Risk managers need more authority within their oragnizations: report

Events of the past year have “uncovered significant deficiencies in the way financial institutions manage risk,” according to a report by the Economist Intelligence Unit and sponsored by ACE, KPMG, SAP and Towers Perrin.
The report, Managing risk in perilous times: Practical steps to accelerate recovery, is based on a series of interviews with senior risk professionals, financial services representatives and academics.
It lists 10 “lessons learned” from events precipitating the current global recession and lays blame on organizations for not heeding the warnings of their risk managers.
“It has become apparent that, during the [economic] boom, the concerns of risk managers were all too often swept aside in the quest for profit and competitive advantage,” the report says. “As the industry seeks to rebuild its reputation and regain trust among investors, consumers and supervisors, the balance of power needs to shift back towards risk management.
“Armed with appropriate authority, clear visibility into lines of business and the ear of senior executives, risk management will become an integral feature of any future recovery.”
The report goes on to say that risk managers lacked appropriate influence over their organizations’ profit centres, and therefore “found it difficult to articulate a firm-wide view of risk exposure.”
Also, “the tools used to manage risk have been found wanting. From stress-testing and scenario analysis to the reliance on external rating agencies.”
The report says a consensus has evolved around 10 practical solutions. Among them:
•    Risk management must be given greater authority within organizations.
•    Institutions should pay more attention to the data that populates risk models, and must combine this output with human judgment.
•    Incentive systems must be constructed so that they reward long-term stability, not short-term profit.
•    Risk management systems should be adaptive rather than static.  
The complete list of recommendations can be found at:
http://74.125.113.132/search?q=cache:K352_uc8ZVMJ:graphics.eiu.com/files/ad_pdfs/2009/Risk%2520and%2520recovery.pdf+Managing+risk+in+perilous+times&cd=1&hl=en&ct=clnk&gl=ca