The financial crisis has raised the expectations that executives in the C-suite have of their risk managers to be leaders within their organizations.
These top executuves want their risk managers to take a more active role in integrating enterprise-wide risk management with their organizations’ broader strategic goals, according to a new survey by Marsh and Risk and Insurance Management Society (RIMS).
An overwhelming majority of risk managers and C-suite executives agree that, during the three years of the financial crisis, expectations of the risk management function have grown, according to Excellence in Risk Management study published jointly released at the RIMS 2011 Annual Conference in Vancouver.
“For those risk managers who may not be sitting on the firm-wide risk committee, now is an opportune moment to seize on these growing expectations and establish a strong strategic role for themselves and their departments,” said Brian C. Elowe, a managing director in Marsh’s Global Risk Management Division.
Of the survey’s more than 1,000 respondents, 80 percent said senior leadership’s expectations of their organization’s risk management departments have grown over the past three years.
When C-suite respondents were asked in what areas expectations have grown:
- 61 percent said they want to see risk managers integrate deeper with operations;
- 60 percent said risk managers need to execute day-to-day activities more efficiently;
- 58 percent said risk managers should do more to lead enterprise risk management activities within the organization; and
- 54 percent said risk managers need to provide better quantification and analysis on risk management; develop greater understanding of non-insurance risks; and increase their involvement in the organizations’ overall business strategic planning efforts.
Although both groups agreed that companies expect there to be deeper integration of risk management across the enterprise, the survey highlighted some areas of disconnect between the views of the C-suite and those of risk managers.
For example, risk managers were much more likely to say that risk management needs to be involved earlier in the strategic planning process; that senior management needs to increase its support of the function; and that communication between risk managers and senior management needs to improve in order for risk issues to be better integrated into overall strategic planning efforts.
Survey participants agreed that in many organizations the presence of “siloed approaches” make it more difficult to practice risk management on an enterprise-wide basis.
“Clearly, the opportunities are there for risk managers to become stronger leaders within their organizations,” said Carol Fox, director of Strategic and Enterprise Risk Practice for RIMS. “Risk managers needn’t wait for an invitation. Rather, seeking opportunities for involvement in strategic initiatives and fostering deeper collaboration across ‘siloed’ functions will demonstrate risk management’s value in advancing the organization’s strategic and operational objectives, just as the C-suite expects.”
Other findings from the survey include:
- Nearly 60 percent of respondents said their use of data and analytics has changed over the past three years.
- Economic conditions ranked as the number one risk among respondents for 2011, and were citied as the risk area that respondents expressed the most discomfort over their organizations’ ability to manage.
- The number of respondents reporting that they have a cross-functional risk committee increased significantly over the past year, from 47 percent to 62 percent. Only 30 percent of respondents, however, described their risk committees as “very effective.”
- Strengthening ERM and training/education are the two primary focal areas for developing risk management capabilities in the coming year, cited by 53 percent and 52 percent of the survey respondents, respectively.
The survey was compiled from online responses received during the first quarter of 2011 from 1,022 risk managers and C-suite, finance, and other executives involved in risk-related functions.