Firms say risk management bigger, but not better
New Ernst & Young survey reveals continued risk management failings
NEW YORK - Actions taken by firms to strengthen their risk management procedures are too often proving ineffective and possibly counter-productive, a survey has revealed.
According to Ernst & Young's Future of risk survey, in which more than 500 senior executives were interviewed, 61% of respondents now say they do not plan to commit more resources to risk management over the next 12-24 months.
The survey shows the number of risk management functions has increased to keep up with compliance requirements but, despite this increase, the coverage and focus of these areas have become both increasingly difficult to manage, and the situation has been compounded by a lack of alignment.
"Although many organisations have boosted the size and reach of their risk management functions, this does not always equate to an increase in effectiveness," says Norman Lonergan, Ernst & Young's global advisory leader based in London. "Too few organisations can claim that shared reporting, data exchange and co-ordination consistently occur among their various risk management functions.
"In the end, this only leaves the organisation more vulnerable to the threat of risk."
For example, 73% of respondents indicate they have seven or more risk functions, but 67% have overlapping coverage among two or more risk functions, with half of those reporting they have gaps in terms of coverage.
"Risk management functions within an organisation often exist in silos that are disconnected from one another and the wider business strategy," says Gerry Dixon, global risk leader at Ernst & Young based in New York. "As a result, risks identified in one area might not be communicated or recognised by another. Moreover, different areas within an organisation might have different views on the severity or importance of certain risks."
Dixon adds: "Leading companies are creating a competitive advantage by using the economic downturn as an opportunity to make practical yet valuable improvements to the way risk is managed.
"More than ever, organisations need to have a comprehensive and co-ordinated risk management approach with strong executive oversight and board of director governance. The opportunity to make those changes is now."
The survey was conducted for Ernst & Young by the Economist Intelligence Unit in June and July and is available here.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
European banks search for consensus on credit spread risk
New EBA guidelines spawn diverging interpretations of which products must be assessed for CSRBB
Dutch regulator in new push on algo manipulation
AFM teams up with Oxford Uni academics to develop data models that will identify “harmful” collusion in automated trading
Fed relief plan for G-Sib agency clearing welcomed
Rollback may revive interest in European FCM model, as principal clearing still treated punitively
Indian initial margin launch brings operational headaches
Conglomerates with multiple entities trading derivatives pose compliance challenges for dealers
Fed’s new liquidity rule spells more pain for regional banks
Limit on HTM assets follows move to deduct unrealised losses from capital buffers
Ruled out: can regulators settle the pre-hedging debate?
Market participants are at odds over the practice and whether regulation or principles can settle the score
SEC streamlines overhaul of stock trading rules
Tick size and access fee rules simplified from first draft, but Peirce still questions rationale
Supervisors use generative AI to tame ‘chaotic’ data
Officials merge credit databases with unstructured reports to sharpen bank oversight, explains Banco de España ex-deputy