Popular in Course
verified elite notetaker
Popular in none
This 56 page Document was uploaded by an elite notetaker on Monday December 21, 2015. The Document belongs to a course at a university taught by a professor in Fall. Since its upload, it has received 9 views.
Reviews for Report-on-the-Accenture-2011-Global-Risk-Management-Study
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 12/21/15
Report on the Accenture 201 1 Global Risk Management Study Risk management as a source of competitive advantage and high performance 2011 Global Risk Management Study 2 2011 Global Risk Management Study Contents About the research 4 Foreword by Steve C2ulp 5 Executive overview2 7 Major findings 10 Part 1: The increasing imp2ortance of effective risk 2management 11 Part 2: Meeting the coming2 challenges 23 Part 3: Achieving risk mas2tery 35 Appendix: Tracking the growing2 importance of risk2 management 51 References 54 3 2011 Global Risk Management Study About the research One of the largest risk management surveys of its kind, the Accenture 2011 Global Risk Management Study finds that advanced risk management capabilities are high on the executive agenda and now seen as a critical business driver and source of sustained growth and long-term competitive advantage. The Accenture 2011 Global Risk remaining quarter had revenues Management Study is based on a between US$500 million and US quantitative survey of executives $1 billion. from 397 companies across ten In addition to the q2uantitative industries. All respondents were C-level executives involved in risk survey, additional in-dept2h interviews management decisions at their were conducted with 2a number of companies; organizations were executives whose vi2ews are also represented in the 2survey findings. split primarily among Europe, North These interviews en2abled us to probe America, Latin America and Asia many of the key iss2ues and further Pacific. Different-sized companies were also represented: about half explore lessons an2d perspectives the companies represented had of some of the lead2ing companies. annual revenues over US$5 billion; Reflections from the2se executives are 2 included throughout 2this report. one-fourth had revenues between US$1 billion and US$5 billion; the A breakdown of geogragphies and industriesg 2% 8% 18% 9% 1€% 31% 9% 12% 19% 9% 12% 30% 9% 10% 10% North America Banking Energy Insurance Consumer Goods and %Services Europe Asia Pacific Capital Markets Retail Latin America Healthcare Utilities Comms and High Tech Life Sciences Africa Note: Due to roundi2ng, total may not 2equal 100 percent. 4 2011 Global Risk Management Study Foreword Steve Culp Welcome to the Accen2ture 2011 Managing Director Global Risk Manage2ment Study Over the past month2s we have had In conducting the research and this global report,2 we have also creat2ed the pleasure of con2ducting our discussing the results with our clients, industry-specific an2alyses, and these global risk manage2ment survey and a number of themes have risen to can be found on our2 dedicated Global interviewing key e2xecutives—all the top: Risk Management Re2search website: the while, of cours2e, working with www.accenture.com/GlobRalRisk our clients to imp2rove their risk Holistic capabilitiges ManagementResearch20R11. We hope The executive minds2et is broadening, management capabil2ities and help and risk management2 is becoming you will take some2 time to explore t2he them drive better b2usiness outcomes. 2 abundant material o2n this site. The research result2s and our clients’ 2 both more comprehen2sive and more experiences are re2markably consisten2t. integrated—whether i2n decision Pragmatism making or in forma2lizing enterprise 2 One message we have2 heard loud and Executives understand that the risk management pr2ograms or in the clear is the need t2o identify practica2l challenges facing their organizations restructuring of t2he risk management 2 steps that can be t2aken to address have never been greater. They organization and it2s leadership. the risk management2 capability are increasingly looking to risk We see this holistic2, integrated gaps which may exis2t within an management leaders to provide characteristic as c2ritical to achievin2g organization. Towards that end, we 2 guidance on the path ahead, mitigating high performance thr2ough effective have developed a sho2rt diagnostic critical risks and enabling long-term risk management. tool that enables y2ou to benchmark sustainable growth. As a result, Leading practices your organization’2s risk management 2 depending on your vantage point, it is The gap between the2 “best and the capabilities again2st industry leaders2 either a great time or a stressful time to (which we have terme2d “Risk be a risk professional. Or perhaps both. rest” when it comes2 to positioning, Masters”), see the 2comparative result2s leveraging and exec2uting risk and gain access to 2leading practices What we are witness2ing, especially management is incr2easing. The risk as we compare the 22011 results with management functio2n is rapidly and materials to he2lp close any gaps 2 the findings from ou2r last survey in changing and virtua2lly every executiv2e you discover. The Accenture Ris2k Mastery Diagnostic2 can be found 2009, is a clear mat2uration of risk is looking for pee2rs with whom to at: www.accenture.com/GlobRalRisk management capabil2ities across share experiences a2nd