This must be the season for surveys on risk management. E&Y recently published their perspective on risk management. They surveyed over 500 companies around the globe, almost 80% of which have over $1 billion in revenue, and the sample represents a variety of industries. You can find the report here.
Only 1% of those surveyed said they would be spending less on risk management in the next 12 to 24 months, which clearly makes sense given recent events; however, putting this in context of overall corporate revenue declines suggests that risk management will emerge from the recent downturn with a large share of the overall spending pie.
E&Y zeroed in on the complexity of risk management at most organizations:
“Over the past few decades, the number of risk management functions has grown to the point where most large companies have seven or more separate risk functions — not counting their independent financial auditor. This has created inefficiencies and resulted in a degree of fatigue on the business.
As the number of risk functions increases, coordination becomes more diffcult and often results in coverage gaps and overlapping responsibilities. The demands and various reporting requirements placed on the business by these risk functions can become significant and burdensome. The number of risk functions and the various communications from these functions can be a challenge for executives and the board of directors to manage and understand.”
In fact, over 90% of those surveyed indicated that there is overlapping coverage in two or more risk functions. Now, redundancy isn’t always a bad idea, but my guess is that a substantial portion of the overlapping coverage is the result of inefficient processes and technology infrastructure. The argument for efficiency addresses not just the business fatigue that multiple risk management functions create but also the huge infrastructure cost of supporting multiple platforms and processes. Interestingly, 61% said that they planned to commit no additional resources augment their capabilities, which means that incremental spending will have to come from savings, which by our measure can amount to millions of dollars per year. Please contact us if you’re interesting in exploring those savings at your organization.