TRENDS IMPACTING BUSINESS RESILIENCE IN LATIN AMERICA

The importance of environmental, social, and corporate governance (ESG) practices has increased in recent years with the COVID-19 pandemic prioritizing ESG and sustainability performance in the corporate agenda worldwide.

Across G20 businesses, the extractives and minerals processing sector was most likely to use COVID-19 as a catalyst to materially enhance their approach to ESG and sustainability.

Key Findings

  • 53% of Brazilian companies felt under ‘extreme’ pressure to improve ESG/Sustainability over the next 12 months.
  • 81% of Latin American business leaders agree that since the COVID-19 outbreak their company has been focusing more on the ‘Social’ pillar
  • 88% of Latin American business leaders agree that companies should be run in the interest of all stakeholders, not just shareholders

89%

OF LATIN AMERICAN COMPANIES ARE USING COVID-19 AS AN OPPORTUNITY TO MATERIALLY ENHANCE THEIR APPROACH TO ESG AND SUSTAINABILITY

The COVID-19 pandemic exposed a multitude of governance failures around the world and led to increased calls for fundamental changes to global political, economic and social systems.

In this challenging scenario addressing corruption and the misappropriation of state resources remains as important as ever.

Key Findings

  • Significantly more Latin American (91%) than G20 (79%) business leaders indicated that they expect an increase in corruption in 2021.
  • 67% of Latin American businesses have been, or are being, investigated for their use of state aid/government support
  • 55% of LATAM business leaders reported that they have faced challenges servicing their debt requirements since the start of the pandemic

OF LATIN AMERICAN BUSINESS LEADERS EXPECT AN INCREASE IN CORRUPTION IN 2021

While fraud and financial crime risk may be less concerning in the region, the Covid-19 pandemic has increased concern among LATAM business leaders over cybersecurity attacks.

Key Findings

  • The majority of LATAM businesses recently underwent or are currently undergoing investigations, with 79% of these related to regulatory compliance.
  • More than 2-in-5 LATAM businesses assumed a proactive role in mitigating fraudulent practices, especially in Chile (51%) and Colombia (47%).

87%

OF LATIN AMERICAN BUSINESSES ARE NOT CONCERNED WITH FRAUDULENT PRACTICES IN THE NEXT 12 MONTHS

Business leaders in LATAM have observed an increase in regulatory risks during the COVID-19 pandemic, although many consider these risks to be short-lived and expect the outlook to improve in the next 12 months. This one-off trend is similar to that observed in the G20 countries, albeit more pronounced in LATAM businesses.

There is also a perceived rise in dispute activity, which is likely a result of increased difficulty in enforcing contracts, regulation changes, effects of COVID-19 in M&A deals and other factors.

Key Findings

  • 70% of business leaders in LATAM are concerned about regulatory uplifts making business more complicated.
  • 52% of Mexican companies report that regulation is currently affecting their business model, and nearly 39% claim they have been subject to new regulation as a result of the COVID-19 pandemic – well above the average in LATAM (32%) and the G20 businesses (30%).
  • 60% of LATAM business leaders agree that there has been increased dispute activity to manage cash flows.

OF LATIN AMERICAN COMPANIES REPORT THAT REGULATION IS CURRENTY AFFECTING THEIR BUSINESS MODELS, COMPARED TO 27% THAT HAVE EXERIENCED THE IMPACT IN THE PAST 12 MONTHS

Covid-19 pandemic has brought an increased concern among LATAM business leaders over cybersecurity attacks.

Cybersecurity risks are significantly more likely to concern companies in Brazil and Chile, with approximately 60% of business leaders responding positively, than those in Argentina or Mexico where only around 45% of business leaders agreed.

Key Findings

  • Almost one-third of LATAM business leaders identified the loss of customer/patient data and third-party information as the most common cyber-attacks over the last 12 months particularly those in Chile (85%) but less for those in Mexico (54%).
  • Approximately 2-in-5 LATAM business leaders showed increased concern over making technology secure as well as over leaks of sensitive internal information.

OF LATIN AMERICAN BUSINESSES HAVE BEEN NEGATIVELY IMPACTED BY CYBER ATTACKS IN THE PAST 12 MONTHS

RESILIENCE BAROMETER™ LATIN AMERICA

FTI Consulting’s Resilience Barometer™ analysis reveals how the pandemic has exposed resilience concerns for Latin American businesses in Argentina, Brazil, Chile, Colombia and Mexico across critical areas: from business models to supply chains to crisis management to regulatory changes.

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