Most Banks Lack Enterprise-wide View of Risks

According to a recent survey commissioned by Ernst & Young,  the vast majority of major financial institutions lack a consolidated view of risk across their organizations.  Only 14% of the 40 global banks surveyed indicated that they have a solid enterprise risk management program.  Given the current crisis and admission that risk controls are lacking, the majority of the respondents also indicated a need for increased investment in this area (see graphic below).  Some of the other findings of the study included the following.

Organizational silos, decentralization of resources and decision-making, inadequate forecasting, and lack of transparent reporting were cited as major barriers to effective enterprise-wide risk management. The need to create a risk-aware culture throughout the institution emerged as a top priority in the study — three-quarters of all respondents cited its vital importance — as banks struggle to develop a consolidated view of risk across business units and various risk dimensions.

The need for effective enterprise risk management programs is certainly clear not only for financial services companies, but also for non-financial services companies.  How effective is your company’s risk management program?  For a no-cost, diagnostic review of your program, contact Wheelhouse Advisors today.

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About Wheelhouse Advisors
Wheelhouse Advisors LLC is the publisher of The ERM Current™, an online publication and blog dedicated to providing the latest updates on current trends in Enterprise Risk Management & Control. Wheelhouse Advisors provides cost-effective Enterprise Risk Management & Control solutions to both large and mid-size corporations. To learn more about Wheelhouse Advisors, please visit our web site at www.WheelhouseAdvisors.com.

2 Responses to Most Banks Lack Enterprise-wide View of Risks

  1. russwbeck says:

    “Only 14% of the 40 global banks surveyed indicated that they have a solid enterprise risk management program.”

    This is a major problem. I completely agree that banks must change this. However, with no policy from the government forcing them to, banks won’t unless they feel it is ‘economic.’ And in today’s world, who’s going to want to spend more money?

    • You make a great point regarding the economic incentives. Beyond the obvious loss avoidance related to events such as the current financial crisis, some external forces are beginning to emerge. For example, Standard & Poor’s has recently adopted an ERM focus in determining credit ratings for both financial and non-financial companies. Not having a true enterprise-wide view of risks will ultimately result in higher credit costs for these companies.

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