Corporate fraud, data theft, financial reporting risk-and a host of others-can cost organizations dearly, says Ernst & Young in a new survey. That's why it's so important for today's businesses to get their risk management strategies right. Doing so protects organizations' valuable assets, and can also create a competitive advantage.
"This financial crisis has taught us that unidentified risk can lead to catastrophe," says Ernst & Young Partner Tanya Khan. "Clearly, leadership in Canada and around the world must refocus and intensify their efforts to ensure effective risk management is tied directly to business priorities."
In The future of risk: Protecting and enabling performance, Ernst & Young finds 96% of organizations believe they can improve risk management, while nearly half say committing additional resources to risk management could actually drive a competitive edge.
Despite the tangible negative effects of neglecting this area, not everyone plans to spend now. Sixty-one percent say they won't commit more resources to risk management over the next 12 to 24 months. Instead, companies are focused on doing more with the same or less resources and budget.
The survey further finds coverage and focus of multiple risks functions has become increasingly difficult to manage and is compounded by a lack of alignment. Fifty percent of respondents say they have gaps in coverage.
"Departments tend to assess how risk affects them, not the entire organization," Khan explains. "Risk management needs to move out of its silo, and reach across an entire organization if it's going to work well. Companies need to ask: Do our efforts allow us to understand what big-picture risks might emerge 12 months from now?"
Khan adds that there can be an upside to risk. "New opportunities will emerge, even now, and companies must ask themselves how they can seize them. This is the perfect chance to make sure your business has a handle on risk management before something goes wrong."
A few questions to consider for balancing risk, cost and value:
1. Do we understand the risks that our company faces?
2. Do we have a comprehensive risk framework in place?
3. Do we have duplicative or overlapping risk functions?
4. Are the risks we take aligned to our business strategies and
5. Are we taking the right risks to achieve competitive advantage?
About the report
The Ernst & Young 'Future of Risk' report is based on a survey of 507 C-suite and board level executives in global companies - the majority with global revenue turnover in excess of US$1 billion - across multiple industry sectors. The survey was conducted for Ernst & Young by the Economist Intelligence Unit in June and July 2009.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve potential.
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