk management should be an organisation wide priority.”
When asked about specific risks that they intend to mitigate, the picture became clearer.
“There are risks that CEOs are focused on mitigating, but perhaps not at a risk-management level. These include economic and policy risks such as uncertainty and volatility, among 58% of Kenya CEOs. Business risks such as energy costs and inadequate infrastructure were cited by 39% of Kenya CEOs. Political stability was recognised by 72% of Kenya CEOs as a global risk that they plan to mitigate.
“Perhaps Kenya CEOs have a different approach to managing risk—in silos, depending upon whether the risks are economic, business-related or global. But I do wonder if a more integrated approach to risk management might help to improve their strategic approach to risk going forward.”
“We are seeing similar results for CEOs in East Africa generally. The question is whether CEOs in Kenya, Tanzania, Uganda and Rwanda are going to change their strategic approach to risk in similar ways.”