Performance and Risk Management · Strategy Vision Purpose Objectives Targets Risk & opportunities...
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Performance and Risk Management Driving better decision-making 1
Transcript of Performance and Risk Management · Strategy Vision Purpose Objectives Targets Risk & opportunities...
Performance and
Risk ManagementDriving better decision-making
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Performance and
Risk ManagementDriving better decision-making
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Today’s Agenda and Objectives
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1 Recap current status of “new tangibles” & WBCSD’s activities to
assess & manage risk and performance
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3 Identify challenges & engagement opportunities to apply &
integrate (breakouts)
Share company application: Integrating ESG into decision-making
(KPMG and DSM)
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Today’s Reality –
Risks, Opportunities,
‘New Tangibles’Eva Zabey, WBCSD
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The global risk landscape continues to shift
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Asset price collapse Extreme weather events
Slowing Chinese economy (<6%)
Failure of climate-changemitigation and adaptation
Chronic disease Natural disasters
Global governance gaps Data fraud or theft
Retrenchment from globalization
Cyberattacks
Asset price collapse Weapons of mass destruction
Retrenchment from globalization (developed)
Failure of climate-changemitigation and adaptation
Oil and gas price spike Extreme weather events
Chronic disease Water crises
Fiscal crises Natural disasters
To
p 5
Glo
ba
l Ris
ks:
like
liho
od
To
p 5
Glo
ba
l Ris
ks:
imp
act
Economic Environmental Geopolitical Societal Technological Source: WEF 2019
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Risk &
Trust
Companies have been impacted by the changing business context
1970s 1980s 1990s 2000s 2010 2011 2012 2013 2014 2015 2016 2017 2018
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Climate
change is now
From intangibles to “new tangibles”
“The idea today that anyone would need to be pitched on why software is a legitimate investment seems unimaginable, but a lot has changed since the 1980s. It’s time the way we think about the economy does, too.”
Bill Gates, principal founder of Microsoft Corporation
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Source: The 2018 EPIC Report, Embankment Project for Inclusive Capitalism
Human
Talent, workforce
and customer
networks
Intellectual
Invention,
innovation, ideas
Natural
Resources, upstream and
downstream footprint
Financial
Legacy balance
sheets, SHR, Credit
Social
Conduct,
Community, advocacy
Brand
Identity, design
and experience
equities
The new
tangibles
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Outdated Performance
& Risk Management Mario Abela, WBCSD
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Flaws in decision-making
34% Find it challenging to
select the right combination of metrics to measure
business performance over different time frames
80% Admit that their
organisation used flawedinformation to make a
strategic decision at leastonce in the last three
years
(Source: CIMA-AIPCA Joining the Dots – Decision Making for a new Era, >300 responses)
32% feel that
information (financial and non-financial) delivered to decision makers
is relevant and timely
40% sufficient
understandingof how the
organisation’sbusiness modelneeds to adaptin response tomarket trends
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CEO insight - data for decisions
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Impact vs likelihood
(Source: KPMG Dynamic Risk
Assessment)
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Velocity, connectivity, resilience…
(Source: KPMG Dynamic Risk
Assessment)
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What WBCSD has to
offer: M&V, IPM, ERM
PackageLuke Blower, WBCSD
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Investor Decision-Making
Redefining Value Structure
External Disclosure
Investor Decision-Making
Business Decision-Making
External DisclosureBusiness Decision-Making
• Enterprise Risk Management*
• Integrated Performance
Management*
• Measurement & Valuation
• Governance & Internal Oversight*
• The Reporting Exchange*
• Purpose-Driven Disclosure*
• Assurance & Internal Controls*
• TCFD Preparer Forums**
• Reporting Matters
• Aligning Retirement Assets
* Project funding by the Gordon and Betty Moore Foundation
** Project funding by Bloomberg Philanthropies
Our work is split into three Program Areas and ten Projects
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Headlines – value creation, risk & integration
How do you create value?
Mission, vision, purpose, strategy,
business model?
What are your key risks,
opportunities, impacts and
dependencies?
