Oct 19, 2011

Risks C-level Executives (Would Like to) Manage

Very close friend is VP in business I would never be successful in - insurance. They say risk management is a key capability there, but that is not why I say that. We all manage risks or are trying to, especially in economic downturn, hoping to ensure future profitability, long term growth or competitive advantage.

More organizations than ever are appointing Chief Risk Officer (CRO). Companies are making significant investment in their risk management capabilities and adopting more proactive approach. Market volatility and organizational complexity do not make anyone's life/job easier.

Risk management seems to be important priority for all businesses, and that is why I spent some time studying findings of recent 2011 Accenture's Global Risk Study.

There are many experts in this field, and as I am not one of them and many of you aren't either I will try to present you key findings and summary of this study.

Key findings or the study

The survey paints positive picture of the role of risk management, which is becoming more comprehensive across different types of risks and better integrated into corporate functions. Consider:
  • More than 80 percent of survey respondents consider their risk area to be a key management function that helps them deal with marketplace volatility and organizational complexity.
  • About half the companies surveyed view their risk organization as a critical driver of long-term profitable growth, while an additional 42 percent see their risk management capabilities as “important” to growth.
  • Risk management is becoming more of a C-suite activity. Compared to 2009, more companies are appointing a chief risk officer (CRO) or its equivalent.
  • More than 80 percent of survey respondents have an enterprise risk management (ERM) program in place, or plan to have one in the next two years.

15 Future Risk Management Challenges

While the survey demonstrates that risk management is an increasingly important priority for all businesses, there are challenges on the horizon.

For example, while companies are making investments in risk management capabilities, more than a quarter of them are not measuring major risk items. Furthermore, organizational silos continue to impede effective risk management across the enterprise. The major challenges facing risk management over the next three years are:

1. Reducing costs.

2. Aligning with the overall business strategy

3. Implementing regulatory demands.

4. Improving risk management and modelling

5. Data management (availability, consistency, organization)

6. Developing a risk culture

7. Integrating risk and finance information and processes within organization

8. Retaining and sourcing resources and talent

9. Developing risk metrics

10. Availability of comprehensive technological solutions

11. Raising risk management as a priority for executive leadership

12. Improving reporting

13. Collaborating with business units

14. Identifying risk management value proposition

15. Expanding Chief Risk Officer's role and view of risk

This, Accenture 2011 Global Risk Management Study, one of the largest risk surveys ever conducted, is based on interviews with C-suite executives from 397 companies across 10 industries. (Banking, Insurance, Capital markets, Healthcare, Comms and High Tech, Energy, Consumer goods and Services, Retail, Utilities, Life Sciences)

There is a separate report for insurance companies I must remember to forward to that friend and contacts in the insurance industry. Maybe you can do the same.

Are you being proactive in your organization or risk management is still not recognized as important?

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