A lack of financial resources is preventing vital improvements to risk management
The global financial crisis has prompted a wholesale re-evaluation of risk management. But while companies admit that major change is needed, a significant proportion is unwilling, or unable, to make the necessary enhancements.
Beyond Box-ticking: A new era for risk governance,a new report written by the Economist Intelligence Unit and sponsored by ACE and KPMG, finds that a lack of financial resources will be the biggest barrier to effective risk management in the year ahead. Companies everywhere are conserving cash, cutting headcount and reining in expenditure. The report finds that risk functions are no exception, with the result that important improvements to risk management are pushed to the sideline.
Asked about the biggest barriers to effective risk management in their organisation, the 364 risk professionals questioned for this study point to poor data quality, inadequate technology and a lack of expertise. But rather than tackling these issues, risk professionals say they are more likely to concentrate on process improvements and training. This suggests that, rather than addressing the key risk management issues—which also carry the biggest price tag—companies are instead opting for some quick wins, and trying to do more with less. While this will have some limited impact the underlying problems with risk management are likely to remain.
“Companies are facing a difficult dilemma in the current environment,” says Rob Mitchell, editor of the report. “On the one hand, they recognise the need to allocate greater time and resources to risk management so that serious shortcomings with their current approach can be addressed. But, on the other hand, they are facing huge pressures to keep costs under control. Satisfying these competing objectives poses something of a conundrum, and this could prevent necessary fixes to risk management from being made.”