from whom to ManagementDiagnostiRc2011 all industries—a ra2pid march up learn. Our global 2report is rich with2 the business value 2chain and the the personal reflect2ions of many I hope that you enj2oy and benefit development of gove2rnance and executives with ris2k management from the Accenture 22011 Global organizational str2uctures that give responsibilities w2ithin their compani2es. Risk Management St2udy. We risk a voice at the2 executive table. In addition, to fac2ilitate and encoura2ge especially value y2our feedback and dialogue, we have c2reated a dedicated the opportunity to 2speak with you Both the survey res2ults and our thought leadership w2ebsite on regarding your own 2experiences in in-depth executive 2interviews have which you can find a 2wealth of generating competi2tive advantage produced clear insi2ghts across industries and geog2raphies: Risk materials explorin2g leading practices2. from risk manageme2nt. Please take management capabil2ities are more You can access the s2ite at: bit.ly/ a moment to contac2t us; we look accentureriskmanagRement. forward to hearing 2from you. critical, more con2nected, more strategic and overa2ll more valuable Industry specificity to enterprises as 2they execute their 2 Executives want to2 compare and business plans. As2 a result, compani2es contrast their expe2riences with peers 2 are spending more t2ime and effort from many types of2 companies, but advancing their ris2k management especially with lea2ders within their capabilities as a 2business priority. own industry. Having access to2 both perspectives can g2enerate new ways o2f thinking, and also 2give executives the2 Steve Culp confidence to push t2hese practices into2 Managing Director their own organizat2ions. In addition t2o Accenture Risk Managgement 5 2011 Global Risk Management Study 6 2011 Global Risk Management Study Executive overview Risk management that enables long-term competitive advantage From reactive to p▯roactive: That’s an effective shor2t summary of the renewed corp2orate attitude towa2rd risk management—2 comparing the findin2gs of Accenture’s 2011 Global Risk Management study wi2th our 2009 survey. Two years ago, the business community2 was still in a st2ate of shock, only 2beginning to recover from a glo2bal economic meltdo2wn. Then, risk mana2gement looked a lot more l2ike crisis managem2ent than a forward 2looking, enterprise-wide app2roach to effectivel2y manage the spectr2um of business risks in 2a way that enables 2sustainable, long-2term growth. Today, across industries2 and around to be effective in2 living their globa2lcapacity”—a company’s capacity to the world, executiv2es are much more operating models. T2he electronic, take on new opportunities (which by likely than they we2re two years ago online, “always-connected” n2ature of definition will include a share of risk), to have invested in2 and advanced business also pres2ents numerous risk2s as well as its ability to withstand the their risk manageme2nt capabilities, of fraud, espionage2 and cyber-crime. economic shocks should those risks and almost all exec2utives surveyed become issues. Neither too cautious indicated that risk 2management is Risk management as ag source of nor too reckless, the best companies a higher priority n2ow than it was in competitive advantagge use their risk management capabilities 2009. Companies have2 increasingly Beyond the immediate pressures of to adjust either their capacity or global markets, more demanding initiated comprehen2sive enterprise customers and dramatic industry their appetite to make more prudent— risk management pr2ograms and are change is a growing recognition that and ultimately successful— more likely to have2 in place C-level 2 companies have an opportunity to investment decisions. executive oversight2 to ensure that ris2k As the Global Risk Manager for a is being managed at2 a more strategic 2 drive competitive advantage from level. In short, ri2sk management their risk management capabilities, European products manufacturer capabilities are n2ot only prevalent 2 enabling long-term profitable growth noted in a research interview, and a target of inv2estments—they and sustained future profitability. “Key risk performance indicators and are also more stra2tegic and aligned specific, focused risk analyses are now This means that risk management at more often included in investment and with growth strateg2ies, and they are the top-performing companies is now strategic decisions.” The Chief Risk helping companies a2chieve their most more closely integrated with strategic Officer of a global reinsurance important business2 priorities. planning and is conducted proactively, company told us that the firm’s Why is risk managem2ent getting with an eye on how such capabilities enterprise risk management might help a company move into so much attention? 