Oliver Wyman research finds most boards receive emerging risk data infrequently
Despite big investment in improving risk management since the financial crisis, most executives still rate their companies as “ineffective” or only “moderately effective” at incorporating emerging risks into decision making, according to a new survey.
A poll of 650 senior executives around the world in April 2010 offered a snapshot of the biggest risks facing companies and evaluates their methods to identify potential threats.
Most executives consider global recession as the greatest risk to their businesses in the next 18 to 36 months. Pressing financial events have pushed risks, such as climate change or pandemics, off most executives' radar screens. Only a small minority of executives surveyed consider potential threats related to environmental issues, societal risks, or technological concerns as major risks.
Emerging risks are defined as both new risks, such as the 2010 eruption of volcanic ash in Iceland, and familiar risks in unfamiliar conditions, such as volatile commodity prices, according to Oliver Wyman, who sponsored the study by the Financial Times.
The survey indicated that many organisations continue to rely on basic, "static" risk analytics and tools rather than multidimensional approaches that take advantage of a wide range of data. Many key decision makers, like boards of directors, also receive emerging risk information only infrequently.
The report makes recommendations for how risk management programs should address not only traditional risks but also new risks that threaten to change the rules of the game