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STRATEGY Cost-cutting: a permanent corporate fixture? It’s a disquieting scenario, but the concerted focus on reducing costs may well become a continuum even as the economic environment improves. While economic “green shoots” seem to be sprouting in the local economy, prospects on the economic front in some overseas locations look as grim as the impending northern winter. Latest forecasts suggest that GDP in the UK is likely to decline this year by a massive 4.5 per cent – the largest amount in a single year since the end of the Second World War. In response, many companies are expecting to make further cuts of up to 25 per cent in the next couple of years, ushering in what some analysts believe will be a new era of “permanent cost-cutting”. According to predictions, the painful cost-cutting and curbing of discretionary expenditure endured over the last 18 months may yet prove to be the “easy bit”. A study by CFO Europe Research Services for KPMG has found that firms have focused on the short-term as they try to weather the economic storm, with 86 per cent of respondents requiring cost initiatives to deliver a payback within 12 months. Unfortunately, while this may be a natural reaction to intense market pressure, it does not always deliver a strategy for permanently lower levels of cost in an organisation. Perhaps the biggest challenge now facing organisations, however, is how to make changes to the cost base that are both sustainable and generate cash for future growth. “It seems that the next 24 months will see organisations stepping up their focus to deliver further cuts to the cost base to create a sustainable advantage,” says a partner in KPMG’s European Operations Strategy Group, Jeremy Kay. “This requires a bolder longer-term commitment to a lifecycle change, not merely a short-term diet, as old habits can easily creep back in. “In a more prudent economic environment, the emerging winners will be those that successfully and regularly recycle funding from cost initiatives to generate cash for growth.” Just over a quarter of respondents said they were using organisational restructuring strategies, including headcount reductions, to cut costs. But while such strategies deliver the biggest savings, they are not the most sustainable for the majority. One-fifth said improving process efficiency was their second most important strategy, while just less than 10 24 RISK August 2009 “A new focus on cost management is here to stay and it must become a continuum even as the enonomic environment improves” per cent claimed that using better risk management was a priority in cutting costs. “A new focus on cost management is here to stay and it must become a continuum even as the enonomic environment improves,” Kay warns. “More than half (53 per cent) the respondents in our survey agree that it has become a permanent and more prominent feature of day-to-day business, both now, and as and when we move out of the economic downturn.” The survey also showed that organisations have already taken steps to embed better cost management, such as making cost leadership an explicit part of the overall strategy. However, there is still work to do in broadening ownership of cost management. A mere 5 per cent of respondents said that all employees were responsible for cost management initiatives. The survey shows that cost management still remains in the domain of the C-level executive, with more than 40 per cent of CFOs and an additional 20 per cent (CEOs) saying they were responsible for these programs. “The survey shows there are winning themes emerging, with a focus on building commercial capability and prioritising sustainability – but there is still a long way to go,” Kay says. Adds partner and leader of KPMG’s European Operations Strategy Group, Martin Scott: “Many businesses probably feel as if they have done enough, in cost reduction terms, to survive the current downturn. But as only a fifth of respondents said they were looking at more radical options than they were 12 months ago, shareholder expectations to deliver bolder and more sustainable cost strategies may take some time to be met. “The winners will be those that create adaptive approaches to cost management so they can continually rebalance resources from underperforming areas into those that promise growth. A new era of ‘earning the right to grow’ is here to stay.” R
Risk = opportunity TRANSITION TO ISO 31000 WORKSHOPS In anticipation of a positive vote in the ballot of ISO member organisations, the AS/NZ Standards Committee has approved adoption of the new standard as AS/NZS/ISO 31000:2009 – RM – Principles and guidelines. AS/NZS 4360:2004 – RM will be withdrawn. A practical workshop series, Transitioning to the New RM Standard, has been developed by RMIA in conjunction with leading ISO 31000 specialists, and will be introduced Australia-wide. Workshop details: Adelaide: Aug 24, Oct 22 Brisbane: Aug 20, Oct 16 Canberra: Sept 10, Oct 19 Cairns: Nov 25 (after the RMIA Annual Conference) Hobart: Sept 8 Melb: Aug 18, Sept 9, Oct 21 Perth: Aug 25, Oct 23 Sydney: Aug 19, Sept 11, Oct 20 A registration brochure will be available soon. For expressions of interest, email msc@rmia.org.au. RMIA ANNUAL CONFERENCE The RMIA Annual Conference, Risk management: the road to resilience, is in Cairns, far north Queensland, on November 22–25. It is an excellent opportunity to partner with RMIA as a sponsor or showcase your products and services in the exhibition area. The partnership prospectus is on the website, www.rmia.org.au. FUNDAMENTALS OF RISK CONTROLS WORKSHOPS RMIA is hosting Fundamentals of Risk Controls workshops for people working in all types of organisations who need to acquire knowledge of how controls help identify and manage risks. Email education@rmia.org.au for more information. Scheduled dates are: Hobart: Sept 2 Melbourne: Oct 13 FUNDAMENTALS OF MANAGING RISK WORKSHOPS Participants in Fundamentals of Managing Risk workshops acquire the skills and knowledge to apply the RM process in their organisations by understanding the AS/NZS 4360:2004 standard. Reference is also made to the draft ISO 31000 RM standard. Workshops are scheduled for: Sydney: Aug 26–27 Perth: Sept 22–23 Darwin: Oct 12–13 Melbourne: Oct 27–28 Wellington, NZ: expressions of interest welcome In-house FMR workshops are available. Please email education@rmia.org.au for details. RMIA DIARY Information or bookings, email eventadmin@rmia.org.au or visit www.rmia.org.au AUGUST 12: Vic chapter meeting Speaker: Paul Barton, Director, Office of Sustainability & Environment 17: NSW chapter conference, Sydney RMIA is a not-for-profit professional membership organisation. For information about partnering with RMIA, email membership@rmia.org.au. R E A L I S I N G O P P O R T U N I T Y Risk Management Institution of Australasia Ltd ACN 106 528 509 PO Box 97 Carlton South Victoria 3053 T 03 8341 1000 F 03 9647 5575 www.rmia.org.au E membership@rmia.org.au
Page 1 and 2: MINIMISE | MITIGATE | MANAGE MAGAZI
Page 3 and 4: IN THIS ISSUE 18 32 CUTBACKS COME H
Page 6 and 7: NEWS COMPILED BY MARK PHILLIPS Mark
Page 8 and 9: NEWS “Green shoots” wake corpor
Page 10 and 11: NEWS IN BRIEF NEW YORK: Despite poo
Page 12 and 13: SPECIAL REPORT: BUSINESS CONTINUITY
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Page 17 and 18: CLOUD COMPUTING: A DOWN-TO-EARTH TA
Page 19 and 20: SPECIAL REPORT Breakthrough on Blac
Page 21 and 22: REGULATION NINE KEY PRINCIPLES FOR
Page 23: AML/CTF Further criticism has recen
Page 27 and 28: MACQUARIE UNIVERSITY APPLIED FINANC
Page 29 and 30: ACI 13th Annual Conference Tuesday
Page 32 and 33: RESEARCH INSIDER THREAT • US orga
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