La Implementación De Instrumentos Derivados En El Uruguay

The future of risk

Protecting and enabling performance

Contents

Introduction .............................................................................. 1

The risk landscape is changing .................................................. 2

Maturing of risk management practices .................................... 4

Recognizing opportunities ......................................................... 6

Focus areas for improvement .................................................... 8

An improved future state of risk ............................................. 10

Summary ................................................................................ 13

Survey approach ..................................................................... 14

Contacts ................................................................................. 16

The future of risk: Protecting and enabling performance 1

Introduction

Albeit painful, progress ultimately results from crisis. The

current downturn is causing companies to challenge their risk

management processes and ask how they can further improve

their risk management efforts. Against this backdrop, we

conducted a survey to provide a snapshot of the current risk

environment and to understand organizational attitudes toward

enterprise risk management. We were also interested in

understanding how recent events have impacted approaches to

risk management and organizations’ abilities to identify and

manage different types of risk. Never has there been a more

critical time to defi ne a path forward for the “future of risk.”

We believe that the recent economic challenges were, in part, more

diffi cult to predict and manage due to the increasing complexity of

risk management processes. 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 fi nancial auditor. This has created

ineffi ciencies and resulted in a degree of fatigue on the business.

As the number of risk functions increases, coordination becomes

more diffi cult 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 signifi cant

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.

As complexity has increased, so has company spending on risk

management. Based on a previous survey we conducted last year

of Fortune 1000 companies, we estimate that the average company

spends about 4% of revenue on risk management activities.

Considering the events of the past 12 months, it is not surprising

that 96% of our recent survey respondents believe that their risk

management programs could be improved. Furthermore, only 1%

of companies intend to reduce their risk management resources.

Given the current cost-conscious mentality, the fact that nearly all

companies want to improve their risk management efforts and intend

to maintain or increase their current levels of investment underscores

the growing awareness of the value of sound risk management.

Moreover, 46% agreed that committing more resources to risk

management would help to create a competitive advantage.

Clearly, organizations recognize the importance of risk

management. Leading organizations acknowledge that risk

management is more than simply protecting existing assets; it is

also about enabling performance to create future value.

However, the reality is that most risk functions will be asked to do

more with the same or limited additional resources. There is a

strong drive to improve risk coverage through better use of existing

resources and to deliver more value from their respective

functions. The challenge for most organizations will be to fi nd

increased effi ciencies in the way their risk management functions

operate and defi ne the improvements that create the greatest

value. We believe the answer to these challenges can be found by

carefully considering how best to balance risk, cost and value

across the enterprise. Companies that effectively address this

challenge are more likely to outperform their competitors.

We believe the answer to these

challenges can be found by

carefully

...