The crisis prompted a re-evaluation of risk management, yet most companies are unwilling or unable to change, notes a new report

While the global financial crisis has prompted a wholesale re-evaluation of risk management, a significant proportion of companies are unwilling or unable to make the necessary enhancements, according to a new report.

With companies everywhere conserving cash, cutting headcount and reining in expenditure, a lack of financial resources will be the biggest barrier to effective risk management over the coming year, found the report.

Economist Intelligence Unit questioned 364 risk professionals about their attitudes to risk in May this year.

Presenting the findings of the risk governance report, Rob Mitchell, the Economist Intelligence Unit’s consulting editor, said: “Risk management is a function in transition. The role is undergoing a reappraisal as it comes under significant scrutiny.”

The report indicated, however, that important improvements to risk management are not being made. Risk professionals said they are more likely to focus on process improvements and training.

Risk management may be gaining more authority but the research highlighted several anomalies.

First, there are significant doubts about risk expertise. Only around 50% of the risk professionals surveyed thought that the risk expertise of their non-executive directors is effective. Most companies also admitted that not enough board time is spent discussing risk issues.

The finding raises significant questions about the level of commitment and expertise of the non-executive function—questions that the UK’s Walker review has sought to address, commented Mitchell.

The risk manager is still seen as the person in the organisation who deals with risk matters alone, rather than providing a framework and guidance for the business units to do it themselves, according to the report.

The report indicated that risk managers are not spending enough time on identifying new risks. Monitoring controls and compliance consume most of the risk department’s resources—75% of those surveyed said they spent most time on these areas. Poor data quality and inadequate technology were also highlighted as problems.

Despite recognising these problems companies are reluctant to recruit risk expertise, noted the report. This finding indicates that either there is a shortage of risk management professionals in the market or companies are not placing it as a priority, commented Mitchell. “If these problems are not tackled, the underlying problems with risk management are likely to remain,” he said.