Against a backdrop of increased regulatory focus on ESG, more Hong Kong companies are now taking ESG-related risks into consideration, according to a joint survey conducted by KPMG and The Hong Kong Institute of Chartered Secretaries (HKICS).
Around 85% of 129 Hong Kong-based senior managers indicated that they consider ESG-related risks in their long-term strategy, which coincides with an increased focus placed on ESG by regulators in recent years.
“Companies operating in Hong Kong have had to deal with increasing uncertainty,” Gilliam Meller, president at HKICS, said in a statement. “It is therefore important for organisations to become agile in identifying, assessing and managing emerging and disruptive risks as part of implementing their strategy and fulfilling their purpose.”
In terms of enterprise risk management (ERM), 55% of survey respondents are taking ESG-related risks into considerations, but only 18% have fully integrated them into their ERM systems.
In addition, only 31% have included ESG in the regulator board agenda.
“A top-down approach can greatly facilitate the ESG integration process of the organisation. To fully integrate ESG into ERM and long-term strategy, it is vital for the board to regularly discuss ESG matters to ensure proper attention,” the study said.
INCORPORATING RISK APPETITE
Separately, the survey also found that many organisations are struggling to incorporate the concept of risk appetite into their strategic planning or decision making process, with 40% of respondents saying they have not developed or are still in the process of developing a risk appetite statement.
Survey findings also show that there is a common mismatch between the frequency of risk assessment and risk reporting. Fifty-six percent of respondents update the risk level of identified risks on the risk profile at least quarterly, while only 29% refresh the risk profile to identify new or emerging risks faced at least quarterly.
The report explained that a risk appetite statement has emerged in recent years as an essential component of the ERM framework that can guide management in the goal-setting and decision-making processes to enhance the chances of achieving its goals and sustaining its operations.
The report noted, however, that 62% of respondents have already developed a defined risk appetite in their organisations, compared with just 21% in 2017.
“This is a good start to see more organisations formally defining their risk appetite,” the report said.
