‘Excellence in Risk Management V: Viewing Risk Management Strategically’

Nearly two in three executives with risk management responsibilities feel their organizations would benefit by taking a more strategic approach to risk, while fewer than one in five views their current risk program as strategic. At the same time, growth of the discipline of enterprise risk management (ERM) — a key component of many strategic risk management approaches — appears to be reaching a plateau.

A new report from Marsh finds the appetite for implementing ERM programs leveling off as firms direct resources to other corporate priorities. The report, ‘Excellence in Risk Management V: Viewing Risk Management Strategically’, expands on findings of an extensive survey of risk practitioners.

Larger, public companies are more likely to take a strategic approach to risk management. Executives at these firms generally considered their most significant exposures to be related to brand reputation, business continuity, and regulatory/compliance issues. On the other hand, firms with more traditional approaches to risk management tended to view their top exposures as those associated with corresponding insurance solutions, including general liability, property, and workers' compensation.

"Strategic risk management goes beyond traditional risk management to include the C-suite's wider perspective, which sees risk as something to optimize, not just to mitigate or avoid," said Brian Elowe, a managing director of Marsh. "This enterprise-wide view looks for ways organizations can approach risk to gain a competitive advantage."

Nearly one-third of the survey participants said they would focus on governance structure as part of their ERM investments, a critical area that receives attention from the C-suite and board. Nearly half indicated they also will invest ERM resources in training and education.

Satisfaction with ERM initiatives often involved the realization that they can't be treated as projects with a set beginning and ending; rather, ERM must be treated as a process for looking at risk throughout an organization. Among firms with ERM initiatives in place for more than two years, 44 percent of the survey participants were either extremely or very satisfied with their program, while fewer than one in four with programs in place less than two years expressed the same level of satisfaction. Similarly, 83 percent of participants with fully implemented ERM programs expressed high levels of satisfaction with them compared to 27 percent for those with partially implemented programs.

The report's findings also covered ERM and credit rating agencies, responses to major disasters and significant risk events, challenges related to supply chain risk management, and perceptions about risk among risk practitioners as compared with the C-suite.

The 21-page report is available by registering here.

•Date: 17th Sept 2008• Region: World •Type: Article •Topic: Operational risk
Rate this article or make a comment - click here