A consulting firm report has found that companies are slow to make use of enterprise risk management (ERM) techniques.
The findings by Aon Global Risk Consulting are the second report in recent days to find a slow take-up of ERM, the strategic method for understanding and managing risks.
Aon said its survey found only one in 10 companies in the Americas and Europe has fully integrated an ERM strategy, even though government regulators and corporate stakeholders are demanding they address and mitigate enterprisewide risks.
Meanwhile, a recent survey from the Conference Board, a nonprofit business research group, found among companies it surveyed that 55 percent said their corporate boards are a top driver of ERM programs, up from 49 percent two years ago. Despite that finding, the report said ERM is not being integrated in corporate cultures.
Aon noted that 83 percent of respondents said they are reasonably familiar or very familiar with ERM and its implementation and purpose, but significant challenges still exist when organizations set out to execute an ERM strategy.
ERM, as Aon defines it, involves an understanding of the global risks facing an organization, the design of strategies to mitigate those risks, and the building of a corporate culture focused on risk management.
While many companies are taking an enterprisewide look at their risks, however, only one in four organizations told Aon that developing ERM programs is part of their strategic planning process.
Aon Global Risk Consulting, a unit of Aon Corporation, identified corporate culture, strategy and resources as the three key elements of successful ERM programs, based on feedback from chief risk officers, risk managers and other senior executives surveyed from among the world's largest firms.
"Companies need clear and consistent ERM frameworks in place to appropriately assess and respond to the collective risks that may impact their organizations today," Stephen Cross, chief executive officer of Aon Global Risk Consulting, said in a statement. "ERM provides the insight investors, management, ratings agencies and other stakeholders need to fully assess a company's risk profile."
Combining corporate culture with ERM increases the likelihood programs will be effective. Those organizations with the most mature ERM programs said corporate culture was entirely or significantly taken into account in its development, the consultants said.
According to the survey, performance-driven companies are more advanced in developing the strategy necessary to support ERM programs, and those with a dedicated ERM function are also seeing greater results. Currently, 50 percent of organizations have a formalized ERM team and an additional 20 percent said they are planning to establish one in the future.
In many companies, implementing an ERM program is at an early stage. One in four respondents said the organization is aware of risk but has not implemented a structured response.
"For businesses to appropriately deal with the risks they face, it is imperative that they communicate the ERM message through all levels of their organizations," said Andrew Tunnicliffe, head of global business development with the consulting unit. "Our survey suggests companies are behind–just one in seven say their ERM function is good at communicating that message," he added.
Geographic differences with regard to ERM also exist. There is slightly greater familiarity with ERM in North America; organizations based in the region are less likely than those in Europe to have a dedicated ERM function.
Results of the online survey, the report and a series of case studies that illustrate how companies are tackling the issue of incorporating ERM into their corporate culture are available at www.aon.com.
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