News Releases

LONDON--(BUSINESS WIRE)--Risk management has emerged from the financial crisis with greater authority and visibility, giving its professionals a unique opportunity to play a more prominent role in high level decision making. However, the risk function still faces questions about its capabilities and challenges based on outmoded perceptions of its role, according to the findings of the latest Economist Intelligence Unit (EIU) report into risk management in business sponsored by ACE.

Based on the findings of a global survey* of 500 senior executives and risk professionals, the report sets a clear direction for the profession if it is to succeed in securing a central, long-term role in corporate decision making.

While the importance of strategic risk management was clearly recognised by businesses - with almost 60% of respondents confirming its value in identifying new and emerging risks, their views of its effectiveness were less clear cut. For instance only 35% of respondents felt their company was effective in anticipating and measuring emerging risk; half felt that there was a good understanding of risk across their business and fewer than half (46%) felt their business was successful at linking risk management with overall corporate strategy.

The profession’s continued exclusion from strategic decision making in many organisations was also confirmed with just 41% saying they expect risk managers to provide analysis for top management to inform corporate strategy. Fewer than 50% claimed to involve their risk teams formally in major strategic decisions.

According to Andrew Kendrick, Chairman and Chief Executive Officer of ACE European Group, “The findings highlight a need for risk managers to demonstrate the value they can add, both at a tactical level and in the boardroom, and to maintain a strong focus on education and dialogue within their organisation to help build a robust risk culture and a clear understanding of the risk management function and the roles everyone can play in it.”

The report goes on to indicate that a contributory factor to the challenge risk managers face in gaining access to the boardroom may be an outmoded perception of their role. When asked where they expected risk management to make the most meaningful contribution, the largest group of respondents (42%) cited ‘conforming with regulatory requirements,’ suggesting that many still associate the profession with preventive, ‘box-ticking’ work to ensure compliance.

Despite the challenges, the survey reveals a growing understanding among risk managers that the most effective way to build the stature of their role is to focus on its more constructive aspects, reinventing themselves as ‘business partners’ instead of ‘business preventers.’ The ability of the profession to help businesses make better decisions was cited as its second most important objective, for instance three quarters of respondents wanted their risk function to spend at least 25% of its time on ‘enabling activities’ such as working with business managers to achieve objectives.

Mr Kendrick says: “Since the start of the global recession, the risk manager’s voice has begun to be heard within many organisations and there has been a growing understanding of the value risk managers can add to business strategy discussion.

“But, the profession now stands at a cross roads. If it allows itself to be side-lined into the purely technical aspects of risk management and fails to take the steps necessary to engage colleagues and build a risk culture within their business, it will lose its relevance as better economic times return.

“If, on the other hand, risk managers concentrate on proving their worth as positive and proactive contributors and demonstrate that they can help their businesses take advantage of risk, they will strengthen their position. Ultimately this will not only secure their future as an invaluable corporate resource but will also help ensure the long-term success of their organisation.”

*About the report
Fall guys: Risk management in the front line is an Economist Intelligence Unit report that examines the changing role and responsibilities of risk management in business. The report is sponsored by ACE and KPMG.

The research for this report drew on two main initiatives:

• In July 2010 the Economist Intelligence Unit conducted an online survey of almost 500 executives from around the world. The survey included companies of a variety of sizes from the banking and insurance industries. Three quarters of respondents have a direct influence on their firm’s risk management, either as CEO or board-level executive (32%), as chief risk officer or other dedicated risk executive (20%), or as a non-executive director (23%). A further sample of senior management (26%) was included to test how non-risk executives view the risk function.
• To supplement the survey results, the Economist Intelligence Unit conducted a programme of qualitative research that included a series of in-depth interviews with industry experts.

About ACE

Celebrating 25 years of insuring progress, the ACE Group is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the S&P 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acegroup.com.

Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6519617&lang=en

Contact: