Firms must navigate roadblocks impeding strategic risk management
Companies with strategic risk management can reap benefits in areas such as development of business strategy, regulatory compliance and improved communication about risk across the organisation, however, they often must first overcome internal hurdles.
That is one of the conclusions of a recent Risk and Insurance Management Society (RIMS) report, which found that although fallout from the global financial crisis and the implementation of more stringent financial regulatory requirements have given businesses the impetus to adopt enterprise-wide risk management approaches, many still face roadblocks in elevating their risk practices.
To achieve a 360-degree view of risk, many firms must hurdle such challenges as organisational silos, divergent views within their own companies about the definition of enterprise risk management and key risk issues, as well as the lack of personnel and financial resources.
“Enterprise risk management, or strategic risk management, is no longer just a ‘nice to have’,” said Deborah Luthi, vice president of RIMS board of directors.
“Regulators, customers, investors and other key stakeholders are pressuring organisations to identify and explain how they manage the risks they face.”
The survey, which was conducted in conjunction with Marsh, found potential communication and perception gaps between risk managers and others in an organisation. As an example, 83 per cent of risk managers said their organisations have a plan in place for business interruption, but only 68 per cent of C-suite and 55 per cent of finance executives reached the same conclusion. Perceptions were similarly divergent on the issue of technology failure.
Lack of dedicated risk management personnel represented the biggest obstacle to improving an organisation’s risk management, followed by higher priorities given to other areas, and the need to demonstrate return on risk management investment.
“This is a time of opportunity for risk practitioners and their C-level colleagues,” said Brian Elowe, a managing director in the global risk management division of Marsh.
“For risk and financial executives, now is the time to move their organisations along a path toward more strategic risk management.”
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