Integration into governance,
ERM, performance
management & decision making
Risk Management – COSO & WBCSD
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2. Impacts and dependencies, Megatrend, Context
• Impact pathways
• Changes in state/condition natural/social
capital
3. Analytical choices - measurement, valuation
• Qualitative, Quantitative & Monetary
• Data sets & quality
4. Monitoring and evaluation
• External changes that may impact
• Selecting key indicators/measures
Risk Assessment - Measurement & Valuation
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Generally-accepted frameworks for business to identify, measure and
value its impacts and dependencies on natural, social and human capital.
Natural and Social & Human Capital Protocols
2016 2019
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Structure of the Protocols
These sister Protocols follow the same 4 Stages:
FRAME, SCOPE, MEASURE & VALUE and APPLY, composed of 9 Steps.
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Introducing - Integrated Performance Management
Performance management, in
this context refers to the way
companies gather, process and
act on information that is critical
to their success. The processes
and practices used to measure,
monitor, and evaluate
performance and make
decisions.
We’re helping companies integrate ESG issues
into mainstream performance management. By
learning from leaders, consolidating thought
leadership, articulating a business case and
developing practical solutions.
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Integrated Performance Management – Scoping
Performance Management
Planning
Forecasting
Investment appraisal
Sensitivities & stress tests
Scenarios
KPIs
Strategy
Vision
Purpose
Objectives
Targets
Risk & opportunities
Budgets & costing
OpEx & CapEx
Discounting
Pricing
Cost curves
Skills & competencies
Learning
Training
Recruitment
Appraisal
Evaluation
Culture
Collaboration
Creativity
Leadership
Innovation
Exploring integration
options in established
functions, disciplines &
processes
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Integrated Performance Management – Approach
The project will be carried out in two phases:
1. Exploring performance management today, articulating and defining - “integrated performance management” and key development challenges & opportunities.
2. Developing professional education and supporting guidance/tools to help companies and individuals develop and integrate a multi-capital approach to their management of performance.
Current state & business case
Practical solutions
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Connecting decision making projects
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INTEGRATED
PERFORMANCE
MANAGEMENT
IDENTIFICATION
• SWOT
• PESTLE
• IMPACTS AND DEPENDENCY
MAPPING
• STAKEHOLDER ENGAGEMENT
• MATERIALITY ASSESSMENTS
• …
ENTERPRISE RISK MANAGEMENT
FO
RE
CA
ST
BU
DG
ET
ING
CO
NT
RO
LS
AP
PR
AIS
AL
ST
RA
TE
GY
RIS
K
RIS
K
ENTERPRISE RISK MANAGEMENT
ASSESSMENT
• IMPACT, LIKELIHOOD, VELOCITY,
RESILIENCE, ADAPTABILITY,
INTERCONNECTIVTY
• RISK SEVERITY MEASURES
• DELPHI
• MONTE CARLO
• SCENARIO ANALYSIS
• …
1 Recap current status of “new tangibles” & WBCSD’s activities to assess & manage risk and performance
Share company application: integrating ESG into decision-making (KPMG and DSM)
Identify challenges & engagement opportunities to apply & integrate (breakouts)
Today’s agenda and objectives
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3
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Click
Application ExamplesArjan De Draijjer, KPMGJeff Turner, DSM
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Montreux
—
3 April 2019
Restoring the connection
29© 2019 KPMG Advisory N.V., registered with the trade register in the Netherlands under number 33263682, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. All rights reserved.
30© 2019 KPMG Advisory N.V., registered with the trade register in the Netherlands under number 33263682, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. All rights reserved.
Benefits from True Value assessments
Make better decisions
Build the case for innovation
Strengthen critical relationships
31© 2019 KPMG Advisory N.V., registered with the trade register in the Netherlands under number 33263682, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. All rights reserved.
Make better decisions – Vopak caseOur prime responsibility is to comply with (local) legislation on air emissions. Our objective is to further reduce our VOC emissions beyond our legal obligation.
For this objective, we believe we need to focus our efforts on those areas where the social impact is largest.
