Although chief financial officers, risk managers, and other corporate executives recognize the importance of strategic risk management, many are as yet unable to put it into full practice and linking it effectively with overall corporate strategy is a still-elusive goal.
These are the findings of a recent survey by the Economist Intelligence Unit. The survey of 500 global executives—from board level to C-suite--found that most (60 percent) see value in creating overarching strategic risk management frameworks for their company, and the importance that this plays in determining emerging risks.
However, turning that perspective into a concrete risk management structure is easier said than done. Of those surveyed, only half felt that risk was well-understood throughout the business, and just 35 percent felt their organization effectively measured and anticipated developing risks.
Plus, less than half of executives said their company was effective in connecting risk mitigation and management with broader corporate strategy.
As our own Anne Field pointed out in her blog here, corporate boards now expect their CFOs to focus more on risk management, so getting the formula correct and working a strategic risk mitigation scheme into global strategy is a mission-critical job for the chief of finance.
However, there appears to be a disconnect between that desire from boards for more effective risk management and recognition of the need to manage risk proactively and holistically.
Chief financial officers, in their role as head of risk management, must look beyond compliance as the main goal of risk mitigation and focus more on identifying and managing risk from an enterprise-wide perspective.
As part of this, they must be able to effectively communicate that strategy from the top down, and create a culture of risk awareness across the organization.