Identifying the risks in corporate risk management 

Since 2008’s financial crisis, the corporate risk-management function has taken the spotlight—in the financial services industry and beyond. And, the pressure is on – expectations are clearly high for these difficult and evolving roles.

In a 2010 survey of senior executives from The Economist Intelligence Unit,* 58 percent of the participants listed “identifying new and emerging risks” as among the most important objectives of the corporate risk-management function. Yet, most executives list their companies’ ability to identify new risks as weak. Only 34 percent of survey participants said their companies are effective at anticipating and measuring emerging risks.

The survey participants gave similar uninspiring critiques to other risk-management functions. For example:

• In terms of recruiting and retaining risk expertise, only 28 percent of respondents said their companies are doing an effective job.
• When it comes to ensuring risk information is timely and up to date, only 38 percent of the executives surveyed said their companies are doing an effective job.
• Just 42 percent of survey participants said their companies are effective at instilling awareness of risk throughout the organization.
• In terms of linking risk management with the overall corporate strategy, 46 percent of the executives rated their companies’ performance as effective.

On a more positive note, corporations received the highest marks for their regulatory compliance efforts. Sixty-nine percent of the executives surveyed said their company is effective at managing regulatory compliance. This is where the majority of respondents believe the risk management function is most useful. When asked where they expect risk management to make the most meaningful contribution to their organizations in the next year, 41 percent of respondents said “conforming with regulatory requirements.”

Looking ahead, risk management is likely to remain at the forefront of corporate strategy. According to The Economist Intelligence Unit study, 51 percent of executives surveyed indicated risk management will play a bigger role in their company’s efforts in the coming year.

The study ultimately found that “although risk management is currently enjoying an unprecedented level of authority and visibility, it remains a function in transition.” In light of recently proposed and pending regulations, risk managers will be challenged to find better ways to manage information, organize it and be able to locate it. Risk management is expected to play a larger part in many aspects – from e-discovery to social media. How is your company faring?  

To learn more about Viewpointe’s services, contact us at info@viewpointe.com.