Organizations in which risk management has a seat at the table are more likely to exceed performance goals and achieve higher growth, according to the latest survey from Deloitte.
The study, The current state of risk management: struggling and succeeding, found that 73% of high-performing risk programs that have risk management represented in executive management meetings (most or all the time) are more likely to exceed performance goals and achieve higher growth. The findings support that an investment in risk management, as well as representation in the C-suite, such as with a chief risk officer (CRO), translates into better financial performance and achievement of strategic priorities overall.
The survey revealed that more than 90% of respondents believe that risk management is becoming more important to achieving their organization’s strategic goals. It suggests, given its importance, it makes sense to have risk management present in key C-suite and board meetings. However, only 38% of responding chief risk officers (CROs) and risk managers said that they have a great deal of input into C-suite or board decisions.
Additionally, the study revealed only 35% of C-suite risk owners characterize their risk management programs as highly integrated. They believe there’s still work left to do in helping the broader organization recognize risk management as more than a compliance and loss prevention function, but instead as a strategic enabler that drives value. In addition, when risk management is present at board meetings always or most of the time, the survey suggests the likelihood that the function will have input increases dramatically—from 11% to 38%.
“Many organizations have, to varying degrees, upgraded and restructured their risk management functions, yet there is ample opportunity for continued improvement,” Deloitte Risk and Financial advisory risk intelligence practice leader and Deloitte Transactions and Business Analytics LLP principal Chris Ruggeri said. “We found that the lack of awareness of risks, particularly strategic risks, and leaders not using the tools available to manage them, can greatly undermine the achievement of strategic goals.”
“New technologies such as advanced analytics, risk sensing, and automated controls are becoming more integral to providing a clearer view of risk enterprise-wide,” Deloitte & Touche LLP Deloitte Risk and Financial Advisory principal Keri Calagna added. “As digital transformation takes hold of most organizations, the interconnectedness of an organization’s various ecosystems and the sheer volume of data they create and process makes leveraging these tech-enabled solutions crucial to the risk management of the future.”
The survey polled a total of 500 C-level executives including 100 executives with the title of chief risk officer (CRO) or equivalent, 100 C-suite executives not primarily responsible for risk, and 300 executives in risk-related functions such as IT and operational risk. This sample was drawn from US companies with at least US$500 million in annual sales in a cross-section of industries.