2The volatility new markets faster or pursue other framework “is really tailored to and complexity of t2he marketplace evolving growth strategies. At its the company to turn it into a are still primary 2drivers, to be sure2.best, risk management is a matter competitive advantage.” Volatility in cash fl2ow planning and commodity markets, 2and in risk of balance—the balance between a Meeting the coming cghallenges exposure in genera2l, are vexing issu2escompany’s appetite for risks and its Surveyed executives2 also noted that in most industries.2 Companies are als2oability to manage them. An advanced stiff challenges li2e ahead when it dealing with multip2le elements of risk management capability includes comes to developing2 risk management the ability to understand and manage capabilities that a2re adequate to the 2 their business on a2 worldwide scope, what Accenture calls “risk-bearing needs of the busine2ss in the future. requiring new form2s of coordination 7 2011 Global Risk Management Study • The types of risks2 to which Learning from the Rigsk Masters compliance in a wa2y that also deliver2s companies are expo2sed, as well as Some companies are leading the way better business pe2rformance. Risk their severity, are growing acco2rding when it comes to driving competitive Masters are also b2etter at developing2 to surveyed executi2ves. Companies advantage from their risk management relationships with 2regulatory agencie2s. are increasingly c2oncerned about capabilities. The Accenture 2011 the spectrum of ris2ks—from supply Global Risk Management Study • Integrate risk ma2nagement capabilities acros2s business units a2nd chain to operations2 to regulation to 2 identified a set of Risk Masters— organizational str2uctures. Much higher2 reputation. Financ2ial fraud and crime2 about 10 percent of the almost 400 percentages of Ris2k Masters excel at2 are on the rise. companies surveyed—whose risk management capabilities are superior the integration req2uired for effective2 • Despite major inv2estments to risk management, s2omething that improve risk capab2ilities, critical 2 to their peer set. requires a commitm2ent to evolving exposures persist,2 especially given 2 Accenture believes2 that by studying organizational cap2abilities over a companies’ inabili2ty to improve the Risk Masters an2d learning how multi-year program2 of change. their risk measurem2ent capabilities they have effective2ly advanced sufficiently. Risk management 2 their risk manageme2nt capabilities, • Establish a dedicat2ed, C-level risk executive with over2sight and visibilit2y needs to support po2sitive business organizations can 2gain practical across the business2. Top performers growth, not only pr2otect against insights as they lo2ok to enhance their2 separate themselves2 from the pack negative occurrenc2es, so companies own risk managemen2t processes, need a better way t2o assess their technologies and ta2lent. The advanced by having in place 2a dedicated risk executive with suffi2cient visibility a2nd risk-bearing capac2ity. capabilities of the2 Risk Masters stan2d leverage to influen2ce risk management2 as a set of directi2onal goals and • Organizational si2los and outdated working examples f2or all companies capabilities acros2s the entire information system2s prevent many organization. enterprises from a2dequately sharing that seek to genera2te competitive information that co2uld mitigate risks 2 advantage and high p2erformance from • Infuse risk aware2ness across the their risk manageme2nt strategies organizational cul2ture. It is vital 2to more effectively. Better organizat2ional and capabilities. have in place mecha2nisms to create structures and unde2rpinning systems and distribute more2 broadly across are essential if t2he challenge of Based on survey ana2lysis, the followin2g integration is to 2be met. risk management ca2pabilities rose to2 the organization an2 awareness of risk2 exposure, detailed 2training and the • Performance gaps ex2ist between the top when it com2es to mastering a 2 means to mitigate 2risks. new generation of 2risk management: companies’ expecta2tions for risk • Invest in continu2ous improvement. management and what2 is actually • Look to create shareholder value from Risk management is2 an ongoing, achieved. Executive2s want risk risk management. R2isk Masters are management to be a2 driver for especially adept at2 creating processe2s evolving capabilit2y. The world changes 2 rapidly and compani2es must be nimble 2 sustained future pr2ofitability, and and mechanisms that 2link risk to in terms of stayin2g ahead of the curve2 they understand the 2importance of business performan2ce. when it comes to me2eting the risks infusing a risk cu2lture throughout the2ir organization, but 2too few companies 2 • Involve the risk o2rganization in key2 and challenges ahead2. decision-making pro2cesses. The risk are achieving those2 goals. management organiz2ation needs In a world of conti2nued dramatic change—economic, ma2rketplace, • Cost pressures co2ntinue unabated— to be included in a2ctivities such as business and techno2logical—companies 2 requiring effectiv2e management both strategic planning2, objective settin2g committed to driving shareholder value in terms of cost o2f operations and in2 and incentives, fina2ncing decisions and2 terms of investmen2t decisions—though performance manage2ment processes. and strategic busin2ess outputs from their risk manageme2nt capabilities wi2ll other concerns are 2rising as well. • Improve the sophis2tication of be better placed to2 achieve long-term 2 (see Figure 1.) Executives see competitive advanta2ge and a growing need to a2lign risk measurement, modeli2ng and analytics management with the2 overall business 2 to anticipate risk2s in an increasing2ly high performance. complex environmen2t. Risk Masters strategy, respond to regula2tory are more likely to2 measure a fuller 2 demands and improve 2their modeling and analytics capab2ilities. spectrum of