Chart 1: Which of the following best reflects your view of risk management’s contribution to your organization? BACK TO CONTENTS
Three steps to success
I believe that, in order to really move forward (and catch up), consumer markets companies need to look at three simple areas.
15% 4% 1
Firstly: Companies need to move risk management away from being simply a governance exercise (reporting and documenting risk) to focusing on the actual management of it. Risk assessments are important – but they need to create the transparency and visibility for actual risk-based decisions to be made.
2
Secondly: They need to step back and ask themselves ‘what are we trying to accomplish with our risk management programme?‘ They need to be clear about the expectations of their stakeholders and how they can address them. Too often, risk management programmes get rammed in just to tick the quarterly risk report box. Companies need to ask themselves what their actual need for risk information is driven by and that should then drive the nature of their programme.
3
Thirdly: They need to look at convergence. By this I mean whether, and to what degree, they can converge all the separate risk reporting that often occurs. If the CIO is reporting their risks to the Board, as is the Head of Internal Audit, as is the Head of Compliance etc, then surely this can be brought together so that the Board can get a better, more holistic view. Over a third of organisations in our survey state that they have used convergence to tackle
34%
overall business complexity and to improve their agility in decision making. Rather than receiving information on all of the risks facing the organisation, the Board need clarity on the key risks and the link to assurance activity so that they can focus on the right issues. Finding a way of converging risk reporting can make a major difference.
47%
{ } FOCUS 26 It is essential for adding value to our overall business
It can occasionally help us improve the way we do business
have no mechanism to measure the ROI of the risk management program
Its contribution to our overall organization is only marginal It does not contribute to our overall business
28%
Chart 2: How do you measure the return on investment (ROI) in your risk management program? How do you measure the return on investment (ROI) in your risk management program?
20%
We review past results or risk events to assess the effectiveness of risk management response
We use quantifiable measures to value the risk management program (e.g., capital costs, hedging or insurance costs, etc.)
28% 30% 5% 17%
Stress testing of core business processes against specific scenarios
We rely on the rating agency to review our risk management program
We have no mechanism to measure the ROI of the risk management program
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MANAGEMENT RISK
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