NU Online News Service, Feb. 18, 12:26 p.m.EST

The global financial crisis brought a new focus on riskmanagement, with nearly 34 percent more institutions reporting theyhave adopted enterprise risk management programs compared to 2008,according to a survey by Deloitte.

The seventh edition of the report, titled “Navigating in aChanged World,” surveyed chief risk officers, or their equivalent,from 131 financial institutions globally, with aggregate assets ofmore than $17 trillion. They represent a range of financialservices sectors including banks, insurers and asset managers,Deloitte said.

The survey’s lead author, Edward T. Hida II, global leader-Risk& Capital Management, Global Financial Services Industry,Deloitte Touch Tohmatsu Limited, noted in his forward remarks thatregulatory requirements are being “rethought and fundamentallyrevised with the goal of reducing systemic risk to the financialsystem.”

He added, “Therefore, the boards of directors and seniormanagement of financial institutions are reexamining theirapproaches to risk management, including their risk frameworks,governance and methodologies.”

The survey found that about 90 percent of institutions had adefined risk governance model and approach, and 78 percent reportedtheir board of directors had approved their risk management policyor ERM framework.

With financial regulators around the world focusing on pay andbonus practices, and new rules being proposed in the U.S., thesurvey found that 37 percent of financial institutions reportedthey had completely or substantially incorporated risk managementconsiderations into their overall performance goals andcompensation decisions.

Insurance institutions said they use a variety of techniques toassess insurance risk, the survey found. About 60 percent cited aseither a primary or secondary methodology: stress testing, value atrisk, economic capital and dynamic financial analysis.

Institutions said they use a variety of organizationalstructures to oversee insurance risks, with no function being namedby more than 39 percent of institutions for any risk type. Forpricing risk, for example, 37 percent said the primaryresponsibility was placed with actuarial; 26 percent said productdevelopment; and lesser percentages cited other areas, the studyfound.

For concentration risk, 39 percent named ERM, while 35 percentcited actuarial. The remainder said they placed the responsibilityin other functions.

Deloitte said that based on its risk management surveys,progress has been made in implementing operational riskmethodologies since 2008, with 62 percent of executives ratingtheir risk assessments and 54 percent rating their internal lossevent data as extremely or very well developed—compared to about 40percent for each two years ago.

For key risk indicators, 30 percent of executives consideredthem to be well developed in 2010 compared with only 12 percent in2008, according to the study.

Other major findings in the survey:

• Not only is the chief risk officer role more prevalent atfinancial institutions, the CRO is reporting to higher levels inthe organization. The survey found that 86 percent of institutionshad a CRO in place, up from 73 percent in 2008. Eighty-five percentreported to the board level, CEO (or both).
• More institutions have adopted enterprise risk management (ERM)programs―79 percent of institutions reported having a program orequivalent in place or in progress, an increase from 59 percent in2008.
• The top-rated risk management technology challenge wasidentified as integrating risk data across the organization.
• More than 80 percent of institutions experienced significantimpacts from regulatory changes in the countries where theyoperate. These impacts included the need to maintain higher capitallevels and the need to maintain higher liquidity ratios.