risk t2ypes, and they have 2 a higher commitment2 to analytics and risk modeling. • Go beyond a compli2ance mindset of risk management2 to deliver more complete business 2solutions that drive competitive d2ifferentiation. Top-performing comp2anies are better at managing2 regulation and 8 2011 Global Risk Management Study Figure 1 Future risk managemgent challenges What will be the maign challenges for yourg risk organization ign the next two yearsg? Reducing costs 47% Aligning with the overall business strategy 43% Implementing regulatory demands 41% Improving risk management and modeling 41% Data management (availability, consistency, organization) 40% Developing a risk culture 35% Integrating Risk and €inance in‚ormation and processes within the organization 34% Retaining and sourcing resources and talent 31% Developing risk metrics 30% Availability o‚ comprehensive technological solutionAs 30% Raising risk management as a 30% priority ‚or eƒecutive leadership 27% Improving reporting „ollaborating with business units 26% Identi‚ying risk management value proposition 24% …ƒpanding the „hie‚ Risk †‚‚icer‡s role and view o‚ risk 21% ˆop 5 challenges 9 2011 Global Risk Management Study Major findings The Accenture 2011 Global Risk Management Study is one of the largest risk surveys conducted, with almost 400 executives surveyed across 10 major industries and all major geographies. (For more, see 'About the Research'.) The study began wit2h a set of hypothese2s about the increasingly compl2ex business enviro2nment and the The report on the s2urvey findings is in three parts: distinctive risk ma2nagement capabilit2ies that need to be2 in place to surviv2e and thrive in that2 environment. These2 hypotheses included:2 Part 1 details surve2y results related t2o the • Increasing volatil2ity and growing com2plexity make risk 2increased emphasis 2being placed on ris2k management by today2’s executives. critical and centra2l to all industries2 operating in today2's business world. • Although heightened a2wareness of the imp2ortance of art 2 discusses the 2challenges ahead as 2seen risk exists, criti2cal exposures pers2ist and the benefitsthrough the eyes of 2risk management ex2ecutives. enhanced risk capab2ilities have yet to2 be realized. Part 3 provides more2 detail about how R2isk • Top-performing orga2nizations transfor2m risk management 2 into a value-enhanc2ing capability wher2e risk is used as Masters differ from2 their peers and wha2t all competitive differe2ntiator. companies might do 2to emulate their ri2sk • Failure to link ri2sk management to g2rowth and value means leaving mone2y on the table, and2, consequently, management strateg2ies and capabilitie2s. the failure to achi2eve high performanc2e. Each of these hypotheses was borne out by the survey findings. As seen in the report, executives are acutely aware of the importance of advanced risk management both to meet pressing needs and to create advantage in the future. Many challenges remain, but for the most part, most of the senior executives across all industries are prepared to invest in what it takes to protect their customer relationships, ensure compliance and advance their competitive market positions. 10 2011 Global Risk Management Study 1 The increasing impo2rtance of effective risk man2agement Results from the Aiccenture 2011 Global Risk Managemient heightened importanice of risk managemeint capabilities ini meeting today’s business challengies and opportunitieis. 11 2011 Global Risk Management Study Risk insight 1 Increasing volatility and growing complexity make risk management central and strategic to all industries More than 80 percen2t of companies For almost all com2panies, risk Perhaps not surprisi2ngly, the bigger surveyed, across al2l industries, management is a hig2her priority the company, the more likely i2t consider their risk2 area to be a key 2 today than it was t2wo years ago. considers risk a hi2gher priority today2 management functio2n that helps them (See Figure 3.) Ninety-eight perce2nt of than two years ago.2 Sixty-seven deal with marketpla2ce volatility and respondents indicat2ed this was so, and 2 percent of compani2es with annual organizational com2plexity. Eighty-six 60 percent indicate2d it was so “to a revenues over US$52 billion stress ri2sk percent identify th2e risk management 2 great extent.” That2 number was higher 2 as a top priority 2compared with 52 function as a drive2r to help them for financial servi2ces firms (70 percent) percent of compani2es with revenues deal effectively wi2th the increasing and insurance compa2nies (69 percent).2 under US$1 billion.2 volatility of the economic and financial environment; 83 pe2rcent see the Changing regulation2s and fallout from 2 One of the key diff2erences between function as driving2 better management2 the economic crisis2 are clearly driver2s Risk Masters and th2eir peer group of organizational 2complexity. behind higher-than-av2erage responses shows up immediatel2y in this first for these industrie2s—but not the only 2 insight about the n2urturing of the ris2k Interestingly, financial services firms ones. According to 2the Risk Director o2f management functio2n as a means to (banking and capital markets) and an Asia Pacific financial ser2vices firm, deal with marketpla2ce challenges. insurance companies were only “Risk is a higher p2riority for us than2 (For more detail ab2out risk slightly more