The vast majority (85%) of surveyed corporate executives agree that they need to overhaul their approach to risk-management if the lessons of the economic crisis are to be used to improve business results, according to results of an Accenture study released today.
Four in ten respondents (40%) said their companies have already increased or will increase their investments in broader risk-management capabilities in the next six months. Nearly another third (31%) said their companies are now considering increasing their future investment in risk management capabilities.
Those findings are from Accenture's 2009 Global Risk Management Study, which is based on a survey of 260 chief financial officers, chief risk officers, and other executives with risk-management responsibilities at large companies in 21 countries.
The survey also found that companies expect new risk-related challenges as a result of the current economic environment, including more stringent regulations and increasing costs associated with growing complexity in the risk environment. For instance, 41% of respondents reported that their risk-management costs have increased at least 25% in the past three years, including 14% who reported a 50% rise in such costs.
Asked to identify the biggest challenges they face over the next two years as they develop more rigorous risk-management capabilities, respondents pointed to the difficulty of aligning with the overall business strategy (identified by 93% of respondents); the need for more effective collaboration with business units (89%); the need for greater integration in the firm's processes and culture (89%); and inadequate resources and talent (88%).
Accenture's analysis pointed to a lack of integration of current risk-management and performance-management processes: While nearly half the respondents said their company's risk-management function is involved to a great extent in strategic planning (48%) or in investment and divestment decisions (45%), only 27% said the risk-management function was involved to a great extent in objective-setting and performance management.
Survey respondents also identified some common problems with their risk-management functions:
- Ineffective integration of risk, return, and capital issues in decision-making (identified by 85% of respondents)
- Lack of alignment between the company's strategies and its risk appetite (85%)
- Insufficient enterprise-wide risk culture (82%)
- Inadequate availability of timely risk, finance, and business data (80%)
- Lack of integration and aggregation across all risk types (78%)
- Ambiguous risk responsibilities between corporate and business units (78%)
Executives identified benefits they anticipate as a result of addressing their companies' risk-management shortcomings: Although nearly three quarters (72%) of respondents said their companies' risk management function has a major impact on their ability to comply with regulations, nearly two-thirds (61%) said the same about its impact on the company's ability to sustain profitability; 58% said that risk management has a major impact on a company's ability to manage liquidity and cash flow.