CFOs are looking for ways to maintain earnings stability and secure a competitive advantage in the uncertain economic market and are finding it in an unlikely place—risk management—according to final results of a survey released by Aon.
Companies are discovering that a more strategic approach to risk management can help identify promising new opportunities, limit potential surprises and create efficiencies.
“Strategic risk management should focus on the critical risks that could impact the company’s business strategy,” Aon’s risk strategies spokesperson – managing director, Randy Nornes said. “With the skittish state of financial markets today, companies can ill afford to simply respond to surprises. Leading companies are using risk assessment, risk modeling and planning to anticipate and exploit risk.”
According to the survey, CFOs believe that strategic risk management can create other significant benefits, including better capital allocation, lowered cost of risk transfer, and an improved response to a wider range of risks. Nearly half of CFOs surveyed believe that risk management creates a competitive advantage for their company. Conducted by CFO Research Services last fall, the survey shows that a significant number—more than half—of senior financial executives at multinational companies have or expect to fully integrate their risk management functions across the company in three years. Only 12 percent expect to continue managing risk on an individual risk-by-risk basis.
However, the study also shows that CFOs face significant challenges in implementing a more strategic approach to risk. Common obstacles include a lack of uniform metrics, time constraints, limited human and financial resources, and inadequate data and technology support. Nearly three out of four surveyed hope that greater involvement from Board-level audit committees will lead to greater senior management support, ultimately helping to overcome some of these obstacles.
“Audit committees are continuing to take a more active role in risk management. As a result, leading companies will continue to accelerate efforts to integrate risk management across business units and promote a closer linkage between risk management and business strategy,” Nornes advised.
The complete results of the survey, “Strategic Risk Management: New Disciplines, New Opportunities,” are available online at www.aon.com and www.cfo-research.com.