As field measurement to obtain a complete picture is not yet feasible, we developed a model in 2017 to provide guidance to the organization on possible reduction measures and their societal impact (according to the True Value method) to ensure that our efforts and investments, beyond what is required from a regulatory perspective, are put in place there where the impact on society is largest.
Source: Vopak Annual Report 2018 ‘Storing vital products with care’
As part of our ambition to minimize our environmental footprint, it is our objective to further reduce our VOC emissions, beyond what is legally required.
We believe we need to focus our efforts on those areas where the societal impact is largest (in addition to fulfilling legislative requirements). We continue to apply our societal and environmental impact model (True Value Model: TV-model).
We have planned more than 25 projects (with a total investment of over 40 million euro) to mitigate vapor emissions with the aim to meet new legislation and reduce the societal impact by more than 20%.
Over the next years, we will use this model as a basis for determining our priorities and investments in terms of emission-reducing measures.
32© 2019 KPMG Advisory N.V., registered with the trade register in the Netherlands under number 33263682, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. All rights reserved.
Build the case for innovation – OSRAM case
Source: https://www.osram-group.com/en/innovation/value-proposition
“The study and the
methodology used in it help us
in two ways: They make it
possible to demonstrate the
impact of alternative options for
action and to make them
transparent,” Jochen Berner
says. “The evaluated
information can then help
people make better decisions in
such areas as investments.”
And it highlights the added
value that OSRAM’s
technologies have for
society…”
KPMG on social media KPMG app
© 2019 KPMG Advisory N.V., registered with the trade register in the Netherlands under number 33263682, is 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 of KPMG International.
Arjan de Draaijer
KPMG Sustainability
Partner, Global True Value Lead
Tel: +31 6 82 00 90 36
For Internal Use Only
PURPOSE LED,
PERFORMANCE DRIVEN.CREATING BRIGHTER LIVES
FOR ALL
Jeff Turner
VP Sustainability, Royal DSM
RISK, MATERIALITY AND MEGATRENDS
HUNGER VS.
OBESITY:
821M
Over 821 million people suffer
from hunger, while over
650 million people are obese.
CLIMATE
CATASTROPHE:
140M
>140 million people
could be forced to migrate
due to climate change.
RESOURCE
CONSUMPTION:
400%
Our demand of resources is
expected to reach 130 billion tons
by 2050. An overuse of the earth’s
capacity by more than 400%.
For Internal Use Only
At DSM, Our Purpose Frames Strategy
For Internal Use Only
DSM
Brighter
Living
Agenda
ADDRESSING RISK AND MATERIALITYTHROUGH OUR BRIGHTER LIVING AGENDA
IMPROVE
NUTRITION & HEALTH
- vitality@ DSM
- occupational safety
- employee wellbeing programs
CLIMATE & ENERGY
- Science Based Targets
- 30% absolute reduction in GHG
emissions (scope 1 & 2, 28%
intensity reduction in Scope 3
RESOURCES & CIRCULARITY
- executing Responsible Care Plan
addressing waste, water, emissions
- embedding circular & bio-based
thinking into sourcing, operations,
innovations and portfolio
NUTRITION & HEALTH
- replacing salt and sugar
- sustainable animal proteins
- Plant based proteins
- advancing biomedical materials
CLIMATE & ENERGY
- limiting the use of fossil fuels
(biofuels, solar)
- 2nd gen bio-fuels from waste
RESOURCES & CIRCULARITY
- reduction of landfill (Niaga®)
- increase use of renewable and
secondary resources as inputs
- eliminating waste from
prototyping (3D printing)
ENABLE
NUTRITION & HEALTH
- partnerships in fighting malnutrition
- active partnerships to address
sustainable & healthy nutrition
CLIMATE & ENERGY
- advocating climate action and
building the movement for a
low-carbon economy
RESOURCES & CIRCULARITY
- advocating the transition from a
linear to a circular and bio-based
economy
- partnering to enable closed loop
solutions
ADVOCATE
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MANAGING MATERIALITY AND RISKFROM DISCONNECTED TO A COLLABORATIVE APPROACH
Independent Collaborative
Pros✓ Processes run and managed independently – no
dependencies
✓ Internal control achieved through cross-
