BOSTON?(BUSINESS WIRE)?
Global companies are intensifying their focus on enterprise-wide risk
management (ERM) in the wake of the 2008 financial crisis and recession,
but most executives feel their companies have a long way to go in
building an effective, risk aware culture, according to a new survey by
Harvard Business Review Analytic Services.
Over two-thirds of 1,419 business executives surveyed in the new
research sponsored by Zurich said risk management has increased in
importance over the past three years. Yet only one in ten said their
executive management is ?highly effective? in creating a strong
risk-management culture.
And while the need to link risk information to strategic decision making
was identified as extremely important, only 14% felt their organization
did that extremely well. Among the top barriers to better risk
management cited:
- Over-focusing on compliance rather than fundamental processes (42%)
- Lack of strong management support (41%)
- Reluctance to de-silo related information (35%)
A majority of the companies said their approach to enterprise risk
management continues to be basic or reactive. However, about 40% of
executives surveyed considered their approach to ERM to be ?proactive,?
involving the board as well as business and functional leaders at all
levels of the organization.
This ?best practice? group included financial services, health care, and
energy companies and those with 10,000-plus employees. But many other
industries have instituted ERM processes or improved their practices.
Executives in companies taking the proactive approach said that
integrating risk management and corporate goals was key to gaining
competitive advantage.
The study made clear that risk management needs to have a clear owner to
be effective? executives reported that Chief Risk Officers are far more
likely to oversee risk management now, than three years ago, although
the CEO bears ultimate responsibility.
The study also found that at companies with strong ERM processes,
?ownership? of risk stays in the hands of business and functional
leaders. The CRO?s role is to advise and assist them, staying in regular
communication and providing them with resources to better manage risk
themselves. The result is what executives interviewed for the study call
a ?collaborative culture? that integrates risk awareness into the
company?s strategic planning.
?Ownership of risk cannot be overstated, since the survey indicated that
companies that employ a Chief Risk Officer, who works in tandem with the
CEO and their executive leadership, scored highest in proactively
managing risk in the organization,? said Alex Clemente, managing
director of Harvard Business Review Analytic Services.
Some of the top benefits of ERM that respondents cited were not directly
related to risk management. Instead, respondents described the
integrated risk management approach as helping their companies achieve
better operational performance by removing siloed communication and by
fostering:
- Improved strategic decision making (39%)
- Improved governance (34%)
- Increased management accountability (31%)
Executives in the survey stressed that their goal was not to create a
risk-averse environment but one in which better measurement and
understanding of risk gives them more confidence about making strategic
decisions to build the business.
?There is no doubt that in today?s challenging environment customers,
shareholders and employees expect clear commitment to comprehensive and
forward looking risk management from top management and board.
Supporting the findings of the survey that it is extremely important to
link risk information to strategic decision making, 41% of the companies
said they are deepening and extending the ties between risk management
and strategic planning,? said Axel Lehmann, Chief Risk Officer at Zurich.
To access a copy of the Risk Management in a Time of Global Uncertainty
report, please visit: www.hbr.org/white-paper/risk-management.
About Zurich
Zurich Financial Services Group (Zurich) is a leading multi-line
insurance provider with a global network of subsidiaries and offices in
Europe, North America, Latin America, Asia-Pacific and the Middle East
as well as other markets. It offers a wide range of general insurance
and life insurance products and services for individuals, small
businesses, mid-sized and large companies as well as multinational
corporations. Zurich employs about 60,000 people serving customers in
more than 170 countries. Founded in 1872, the Group is headquartered in
Zurich, Switzerland. Zurich Financial Services Ltd (ZURN) is listed on
the SIX Swiss Exchange and has a level I American Depositary Receipt
program (ZFSVY), which is traded over-the-counter on OTCQX. Further
information about Zurich is available at www.zurich.com.
About Harvard Business Review Analytic Services
Harvard Business Review Analytic Services is an independent sponsored
research unit within Harvard Business Review Group, which conducts
research and comparative analysis on management challenges and emerging
business opportunities. HBR Analytic Services has been recognized for
its ?Face-to-Face? research report, sponsored by British Airways, as a
finalist in the 2010 MM Awards in the category of ?Best Contribution to
a Media Campaign by a Media Owner.? Research from Harvard Business
Review Analytic Services has appeared in The New York Times,
Economist.com, USA Today, the Times of London, and other major media.
About Harvard Business Review
Harvard Business Review?is the leading destination for smart
management thinking. Through its flagship magazine, 10 translated
licensed editions, books from Harvard Business Review Press, and digital
content and tools published on www.hbr.org,
Harvard Business Review provides professionals the world over
with rigorous insights and best practices to lead themselves and their
organizations more effectively and to make a positive impact in a
changing world.
Article source: http://finance.yahoo.com/news/harvard-business-review-survey-risk-161100257.html
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