Risk management in emerging markets: insights and findings from the automotive sector

With this global study, Ernst & Young is continuing its research into business risk and risk management practices. Given the evolving regulatory environment in key markets and current or pending changes – including Auditing Standard No. 5 (AS5) in the US, International Financial Reporting Standards (IFRS), and Japan’s Financial Instruments and Exchange Law (J-SOX) – compliance and risk management remain important and challenging priorities for our global automotive clients. Dealing with these issues in emerging markets continues to be an important strategic consideration for automotive companies expanding their business activities into new, growing regions, and/or monitoring ongoing risks with more mature operations.

Many automotive companies have moved considerably from the traditional view that the primary objective of investment in emerging markets is cost savings. Balancing market potential is also a strategic imperative. Many companies that have invested or are operating in these markets are still working out the most effective approaches to doing business. They are also managing risk in areas that are far from the headquarters in a relevant and cost-effective manner. While some companies have developed effective practices, many respondents cite the need for improvement in the overall approach.

We believe that one of the main takeaways of this report is the effectiveness of a holistic, integrated overall approach to risk that gets freshened periodically to reflect current market conditions. The best approach to risk management allows for an integrated answer on how to align effectively the relationship between risk, control, and performance in a way that directly allows for an increase in competitive advantage and enterprise value.



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