Nearly half (45.9 percent) of executives report that complexity of implementation is their organizations’ biggest challenge in improving enterprise risk management, according to a recent online poll from Deloitte.
“Executives relying on conventional wisdom often miss the unconventional realities that can make risk management appear insurmountably complex,” said Frederick Funston, a principal with Deloitte & Touche LLP and co-author of the newly released book titled, Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise.
“But, there are risk intelligent skills that can help any executive or board member evolve his or her views on risk and reward to help shift organizations from reactive, conventional risk management into a broader, proactive strategic culture of risk intelligence.”
Respondents indicated that their organizations’ senior managers focus risk management efforts most on developing repeatable and sustainable skills, processes and tools (29.7 percent) and improving the transparency of risk management for the board, employees and other key stakeholders (17.9 percent).
Conversely, areas where flaws in risk management were reported included failure to challenge fundamental business assumptions (22 percent), inability to anticipate potential causes of business failure (15.6 percent) and failure to maintain constant vigilance for threats and opportunities (13.1 percent).
Funston and co-author Stephen Wagner recommend executives and boards make their companies more risk intelligent by:
- Acting on their knowledge at-hand, but being ready to adapt
- Creating the tone at the top to build risk intelligence into core business processes
- Leveraging the best of existing organizational culture, while improving cross-functional preparedness and coordination
- Focusing efforts on the few vital risks and opportunities, as opposed to many that are trivial
- Demand discipline and accountability in execution by linking metrics to compensation and performance management
“The mindset and vernacular of corporate America really needs to shift from ‘enterprise risk management’ to ‘risk intelligent enterprise management,'” added Stephen Wagner, retired managing partner of the Center for Corporate Governance of Deloitte LLP and co-author of the book.
“Having reporting mechanisms in-place is great, once a risk has presented itself. But, engaging the C-suite, directors and everyone else in a more proactive approach to risk stands to serve companies better as they try to not only survive, but thrive, in our ever-changing economy.”
During an April 2010 Deloitte webcast, more than 1,650 business professionals from the consumer and industrial products; financial services; technology, media and telecommunications; and energy resources industries responded to polling questions.
The results were released Monday, July 12.