checking MM and CRA outcomes
✓ MM refresh is executed early in the year giving
clear guidance for current year
✓ CRA follows at end of year, using MM as input
for CRA (which in turn feeds into next cycle)
✓ Staggered the processes = increased
engagement
Con
s
Processes are run simultaneously, potentially
confusing key stakeholders and increasing their
workload
Cross-checking delivers limited alignment
2 processes are run each year
Alignment between MM and CRA needs to be
safeguarded
MM – Materiality Matrix
CRA – Corporate Risk Assessment
Based on WBCSD (2017), Sustainability and enterprise risk management: The first step towards integration
available at https://www.wbcsd.org/Programs/Redefining-Value/Business-Decision-Making/Measurement-
Valuation/Resources/Sustainability-and-enterprise-risk-management-The-first-step-towards-integration
For Internal Use Only
THANK YOU
1 Recap current status of “new tangibles” & WBCSD’s activities to
assess & manage risk and performance
Share company application: integrating ESG into decision-making
(KPMG and DSM)
Identify challenges & engagement opportunities to apply & integrate
(breakouts)
2
3
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Today’s Agenda and Objectives
Click
Challenges that
Remain – Barriers
Limiting Application
& Integration
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1. New tangibles, Luke
2. Training needs, Matt
3. Process integration, Mario
4. Valuation – non-financial & market, Eva
5. Engagement & implementation, Eleanor
5 breakout discussions (15 mins + 10 min feedback)
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Questions for each table to
discuss:
• What are 3 top challenges?
• What are 3 top solutions?
• What can you / your company
contribute?
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Engagement
opportunities
Eleanor Leach, WBCSD
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Engagement Opportunities
Use the guidance – we can help you!1
• Natural and Social & Human Capital
Protocol + toolkits
• ESG Enterprise Risk Management, incl. diagnostic tool
Engagement Opportunities
2 Training
• Attend a training session on ESG in ERM
• Join the We Value Nature Campaign and help
shape & test business training program on
valuing nature
https://wevaluenature.eu/
Engagement Opportunities
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4
5
Play
• Resilience: A corporate survival game,
board game
• Financial Statements of the Future, Excel-
based
Share your examples, on-line and at events
Stay engaged
• Join the ESG in ERM pilot program
• Join the Social & Human Capital Coalition (& the Natural
Capital Coalition, of course!)
• Join IPM roundtables, volunteer for interviews
• Join working groups
Dynamic Risk Assessment Pilot
To build on the recent guidance and in particular
chapter three, we are working with KPMG to run a
project known as the Dynamic Risk Assessment.
Looks at how companies can develop their risk
assessment processes beyond the traditional
impact vs. likelihood to look at both the velocity
and connectivity of risks.
It will help companies to understand the weak
links, new opportunities and those risks that are
likely to have disastrous consequences.
Food companies, please signal any interest by
emailing [email protected]
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Reflections
& closeRodney Irwin, WBCSD
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Redefining Value Montreux Sessions
Monday
11:00 - 13:00 Investing Responsibly. Retiring Responsibly
11:00 - 16:00 Social & Human Capital Workshop
Wednesday
09:00 - 10:30 Briefing Session Redefining Value
11:00 - 13:00 Performance & Risk Management
14:30 - 16:00 Disclosure Dilemmas & Decisions
Thursday
09:00 - 10:30 Building Resilience through Enterprise Risk Management
11:00 - 13:00 Turning Sustainability into a Competitive Advantage
Thank you & stay in touch!
Risk• Mario Abela: [email protected]• Eleanor Leach: [email protected]• [email protected]
Integrated Performance Management
• Mario Abela: [email protected]
• Luke Blower: [email protected]
Measurement & Valuation
• Eva Zabey: [email protected]
• Matt Watkins: [email protected]
• Katia Bonga: [email protected]
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Click
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