Risk culture still lacking says Zurich survey

Although the importance of risk management has increased since 2008, companies still have a long way to go in building an effective, risk-aware culture, according to a survey by Zurich.

Conducted in collaboration with Harvard Business Review Analytic Services (HBRAS) the report surveyed 1,419 business executives.

Two thirds agreed that risk management has gained in importance since 2008. But only one in ten respondents said their executive management is “highly effective” at creating a strong risk management culture.

Global companies are intensifying their focus on enterprise risk management (ERM) in the wake of the 2008 financial crisis and recession but are failing to create a truly proactive approach, the survey said.

There is no doubt that in today’s challenging environment customers, shareholders and employees expect clear commitment to comprehensive and forward looking risk management from top management and board.

Axel Lehmann, chief risk officer at Zurich

Axel Lehmann, chief risk officer at Zurich, said: “There is no doubt that in today’s challenging environment customers, shareholders and employees expect clear commitment to comprehensive and forward looking risk management from top management and board.

“Supporting the findings of the survey that it is extremely important to link risk information to strategic decision making, 41% of the companies said they are deepening and extending the ties between risk management and strategic planning,”

However, about 40% of executives surveyed did consider their approach to ERM to be “proactive”, meaning that it involves the board, business and functional leaders at all levels of the organisation.

According to the study, executives in companies taking a proactive approach said that integrating risk management into corporate goals is vital to gain a competitive advantage.

In relation to this the importance of “ownership of risk” was highlighted by various executives with strong ERM processes.

Respondents reported that dedicated chief risk officers (CROs) are far more likely to oversee risk management now than three years ago, although the chief executive officer (CEO) bears ultimate responsibility.

“Ownership of risk cannot be understated, inasmuch as the survey indicates that companies that employ a CRO, who works in tandem with the CEO and executive leadership, score higher in proactively managing risk in the organization,” said Alex Clemente, managing director of HBRAS.