likely to focus on risk two years ago beca2use business and management mastery2, see Part 3 of management as a support for managing risk complexity ar2e changing—driven this report.) Sixty2-nine percent of R2isk external volatility—reinforcing the view by regulation, com2petition, customer2 Masters believe ri2sk management is that risk management is increasingly expectations, techn2ology, processes, a higher priority f2or their companies 2 important across all industry segments. environmental issu2es and new today than two year2s ago, compared (See Figure 2.) products, as well a2s macroeconomic with 59 percent of 2their peers. and market factors.2 Business and risk 2 Sixty-four percent2 of Risk Masters complexity are ris2ing faster than the2 recognize their ris2k management current risk manag2ement function can2 organization at the2 highest level keep up. Hence, we2 are now enhancing 2 of importance to m2anaging the our risk managemen2t capabilities to 2 increasing volatil2ity of the economic2 enable our organiz2ation to keep pace2 and financial enviro2nment, compared with those complexi2ties.” with 35 percent of 2non-Risk Masters. 2 And 52 percent of R2isk Masters From a geographic p2erspective, slightl2y recognize their ris2k management fewer executives i2n North America (532 organization as im2portant to managin2g percent) state that2 risk management the growing complex2ity of their is a higher priorit2y today “to a great2 extent” compared wi2th Europe (62 internal organizat2ion, compared to ju2st percent) and Asia P2acific (65 percent)2. 27 percent of the o2ther companies. This finding is most2 likely due to In short, the Risk Masters the fact that many 2North American acknowledge risk management as companies have been2 investing in risk2 a key priority for their companies management as a pr2iority for several2 and plan and invest accordingly. years. However, leading practices2 and As the Chief Risk Officer of one of abilities to share 2risk management the companies in our survey put it, lessons are clearl2y multi-directional2 “A high-quality and efficient risk in today’s global environme2nt. All management function is among the companies need to l2ook both East and top strategic goals of the company, West in seeking out2 important insights2 ranking second only to growth from today’s best companies. and profitability.” 12 2011 Global Risk Management Study Figure 2 Risk management capgabilities are seen gacross industries as gcritical for managigng volatility and organgizational complexitgy How would you rate thge importance of yourg risk organization ags a driver to achievge the following? Managing the increa2sing volatility of2 the economic Managing the growin2g complexity of the2 and financial enviro2nment (external fo2cus) organization (inte2rnal focus) 90% 90% 86% 85% 82% 85% 84% 84% 83% 79% Financial Insurance AverageOther Resources Resources FinanciaOther Average Insurance Services Industries Services Industries % of Critical and Impoortant Note: Financial Services oincludes Banking ando Capital Markets€ Resources includes ‚otilities and ƒnerg„€ Other Industries incoludes… Consumer †oods‡o Retail‡ ˆife Sciencoes‡ ‰ealthcare and Commuonications and ‰igh Šech€ Figure 3 For almost all compagnies, risk is a higher prgiority today Is risk management ag higher priority for gyour company now thang 2 years ago? 98% 38% 60% 1% 1% Not at all Yes, to a limited e%xtent No, less of a prio%rity Yes, to a great exte%nt 13 2011 Global Risk Management Study Risk insight 2 Executives see their risk management capabilities as important to future profitability and long-term growth Beyond simply seeing risk management These are high perce2ntages. Put of sustainable fut2ure profitability as a top priority, Risk Masters vie2w another way, 91 percent and 93 compared with 46 per2cent of the the risk management2 function as a percent of executi2ves, respectively, others, a 21 point difference.2 Similar more proactive par2tner to the busines2s, see the risk manage2ment function as gaps were found in 2other business helping to drive gr2owth and sustained important or criti2cal to growth and benefits to be deriv2ed from effective profitability. Almost all respo2ndents profitability. The Risk Director2 for an risk management: felt that their ris2k management Asia Pacific financial ser2vices firm • Reduced operational2, credit or capabilities provi2de at least some states this importa2nce explicitly: “O2ur market losses: 74 p2ercent of Risk source of competit2ive advantage, a risk organization 2and functions were 2 finding consistent established to supp2ort and enable Masters versus 34 p2ercent of others across industries. our organization t2o achieve strategic2 (40 point difference2) goals such as susta2inable growth and • Infusing a risk cu2lture in the About half the comp2anies surveyed (49 percent) see the2ir risk organizati2onprofitability, competitive advan2tages organization: 69 p2ercent versus as a critical drive2r for enabling lon2g- and capital managem2ent. Put simply, 36 percent (33 poi2nts) term profitable gro2wth; another 42 we recognize risk 2as a part of the • Positive comments f2rom analysts: strategic agenda.” 