August 4, 2004 by Canadian Underwriter
In the latest survey of financial services companies’ views on risk management, PriceWaterhouseCoopers and the Economist Intelligence Unit find a heightened profile for the risk management function and specific concerns about unquantifiable risks, namely reputational risk. In fact, reputational risk is now viewed as the greatest threat to the market value of organizations.
A previous study conducted two years ago found awareness of credit and market risks, but a lack of awareness of less visible risks. And while the current study finds significant awareness of issues, 72% of respondents point to regulatory pressure to address risk, highlighting the focus being placed on meeting regulatory requirements versus protecting the institution’s value, much less enhancing it.
While companies are spending more on risk management and have pushed the risk management up the corporate agenda, with more companies having a senior risk management executive and committee at the group level, only 31% of companies report that this committee’s opinion is sought on all major transactions, the report notes. Further, only 43% say merger & acquisition operations have a structured approach to risk assessment, and this number drops to 17% for the setting of director compensation and recruitment policies.
Added to this is the finding that companies remain focused on quantifiable risks such as credit, liquidity and market risk. PWC says greater attention needs to be paid to emerging risks and the “big picture” or total risk portfolio if companies want to control/mitigate risks to gain competitive advantage.