Survey: Risk management under pressure as firms refocus on profits, growth
Complexity, poor communication, increased reporting requirements hampering evolution of risk cultures
15 June 2011 - The Premier Business Leadership Series, ANTWERP, BELGIUM – Has the financial services industry reached a comfort zone, placing it in jeopardy of another crisis? Are today's risk management practices and reporting in tune with existing risk culture and organisational expectations?
Despite lessons learned, reform remains threatened by an imbalance of risk management demands and actual programs and practices in place, according to a recent global risk management survey . In February and March 2011, the Economist Intelligence Unit (EIU) surveyed 315 executives globally for SAS, the leader in business analytics software and services. Respondents were primarily focused on risk management in banks, capital markets firms and insurers of all sizes from less than $100 million to more than $1 trillion in assets (USD). While financial institutions initiated some risk management measures to address deficiencies exposed by the financial crisis, risk cultures are ill-prepared for current demands and have been overtaken by competing priorities that encourage growth and profitability without embedded risk strategies.
Because of the cautious overall recovery and recent strong performances in the financial sector, firms have seen increased risk appetites with pressure to expand and boost profits. Respondents are struggling to manage risk, with more than three out of five citing growing complexity in their organizations' risk exposures. Two-thirds of respondents say external risks pose a greater challenge to their institutions than internal ones, yet only 52 percent say that their risk management processes are well placed to deal with this volatility and complexity. The momentum of revamping and strengthening risk management may have peaked since the percentage of respondents is the same compared to last year when questioned about confidence in having a clearly defined risk management strategy. Year on year, the proportion of respondents who are increasing investment in the risk function has fallen slightly across IT, data, training and recruitment.
Silos continue to hamper risk management progress. Although the risk function has been elevated, organizations still lack strong and open relationships between the risk function and lines of business, which need the most improvement. Respondents cite poor communication between departments as a major barrier to effective risk management – whereas last year's report named future regulation the top concern.
According to the survey, management boards have increased both their risk expertise and demand for risk reporting. More than two in five respondents indicate a rise in the board's risk expertise and over half report boosted demands for risk reporting, with the retail banking seeing the most. Yet only a minority of institutions appears to be taking steps to upgrade risk reporting, including timeliness, consistency and extent of reporting on emerging risks.
"To take its necessary place at the executive and board level, risk management must evolve from a technical support function to a strategic process," said David Rogers, SAS Global Product Marketing Manager for Risk. "This requires an assimilated and comprehensive risk culture, top-down, supported by a truly integrated risk framework, that provides both a holistic and specialized view of risk for each business level."
For the full report, please visit http://www.sas.com/reg/wp/corp/32620.
SAS and EIU will discuss the survey results in an interactive webcast on June 23, 2011 at 10:00 a.m. ET. For webcast details, please visit www.sas.com/ermresearch.
Enterprise risk management and SAS
Since their introduction in 2010, SAS Risk Management for Banking and SAS Risk Management for Insurance have been selected by several leading organizations, including Danske Bank, Assicurazioni Generali, HDI Assicurazioni, KBC, P&V Group and Unipol Gruppo Finanziario. The latest versions of these solutions were announced today. SAS Risk Management for Banking provides a complete, integrated solution, including risk data management and reporting, asset and liability management, market risk, credit risk, and firmwide risk management. SAS Risk Management for Insurance is a comprehensive solution for performing risk analysis and risk-based capital calculation.
More than 200 organizations use SAS for risk management, including: ABN AMRO (Netherlands), Allied Bank (Pakistan), Banca delle Marche (Italy), BankWest (Australia), Barclays (UK), BB&T (USA), Caisse Nationale des Caisses d'Epargne (France), China Merchants Bank (China), CIMB Bank (Malaysia), Citibank Singapore (Singapore), EON Bank Group (Malaysia), First City Monument Bank (Nigeria), FirstBank of Nigeria (Nigeria), Kookmin Bank (Korea), Minsheng Bank (China), Nottingham Building Society (UK), Riyad Bank (Saudi Arabia), Skye Bank (Nigeria), Swedbank (Sweden), Union Bank (US), Vattenfall (Sweden) and Woori Bank (Korea).
Today's announcement came at The Premier Business Leadership Series event in Antwerp, Belgium, a business conference presented by SAS that brings together more than 600 attendees from the public and private sectors to share ideas on critical business issues.
SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions delivered within an integrated framework, SAS helps customers at more than 50,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world
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