2 percent saw their r2isk management 55 percent versus 223 percent (32 capabilities as “i2mportant” to growt2h. From an industry pe2rspective, retaile2rs points) Almost identical nu2mbers (48 percent) 2 find their risk mana2gement function to2 • Managing reputatio2n: 62 percent saw risk managemen2t as critical to be a source of com2petitive advantage,2 sustained future pr2ofitability, with with capabilities t2hat include more versus 35 percent 2(27 points). another 45 percent b2elieving it to be 2 efficient capital a2llocation and As further support,2 the link between “important.” (See Figure 4.) reductions in cost 2of capital. At 37 2 risk management an2d profitability has 2 percent, consumer 2goods and services 2 been validated by o2ther independent, is the least likely2 industry to believ2e academic studies. A2 2009 research the risk function i2s a source of initiative from the2 University of competitive advanta2ge and of higher Gothenburg, for exa2mple, found performance relati2ve to competitors.2 that credit risk ma2nagement had a positive impact on2 profitability for 2 Our risk organization the commercial bank2s in the study. and functions were The findings reveale2d that credit risk management had a po2sitive impact established to support on profitability at2 all four banks studied. Capital ade2quacy ratio (CAR) 2 and enable our contributed positiv2ely to banks’ organization to achieve profitability as me2asured by return on equity (ROE), w2hile non-performing2 strategic goals such as loan ratio (NPLR1 2showed sustainable growth and negative effects. As seen in the deta2iled discussion profitability. of risk mastery in2 Part 3, supporting 2 By generally wide m2argins, Risk growth and profitabi2lity will depend Masters were signi2ficantly more likel2y on a number of adva2ncements to see the risk org2anization as a driv2erthat improve the ri2sk management of several importa2nt business benefit2s. function’s ability to be pr2oactive and (See Figure 5.) For example, 67 to achieve a more s2trategic reach. percent of Risk Ma2sters hold their ris2k management capabil2ities to be a drive2r 14 2011 Global Risk Management Study Figure 4 In addition to managging compliance, risgk management is seeng as an enabler of long-term growth and gprofitability What is the importangce to your organizatgion as a driver to agchieve the following?g Average 3.€‚ 6% 41% 53% Compliance with reSgulations 3.3ƒ 8% 42% 49% Enabling long term Sprofitable growth 3.€„ †ˆ 6% 45% 48% Sustainability of fuSture profitability 3.…† 3ˆ 13% 44% 40% Managing liquidity Sand cash flow 3.3„ †ˆ 8% 51% 40% Infusing a risk cuSlture in the organSization 3.…‚ †ˆ 10% 50% 39% Reduced operationaSl, credit or markeSt losses 3.…3 †ˆ 12% 49% 38% Managing reputationS in public and mediSa Managing the increaSsing volatility of tShe 3.…3 …ˆ 12% 48% 38% economic and finanScial environment 3.…€ †ˆ 11% 51% 37% Risk-adjusted perfSormance managementS 3.…„ …ˆ 12% 50% 36% Improved capital alSlocation 3.†‡ †ˆ 14% 51% 34% Reduction in the cSost of capital 3.†€ 3ˆ 14% 49% 34% Positive rating fromS rating agencies 3.†€ 3ˆ 12% 53% 32% Competitive advantagSes 3.†… †ˆ 15% 54% 30% Managing the growinSg complexity of theS organization 3.„3 3ˆ 18% 53% 26% Positive comments frSom analysts ‰ot important at aSll Important ‰ot really importanSt Critical 15 2011 Global Risk Management Study Figure 5 Risk Masters are morge likely to use theigr risk management cgapabilities to drivge important business bgenefits How would you rate the importance of your risk organization as a driver to achieve the following? Reduced operationahl, credit or markeht losses …ƒ„ ‚ƒ„ Infusing a risk culhture in the organizhation †‡„ ‚†„ Sustainability of fuhture profitability h †…„ ƒ†„ Managing the increahsing volatility of hthe economic †ƒ„ and financial envirhonment (external fohcus) ‚ˆ„ †‰„ Managing reputatiohn in public and mehdia ‚ˆ„ †Š„ Compliance with reguhlations* ˆ‰„ †Š„ Enabling long-termh profitable growth*h ƒ…„ ˆ…„ Risk adjusted perfohrmance management*h ‚ˆ„ Managing liquidityh & cash flow ‚‹„ ˆˆ„ €ositive comments hfrom analysts ‰‚„ ˆˆ„ €ositive rating frohm rating agencies h ‚‰„ ˆ‰„ Managing the growinhg complexity of theh organization (interhnal focus) ‰…„ ˆ‰„ Improved capital alhlocation ‚ˆ„ ƒ‹„ Competitive advantahge* ‚Š„ ƒ‚„ Reduction in the cohst of capital* ‚‚„ ‚ƒ„ Critical for Risk MahsteCritical for Œon-Risk MasterŽop ‚ largest gaps *Œo significant diffehrence between Riskh Masters and non-Rhisk Masters‘ 16 2011 Global Risk Management Study Risk insight 3 Companies are implementing comprehensive enterprise risk management programs As a sign of the in2creasing importanc2e As seen in some of2 the findings Several of the exec2utives interviewed 2 of risk both in man2aging market discussed previousl2y, financial stressed recent wor2k within their risk2 events and in drivi2ng better services firms are 2above the survey management functio2n to create a business performan2ce, we find that average in this are2a: 79 percent have 2 more comprehensive 2ERM framework. companies are inve2sting: they are existing ERM progr2ams compared At one Asia Pacific financial ser2vices taking risk manage2ment seriously to the survey avera2ge of 67 percent. 2 firm, management has2 recently from a structural 2and technological Resources companie2s—utilities and reviewed its ERM bl2ueprint as a perspective and spe2nding in smart energy—were below 2the average at path toward managin2g risk more ways to make it mo2re durable. 