Over the last few weeks, several studies have emerged that indicate a growing demand for risk management. In one of the better ones, in late July, Accenture published their study on Risk Management. Entitled Managing Risk for High Performance in Extraordinary Times, Accenture surfaces several major findings, a few summarized here:
1. Risk management capabilities are not up to today’s challenges.
2. Risk management is too separate from the business and not integrated with day to day operations.
3. Companies are expecting to invest more in their risk management capabilities, despite the fact that many budgets are decreasing.
The study’s participants included 250 of the world’s largest companies; Accenture appears to have spoken with a representative sample of global businesses. Many of the study’s participants were focused on trying to align risk management with strategic objectives. Over 90% of respondents said that one of risk management’s primary challenges in the next two years is being aligned with overall business strategy. In other words, how can risk management help the business take on more risk?
This makes sense. As companies look to exploit competitors’ weaknesses during this downturn, they’re likely to want to move into new markets, offer new products, develop new channels. But these kinds of strategic initiatives will be coupled with additional risks that must be managed. We have always talked about the importance of integrating risk management into day to day operations and have developed software to enable business users to incorporate risk management in to their daily activities. As companies take on more risk to capitalize on opportunities afforded by the current downturn, they will be looking for programmatic ways to have business managers identify and manage risks associated with these new opportunities. From the current financial crisis, we now have many good examples of what happens when companies discount the risk management process, which is one reason risk management, both in terms of personnel and technology, is in greater demand today than a year ago.