@Risk

Yesterday, Accenture released its 2009 Global Risk Management Study, and the results, to be frank, are sobering. The economic crisis has hit hard, and the vast majority of companies in the survey (85%) say they need to overhaul their approach to risk management. In the past, there has been little effort to align risk management with core business strategies, or to integrate risk management with operations and performance. Now, though, it appears that organizations are waking up to the benefits of investing in enhanced, integrated risk management capabilities.

Between November 2008 and February 2009, Accenture surveyed CFOs, chief risk officers, and other risk executives from 260 of the world’s largest enterprises. Here are a few of the key findings from the study:

• Companies don’t have the risk management capabilities to meet today’s challenges. 85% of survey respondents said they need to overhaul their approach to risk management.

• Risk management isn’t aligned with business strategy, and it’s not integrated with business operations or performance management. Only 27% of survey participants said the risk-management function was involved to a great extent in objective-setting and performance management.

• If it’s not integrated, risk management isn’t effective. Companies in the survey also admitted: deficiencies in the alignment between their business strategies and risk appetite (85%), inadequate availability of timely risk, finance and business data (80%), lack of integration and aggregation across all risk types (78%), and ambiguous risk responsibilities between corporate and business units (78%).

• Businesses can anticipate more regulations and increased costs. 41% said that their risk-management costs have increased by at least 25% in the past three years —that includes 14% who reported a 50% rise in these costs.

Not all of the results were as grim, however, and the report also hints at a silver lining to the dark clouds.

• Companies are beginning to recognize the business benefits of investing in improve integrated risk management capabilities. Survey respondents cited a variety of potential benefits, including enhanced profitability and sustainability (48%), improved capital allocation (37%), anticipation of crisis/early warning capabilities (27%), and enhanced process efficiency (26%).

• And so, despite tight budgets, most companies already have or are considering increasing investments in risk management capabilities. 40% of respondents said their companies already have increased or will increase investments in risk management capabilities in the next six months. Another 31% said they’re considering increasing risk management budgets.

The 20-page report concludes with recommendations for improving risk management capabilities to drive business values. For example, Accenture advocates for a holistic view of risk across the entire organization. “To be effective, risk management must be a normal and expected component of the meetings and reviews that are held and the questions that are asked. Risk issues must inform governance and decision-making processes, the training people receive, the management and the leadership behaviors expected throughout the organization and the reward structures in place,” the report says.

For more details, read the full report, “Managing Risk for High Performance in Extraordinary Times; Report on the Accenture 2009 Global Risk Management Study.”