Enterprise risk management (ERM) is no longer new. The phrase has been bandied around by both companies and their risk consultants for several years. But so far it seems that few major European companies have taken the plunge. One drawback may be confusion about who should lead the initiative. The different internal professional functions within many companies, such as treasury, internal audit and risk management, may work more closely together. But creating a chief risk officer - that elusive well-rounded individual whose understanding encompasses not only operational risk management but also financial risk strategies - still seems to be a considerable stumbling block.
This looks set to change. A recent study, conducted by CFO Research Services for Aon Corporation found that 20% of senior financial executives from multinational companies were to some degree dissatisfied with their risk management practices, because they did not meet company objectives. A further 30% were only 'somewhat satisfied' with their risk management's alignment with their objectives.
According to UK chairman and CEO of Aon Limited, Dennis Mahoney, the silo approach is fast losing appeal. Only 12% of respondents planned to continue managing risk within individual business units. And, in the bid to align risk management more closely to corporate goals, 73% of CFOs will look for greater involvement from their audit committees.
ERM has been slow to take off. But 40% of the multinationals surveyed said they expect to have a fully integrated risk management programme in place within the next three years.