Conference Board advisory: Attend to risk management day by day
More corporate boards are driving enterprise risk management (ERM), but despite progress, it has yet to be embedded in most companies’ day-to-day activities, according to a report from The Conference Board .
The report, sponsored by Oliver Wyman , a global management consultancy, is based on a survey of risk, audit, and finance executives of 200 companies from manufacturing, financial services, health care, energy/utilities, wholesale/retail, communications/transportation/warehousing, and business/professional services.
Of survey participants, 55 percent says their corporate boards comprise a top driver of enterprise risk management program—up from 49 percent two years ago.
Still, ERM—a strategic method of understanding and managing risks—is not being integrated
The Conference Board survey, conducted over 2006 and 2007, sought to update its own 2004 survey on ERM (of 271 companies). Latest results show that, almost universally, there is greater awareness of risk across companies. Executives now report that the top of the organization is far more interested in ERM than previously. While CEOs in particular are slightly less certain than in 2004 that ERM is crucial to performing their own role, this result could be partly due to many CEOs delegating risk management responsibility to chief risk officers and other high-level executives.
“Once adopted and implemented broadly throughout the [organization], ERM becomes truly part of how companies do business,” says Ellen Hexter, head of The Conference Board Enterprise Risk Management Center, and author of the report. “The goal is to create greater awareness of risk and reward tradeoffs, and to drive risk thinking and appropriate risk management throughout businesses. Ownership is a critical operational and cultural component to enterprise risk management. When risks are identified and assigned to individuals, there is likely to be greater accountability for each risk, and greater understanding of how any specific risk impacts a business.”
ABOUT THE SURVEY
The majority of companies represented in the current survey of risk, audit, and finance executives reported $1 billion in revenue, with only 22 percent reporting less than $1 billion revenue. The majority are based in North America (70 percent), with 22 percent from Europe and 8 percent representing the rest of the world.