Feeling increasingly exposed to unpredictable events such as political uprisings and natural disasters, companies worldwide updated their risk management strategy in 2011, a new survey suggests.
Forty-five percent of respondents to a recent PwC survey said the ongoing sovereign debt crisis in Europe caused their companies to change their strategy, risk management or operational planning. One-quarter said the March 2011 earthquake and tsunami in Japan triggered such changes, and 18% made changes because of political upheaval in Arab countries.
The changes frequently challenged conventional thinking, according to the PwC report, which was based on a survey that was conducted in November. The survey generated responses from more than 1,000 executives and risk management leaders with businesses worldwide.
“We have a heightened awareness of global risks today, thanks to better education and faster, broader communications,” Kanwardeep Ahluwalia, managing director of financial risk at global re-insurer Swiss Re, said in the report. “But perhaps we feel risk is growing simply because we know more.”
The report highlighted other risk factors. For instance, 56% of the respondents, or about twice as many as a year earlier, said they worried about data privacy and security.
Companies participating in the survey took the following risk management measures:
- Placed greater emphasis on data sharing and improved cross-departmental communications.
- Beefed up data quality and reporting.
- Turned to more sophisticated forecasting and risk modelling.
- Elevated the role of the chief risk officer to better integrate risk management into business strategy and planning.
- Bolstered IT against security breaches.
- Increased the involvement of the board of directors in risk management.
A recent Deloitte report echoed some of the PwC findings. The Deloitte report suggests that companies are increasingly leveraging risk and regulatory analytics to predict market trends, evaluating risks and rewards associated with strategic and operational decisions and addressing disruptions from expanding regulatory requirements.
—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.