Enterprise Risk Management gaining ground

The seventh edition of Deloitte’s ‘Navigating in a changed world,’ surveyed chief risk officers from 131 financial institutions around the world, with aggregate assets of more than $17 trillion and representing a range of financial services sectors including banks, insurers and asset managers.

Major findings from the survey included:

* While the majority considered their institution to be either extremely or very effective in Risk Management overall, one-third (33%) of survey participants graded themselves below that level.

* Not only is the Chief Risk Officer (CRO) role more prevalent at financial institutions, but he or she is reporting to higher levels in the organisation. According to the survey, 86% of institutions had a CRO in place, up from 73% in 2008, and reports to the board level or to the CEO (or both) at 85% of institutions. In addition, they are playing a more strategic role.

* More institutions have adopted Enterprise Risk Management (ERM) programs: 79% of institutions reported having a program or equivalent in place or in progress, an increase from 59% in 2008.

* While the value of ERM has increased, so have the challenges of implementing the information and technology infrastructures to support a comprehensive program; the importance of information and technology management in effective risk management has only been emphasised by the events of the global financial crisis.

* The top-rated Risk Management technology challenge among those surveyed was integrating risk data across the organisation, which was rated as an extremely or very significant issue by 74% of executives.

Deloitte’s study also indicates that financial institutions may need their Risk Management programs to have greater flexibility to adapt to new business models and changing regulatory requirements.

“During the last few years, Risk Management assumptions and methods have been challenged as never before, and will be facing even more rigorous requirements in the future,” said Hida. “Regulators have numerous risk-focused efforts on the horizon including Basel III, systemic risk initiatives and various implementation efforts related to Dodd-Frank Act.

As a result, many institutions have been strengthening their Risk Management governance models, and there is likely to be a continued focus on enhancing Risk Management data and analytics capabilities. This is a very busy time for Risk Managers at financial institutions.”

The report can be found online at www.deloitte.com/fsiglobalrisksurvey