More Risk Management Work Remains

A recent survey demonstrates the need for more work to improve risk management practices at financial institutions across the globe.  Results from the survey conducted by Deloitte show that while great strides are being made in strengthening corporate governance, the supporting risk management infrastructure at many institutions continues to be a work in progress.  The following are some significant findings from the survey of 111 financial institutions across the globe.

• Seventy-three percent of the institutions surveyed had a Chief Risk Officer (CRO) or equivalent position. As an indicator of the role’s importance, the CRO reported to the board of directors and/or the CEO at roughly three quarters of these institutions.


• Only 36 percent of the institutions had an enterprise risk management (ERM) program, although another 23 percent were in the process of creating one. Among institutions with $100 billion or more in assets, 58 percent had an ERM program already in place. The institutions that had ERM programs found them to be valuable: 85 percent of the executives reported that the total value (both quantifiable and non-quantifiable) derived from their ERM programs exceeded costs.


• Roughly three quarters of the institutions had fully completed or substantially completed the work required to identify operational risk types, and to standardize the documentation of processes and controls for operational risk. Yet, only roughly 40 percent of executives considered their operational risk assessments and their internal loss event data to be well-developed. Other operational risk methodology areas, such as key risk indicators, external loss event data, and scenario analysis, were said to be well-developed by 20 percent or less of the institutions surveyed.


• Many institutions may have significant work to do to upgrade their IT risk management infrastructure. Roughly half of the executives were extremely or very satisfied with the capabilities of their risk systems to provide the information needed to manage market and credit risk. In other areas, such as systems for liquidity risk and operational risk, 40 percent or fewer provided ratings this high.

Wheelhouse Advisors is well equipped to address risk management challenges such as these.  Visit www.WheelhouseAdvisors.com to learn more.