56 percent. This is2 perhaps due to the 2comprehensively and2 in an integrated More than 80 percen2t of survey fact that this indus2try has historicall2fashion. Noted the e2xecutive, “We respondents overall2 have an enterprise2 had very specific ri2sk management understand that the 2best approach for initiatives across2 both their upstrea2m capturing and using2 risk measures is 2 risk management (E2RM) program in and downstream oper2ations, so these an integrated appro2ach.” The company place or plan to ha2ve one in the next 2 companies are there2fore starting from2 has also establishe2d an Enterprise Ris2k two years. And the 2existence of ERM programs correlate2s strongly with ris2k a higher base. Management Divisio2n and a Policies mastery. High percentages 2of Risk Interesting geogra2phical differences 2 & Governance Unit,2 a reconfiguration 2 of its previously 2existing Risk Masters (90 percent2) have an ERM were apparent from2 the survey results2. Management Divisio2n, to enhance its program in existen2ce today, compared Companies in Latin2 America, for firmwide risk manage2ment capabilities.2 with only 64 percent2 of of non-Risk example, are espec2ially likely to hav2e Masters. (See Figure 6.) ERM programs—an al2most unanimous In accord with the e2arlier point 99 percent of those2 surveyed. about risk managem2ent as a European companies2 were the least support for busine2ss performance, likely to have an E2RM program at 52 Accenture believes2 that one of the percent; North America was also b2elow primary benefits of2 a comprehensive the survey average 2at 60 percent. enterprise risk ma2nagement capabilit2y is its symbiotic r2elationship with performance manage2ment. Risk Figure 6 management and perf2ormance management are rea2lly two sides Risk Masters are m2ore likely than the2ir peers to have of the same coin. A2 certain tension an existing enterp2rise risk manageme2nt program must exist, since 2the risk function exists in part to 2rein in behaviors Does your company have an Enterprise Risk Management that could damage th2e company and keep entreprene2urial activities (ERM) program? within reasonable l2imits. However, there are times whe2n a strong risk Risk Masters management capabil2ity should 7% 90% encourage a compan2y to probe those 0% 2% limits. With closer2 integration, the risk and performanc2e sides of the Non-Risk Masters organization are k2ept in sync, worki2ng 9% 11% 16% 64% together toward the 2common goal of driving growth and p2rofitability. If it is to be accurate, me2asuring performanc2e No Yes management must ac2count more No, but it is in dgiscussion comprehensively for2 risk. No, but we are plangning to implement one in the next 1–2g years Note: Due to rounding figu2res might not total2 100% 17 2011 Global Risk Management Study Risk insight 4 Companies are establishing C-level oversight of the risk management function Compared to the situation in 2009, we Almost half of the executives surveyed and business-unit level. Only 6 percent find that there has been an increase (45 percent) say the majority of risk are totally decentralized, with risk in appointments of Chief Risk Officers management is owned by the CRO, managed only in the business units. (CROs) or their equivalent—executives up from only 33 percent in 2009. Financial services and insurance who in most cases own the primary (See Figure 7.) A higher proportion companies, largely organized internally responsibility for risk management. of financial services and insurance between credit, market and operations Over two-thirds of all survey firms have CROs owning risk areas, typically manage risks in a management—59 percent and 54 respondents have a CRO operating percent, respectively, compared with decentralized manner. Among non- with that title. Another 20 percent the survey average of 45 percent. financial firms, retailers are most likely have an executive in the role fulfilling to have an executive with assigned risk those responsibilities, though without From an industry perspective, insurance responsibilities and have a centralized the title. Financial services companies companies are more likely to have risk management function. are more likely to have an executive in their risk executive reporting directly place with the CRO title (84 percent); to the CEO—88 percent, compared What’s the key takeaway with regard to executive oversight of the risk insurance companies (71 percent) are to the survey average of 79 percent. management function and the manner also above the survey average of Geographically, Latin American business in which it is structured? Above all, 64 percent. appears to stress the importance of the criticality of risk management a direct reporting relationship of the risk executive to the CEO: 100 percent is being recognized and supported of Latin American respondents have a by investments in capabilities but, risk owner reporting directly to the top equally important, by the way it is staffed and connected to the day-to- executive; in North America, only 70 day flow of business. percent of risk owners report to the CEO. Financial services and The presence of CROs is not limited insurance companies, only to large companies. Indeed, higher percentages of companies with largely organized revenues of US$500 million to US$1 billion (73 percent) have a CRO in internally between credit, place, compared with 63 percent of companies whose revenues exceed market and operations areas, typically manage US$5 billion. What is the optimal structure for risks in a decentralized organizing the risk organization, manner. in terms of centralization versus operating directly within the business units? Here, no dominant model has emerged, because effective risk management needs to reflect and integrate with the culture of the organization to be part of how things get done well, not exist as a separate function sitting above, below or alongside the core business processes. Forty-four percent of respondents have a single, centralized risk management function operating at the corporate level; 50 percent have an amalgam, with risk functions at both corporate 18 2011 Global Risk Management Study Figure 7 Compared to the Accegnture 2009 Global Rgisk Management Studgy, more companies now have ing place a Chief Riskg Officer who owns risk mganagement Who primarily owns risk management in your organization? 