Adoption of enterprise risk management (ERM) programmes has continued to grow as 79 percent of respondents said they were currently implementing an integrated ERM programme as against 59 percent two years ago, according to a survey conducted by Deloitte.
It also revealed that “the perceived value of ERM is also on the rise.” The survey solicited responses from chief risk officers or their equivalents at financial services firms around the world. Participating institutions totaled 131, with aggregate assets of more than $17 trillion.
Moreover, the scope and frequency of risk management related reporting to Board of Directors has substantially increased. That was part of the recent findings of the 7th edition of Deloitte Global Risk Management Survey.
In response to the survey question, “how much value do you believe your organisation has received from its ERM programme or equivalent, in each of the areas?,” 81 percent of the respondents said there has been an improved understanding of risks and controls;
76 percent said increased ability to quality escalate critical issues to senior management; 73 percent-enhanced risk culture and better balance of risk and rewards; 72percent favoured improved perceptions by the regulators; 63 percent –improved perceptions by the rating agencies; 59percent- improved reputation and transparency for shareholders;
59 percent agreed there has been reduced losses due to risk events; 54percent- improved risk-adjusted returns; 53percent – improved capital allocation; 40percentimproved earnings quality; 40percent- lowered requirement for economic capital; and 18percent observed there have been reduced insurance premiums.
In response to a poser on “which of the following types of risk information does your organisation currently report to the Board of Directors?,” 73percent of the respondents suggested risk concentrations; 73 percent- operational failures; 72 percent favoured stress testing; 67percent said new and emerging risks; 64 percent- utilizations vs. limits;
58 percent new products and business; 53 percent favoured risk exceptions reporting; 41 percent – code of ethics violations; 31 percent- system risk; 31 percent shareholder/customer complaints; 3 percent- other; and 1percent chose none.
The latest assessment focused on the state of risk management at financial services institutions around the world.
Deloitte survey further observed that the scope and responsibilities of the Board, chief risk officer and risk management function have continued to grow with more and more responsibilities being added.
Seeking to know the step(s) organisations had taken in response to recent concerns regarding risk governance; 63percent favoured improved board risk reporting information against 11percent that frequent board of directors meetings had been adopted, among other options.
The survey, among others, found out that “increasingly, risk management responsibilities are being incorporated into goals and compensation decisions across organisations. This trend will likely continue to grow.
“There has been increased attention given to aligning incentives in compensation to various methods of risk management, results and performance.”