Stepping Back to Move Forward

New survey results on Enterprise Risk Management (“ERM”) practices at global financial institutions was released last week by Deloitte.  The survey points to the changing attitudes towards ERM as well as the continued challenges many institutions face as they implement ERM programs.  Here is a summary of the survey results.

The seventh edition of the report, titled “Navigating in a Changed World,” surveyed chief risk officersor their equivalent – from 131 financial institutions from around the world, with aggregate assets of more than $17 trillion and representing a range of financial services sectors including banks, insurers and asset managers.

Among other major findings in the survey:

  • While the majority considered their institution to be either extremely or very effective in risk management overall, one-third of survey participants graded themselves below that level.
  • Not only is the chief risk officer (CRO) role more prevalent at financial institutions, but he or she is reporting to higher levels in the organization. According to the survey, 86 percent of institutions had a CRO in place, up from 73 percent in 2008, and reports to the board level or to the CEO (or both) at 85 percent of institutions. In addition, they are playing a more strategic role.
  • More institutions have adopted enterprise risk management (ERM) programs — 79 percent of institutions reported having a program or equivalent in place or in progress, an increase from 59 percent in 2008.
  • While the value of ERM has increased, so have the challenges of implementing the information and technology infrastructures to support a comprehensive program; the importance of information and technology management in effective risk management has only been emphasized by the events of the global financial crisis.
  • The top-rated risk management technology challenge among those surveyed was integrating risk data across the organization, which was rated as an extremely or very significant issue by 74 percent of executives.
  • More than 80 percent of institutions experienced significant impacts from regulatory changes in the countries where they operate; at 40 percent of responding institutions, these impacts included the need to maintain higher capital levels and the need to maintain higher liquidity ratios.

It seems that while ERM is gaining in prominence within these organizations, the primary challenges to a successful ERM implementation remain.  Many companies will find themselves needing to take a step back to streamline ERM processes before trying to tackle the gaps in information and technology.

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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.

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