33% Chief Risk Officero 45% Chief Executive Ofoficer 23% 45% 13%% Chief Financial Offiocerr 14% 23% 34%% Chief Compliance Offiocer 8% 14% 8%% Chief Compliance Offiocer 8% 3%% Chief Operating Offiocer 5% Risk Controllerg Offiocer3%5% 6%% Other Controller 32% 3%% Other 2% 3% Accenture 2009 €lo‚alo Risk ƒanagement „tu…o† Accenture 2009 €lo‚alo Risk ƒanagement „tu…o† Does your company have a Chief Risk Officer? Yes, someone has the otitle 64% Yes, a senior executoiveitle 64% Total performs the role of the Cohie14% Yes: Risk Officer withouot the title Total performs the role of the Cohief14% 84% Yes, a manager reportiong to an Yes: executive performs tohe roleitle 84% Yes, a manager reportiong to an executive performs tohe role No 14% No 14% Don’t know 2% Don’t know 2% 19 2011 Global Risk Management Study Risk insight 5 Executives expect 2their investments i2n risk management to2 increase over the 2next two years As the importance o2f risk Eighty-three percen2t of respondents Geographically, Latin American management expands,2 and as see risk managemen2t investments companies foresee 2larger risk companies increasi2ngly view the risk 2 (which includes sala2ry and benefits formanagement investm2ents than other management functio2n not only as a risk employees, pr2ofessional service2s,parts of the world:2 90 percent foresee2 preventive capabil2ity but also as a 2 technology costs, f2acilities and trave2significant or moder2ate investment performance enabler, one would expect increasing in the n2ext two years. Of 2 increases, compare2d to the survey spending levels to 2rise accordingly. those, 21 percent foresee a2 significantaverage of 83 perc2ent. Asia Pacific and This is indeed the e2xpectation of the increase (more than2 20 percent) while North America are s2lightly under the executives surveye2d in the Accenture 2 62 percent foresee 2an increase of les2saverage, at 82 perc2ent and 81 percent, 2011 Global Risk Manag2ement Study. than 20 percent. (See Figure 8.) respectively. Spending is already2 fairly significant2The largest compani2es, perhaps not More than half of t2he companies surprisingly, will continue to2 invest at surveyed have inves2ted at least US$25 2comparatively highe2r levels. Among million over the pa2st two years in companies with reve2nues exceeding risk management ca2pabilities. Fiftee2n US$5 billion, 88 p2ercent of executiv2es percent of responde2nts have invested foresee significant2 or moderate between US$50 milli2on and US$100 investment increas2es, compared to the2 million. About 1 in2 10 has invested survey average of 283 percent. above US$250 millio2n. (See Figure 9.) What enhancements i2n particular Looking ahead, the l2argest investment 2do companies intend2 to invest in? increase in risk m2anagement The top answers wer2e: data quality; capabilities will 2be in financial ser2vices: management and arch2itecture; 90 percent of respo2ndents from the analytics and risk 2modeling; and finance industry for2esee significant better integration2 of risk processes2 or moderate investm2ent increases, with finance process2es. However, compared to the sur2vey average of many other areas ar2e also slated for 83 percent. investment, includi2ng performance management, IT inf2rastructure, proce2ss re-engineering and 2automation. (See Figure 10.) Figure 8 Companies expect to ginvest in their riskg management capabilities in theg coming years How will the total level of investment to develop risk management capabilities evolve in the next two years? 83% 1% 14% 62% 21% 2% Significant decreahse (more than 20% lowher) Moderate increase h(less than 20% higherh) Moderate decrease h(less than 20% lower)h Significant increahse (more than 20% highher) No change 20 Below $10m- $25m- $50m- $100m- 2011 Global Risk Management Study $10m $25m $50m $100m $250m $250m know Figure 9 Companies are making significant investments in their risk management capabilities What is the total approximate investment your company has made at the global level, to develop its risk management capabilities over the last two years? 20% 18% 15% 15% 15% 9% 8% Below $10m- $25m- $50m- $100m- Above Don’t $10m $25m $50m $100m $250m $250m know Figure 10 Companies intend to ginvest in a range ofg important risk mangagement capabilitiegs What changes are you currently undertaking or considering for the next two years in order to enhance your risk organization? 10% 41% 49% Data quality, management and aorchitecture 12% 39% 49% Analytics and risk moodeling 10% 41% 49% Better integration oof Risk and Finance oprocesses 16% 36% 48
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'