The international opportunities in the banking industry are tremendous, and KPMG's global presence in the financial services sector places them in an envious position; or does it? Are risks and risk management underestimated by many financial services organizations?
The opportunities and optimism that surrounds the emerging markets of China, Brazil, Russia and India may also bring uncertainties and risks that financial service organizations, such as KPMG are underestimating. Recently, KPMG Financial Services Partner, Simon Gleave, posed the following questions in an attempt to provide assurance that risks and risk management continues to be a priority in an environment that is experiencing regulatory changes, economic volatility, and inadequate government management.
Can we afford not to be involved in the Chinese market? As one of the last great banking frontiers, can any firm in the financial services sector afford not to explore and infiltrate this immense consumer market that is expected to experience growth rates of 13-20 percent over the next 10 years? The growth opportunities that this market is expected to present cannot be ignored by firms such as KPMG, Accenture and Ernst & Young in their global expansion projects. The issues of risk management however will be a closely monitored and evaluated regularly in these changing regulatory times.
How can we leverage from the Chinese government's desire to bring in foreign expertise to help develop and improve the country's banking system? This is one sector that many of the Big4 firms have significant influence over, and as a result, can bring about significant change. The risk of government interference and difficult regulatory compliance are deterrents to the financial objectives of these firms; however, China is looking to many of the foreign financial investors such as banks and financial services to provide the expertise, technology and training needed to bring their banking industry into a competitive position.
Upon entering the Chinese market, do we have a clear strategy and goal that enables us to manage our investments closely and measure their performance? This may perhaps be the most important question posed. Do many of the foreign financial services firms have the strategies and goals in place to cushion their investment against small risk issues, while measuring performance so that timely adjustments can be made? This is a tremendous challenge, and one that many of the Big4 firms have spent much time and money to address, assess, and implement.
The global environment is awash with new regulations, political considerations, and cultural differences that must be successfully navigated. The risk management policies and procedures will undergo change as well; technology, managerial skill, and adequate assessment strategies will work to minimize the risk, not eliminate it.
The greatest risk however, may lie in the missed opportunity. The Big4 firms and many other global financial service organizations are unanimous that China, and other developing countries represent a significant untapped frontier for global banking and banking services.
