The findings of the 2009 global investment management risk survey, the first initiative of the new SimCorp StrategyLab, show that the risk function has lost status and moved down in the line of reporting, despite the financial crisis. The survey, carried out in cooperation with The Nielsen Company, has revealed that since 2007 the number of organisations that have the risk management function reporting into the board of directors has dropped by 5% (from 36% to 31%) – a fall of 14% within that group. During this same period of time, the organisations that have moved the overall responsibility of risk to senior management level has increased by 5% (from 23% to 28%) – an increase of 22% within that group. This position is not expected to change.
When it came to looking into the future, however, the need for increased strategic influence of the risk function was cited as the most important factor to effect an improvement in risk management, as stated by 76% of interviewees. This implies a call from respondents for support from the most senior officers within the organisations.
Despite its loss of status, the role and responsibility of the risk function has been extended during 2008, as reported by 58% of the respondents. Key areas of future investment are expected to be in staff, staff competencies and the implementation of new models and methods.
Of serious concern is that, when asked: ‘Does your current risk function contribute to efficient use or allocation or capital and resources within the organisation?’, 14% of the respondents replied ‘Not at all’.
Also of concern is the lack of monitoring of strategic risk. This area of risk covers the long-term strategic objectives of an organisation. It includes capital availability, sovereign and political risks, legal and regulatory changes and changes in the physical environment. A third of the respondents did not actively monitor strategic risk on a frequent and systematic basis.
“Much has been learned about the failures of risk management during the ongoing financial crisis,” says Professor Ingo Walter, director of SimCorp StrategyLab. “It is, therefore, disturbing that the findings of this survey suggest some of the needed reforms and the degree of urgency – notably about the resources needed for effective risk management and its role in overall senior management and strategy development – is not perceived by the respondents as compelling and in some ways is moving in the wrong direction.”
The 2009 global investment management risk survey was initiated and prepared by SimCorp StrategyLab. The interviews were conducted by The Nielsen Company. The survey was based on 90 CATI interviews with respondents, randomly selected from investment management institutions, around the world, with only one contact person per company being interviewed. All contacted persons had risk management as their primary field of work, and/or strategic responsibility, and/or decision-making with risk management; they were either executive or general management. The interviews were conducted during February and March 2009.
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