Audit Committee Institute: Risk Reimagined...risk reimagined; risk and technology; risk challenges Created Date: 9/13/2019 12:59:38 PM

Risk Reimagined

Audit Committee Institute

March 2019

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Document Classification: KPMG Confidential

© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Risk Reimagined Globally connected, leveraging single source data, applied machine learning and predictive analysis to make better business (risk) decisions.

We will discuss the evolution of risk management, consider lessons from the past, through to dealing with the challenges and opportunities risk and technology brings for tomorrow.

Through applied risk appetites addressing the values and behaviours, to instil risk aware cultures that form the foundations of sustainable and consumer focused businesses.

Embedded risk focus across the organisational structure, risk at the front line in core decision making - to deliver truly integrated opportunity and risk management


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Organisations focused on relatively short term capital market reporting requirements

Limited availability and access to data and information

Risk management has evolved from - intuitive in making business decisions, to a large and growing practice and profession in its own right

Risk management has become more and more separated from what used to be considered the front line executives responsibility

The last 30 years


4© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.


"Too often the answer seems to be greed — the pursuit of short-term profit at the expense of basic standards of honesty.“ – Interim Report

In almost every case, the conduct in issue was driven not only by the relevant entity's pursuit of profit but also by individuals' pursuit of gain, whether in the form of remuneration for the individual or profit for the individual's business. Providing a service to customers was relegated to second place. – Final Report

“Failings of organisational culture, governance arrangements and remuneration systems lie at the heart of much of the misconduct examined in this commission.” – Final Report

Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry


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Second line risk functions, of varying maturity and connection to organisational business activity

Public pressure for increasing regulation and oversight to protect consumers

Leaders challenging the balance between regulation and oversight vs innovation and business growth

Vast amounts of data being created and available, but organisations are failing to interpret

Where are we now


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Corporate values and behaviours need to shift organisational culture to deliver longer term sustainable strategies through an understood risk return relationship - appetite

Understanding the end customer and building shared trust through data interpretation and risk informed decisions

How does technology advancement and the increasing use of A.I and machine learning impact and shape corporate culture?

Corporate Culture


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A robust risk appetite statement will help operationalise the desired risk culture and shift organisations into a more sustainable operating environment.

Connecting the corporate strategy, narrative and purpose with the community and public expectations

Moving from “pursuit of short-term profit” to longer term sustainability

Risk Appetite


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Digital transformation and the 21st Century Enterprise

Infrastructure

Data

Smart Engines

Interface / Appl ications

Workforce of the Future

Everything as a Service

Customer Engagement

Changing Nature & Value of Assets

Mobile Voice AR/VR 3D PrintingDrones Bots Smart Devices/ Sensors

AI Insight Engines Analytics

Cloud APIs Blockchain

Suppliers, Partners

Employee, Contractors, BotsCustomer Internal,

Operations

Source: SAE Analysisare ready for radical organization transformation

Source: 2018 KPMG CEO survey

of Global CEOs 71%


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“Rates of adoption of intelligent automation with all industry verticals and business functions jumping on the bandwagon are at an unprecedented level. Companies will need to evaluate desired business outcomes, level of financial investment and complexity of task/process to help determine which classes of intelligent automation addresses their needs while understanding the risk implications of automation.”

“IoT offers tremendous opportunities to automate

processes and increase intelligence beyond expanded

reach and efficiencies. Identifying where the risks are

coming from and understanding how to manage that risk will have an immense impact on how successful the

adoption of IoT will be in our rapidly emerging new world of

connectivity.”

Intelligent Automation Connected Devices


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We see a need for the convergence of risk, technology and finance into front line decisions?

What will happen to the traditional second line risk functions with the move to integrated GRC solutions?

Will the shareholder and the end consumer ultimately be better off?

Convergence of Finance, Risk & Technology


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The ability to interpret data and information to make better informed risk decisions”

1* LogicMonitor’s Cloud Vision 2020: The Future of the Cloud Study

83% of enterprise workloads will be

in the Cloud by 20201

Convergence of risk finance and IT – IT’s move from back office shared service to front line service delivery

Risk management fundamentals will be delivered though augmented intelligence and predictive analytics

Technology enabled


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Cognitive expertadvisors

Quantum computing

Smart dust

Machine learning

Digital twin

Virtual assistants

Conversational user interfaces

Smart robots

Drones

Autonomous vehicles

Artificial General Intelligence

Augmented Data Discovery

Neuromorphic hardware

Blockchain

IoT platform

Software defined security

Edge computing

5G

Smartcity

Serverless PaaS

Augmented reality

Human augmentation

Volumetric displays

4D printing

Connected home

Nanotubeelectronics

Virtual reality

Brain Computer Interface

Cognitive computing

3D printing

Artificial intelligence

Impact

Transformational

High

Moderate

Immersive experience, AI & Digital platforms

Digital platforms

Immersive experience

Emerging technology radar


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1 - KPMG Technology Innovation & Business Transformation Surveys

2 - KPMG U.S. CEO Outlook 2017 3 - KPMG The changing landscape of disruptive technologies 2017

Regulatory environment has not kept pace with technology

deployment.

5 of the top 7 barriers of technology

adoption are from Risk.1

35% of companies cite

risk management as top barrier to commercialising

tech.3

Continued adoption of emerging

technology, no IT risk

measurement.

93%of companies are

in some phase of changing their business model.1

65% see technology disruption as

opportunity, not a threat.2

Emerging Technology risk


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ContactsRisk, Strategy & TechnologyKevin Smout, PartnerTel: +61 401 991 [email protected]

Data and Analytics Zoe Willis, PartnerTel: +61 2 9335 [email protected]

Risk CultureJo Bowles, DirectorTel: +61 2 9335 [email protected]

Compliance and RegulationJacinta Munro, PartnerTel: +61 3 9288 [email protected]

Risk and Emerging Technology Anu Kukar, DirectorTel: +61 2 9346 5462 [email protected]

National Head of Risk, Strategy and TechnologyAdrian Fisk, PartnerTel: +61 2 9335 7923 [email protected]

Risk, Strategy & TechnologyAnthony Donohoe, PartnerTel: +61 3 8626 [email protected]

Risk, Strategy & TechnologyPeter Beaton, PartnerTel: +61 7 3233 [email protected]


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© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

Liability limited by a scheme approved under Professional Standards Legislation.

The information contained in this document is of a general nature and is not intended to address the objectives, financial situation or needs of any particular individual or entity. It is provided for information purposes only and does not constitute, nor should it be regarded in any manner whatsoever, as advice and is not intended to influence a person in making a decision, including, if applicable, in relation to any financial product or an interest in a financial product. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions, defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence, negligent misstatement or otherwise).

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Documents

Audit Committee Institute: Risk Reimagined...risk reimagined; risk and technology; risk challenges Created Date: 9/13/2019 12:59:38 PM