More organizations employ chief risk officers

Ninety percent of risk management experts have implemented or plan to implement an enterprise-wide risk management approach, according to a new survey from the Society of Actuaries (SOA) and its partners. As corporations work to gain a foothold following the global financial crisis, businesses are taking a closer look at risk management implementation and the role of the chief risk officer (CRO), as noted in the survey. Other top factors in the decision to implement ERM are ratings agencies and risk events affecting the firm.

In addition to an increased emphasis on risk management, it is evident that more clarity and communication on the topic is necessary for stakeholders. Nearly half of respondents, 46 percent, either disagreed or were not sure their firm's external risk disclosures effectively convey an understanding of the key risks inherent in shareholders' investment.

The survey found that the position of CRO is becoming more prominent, with 70 percent of respondents' organizations having or planning to have a CRO. Those CROs, as well as other executives and boards, will face a multitude of risk management issues in 2010, according to the survey.

In order of importance, these include:
- Financial risk
- Systemic risk - or risk affecting an entire financial market or system
- Regulatory risk
- Pandemic risk
- Terrorism risk.

Operational risk, which encompasses a wide range of events and actions including execution errors, violations of policy, law/regulation and excessive risk taking, was mentioned frequently as an important issue for executives and boards. The SOA recently highlighted a new, modern approach for managing operational risk, which includes the recommendation that businesses consider this approach to better assess potentially catastrophic losses. To read about the Modern Operational Risk Management approach, click here.

Companies have also shown an increased emphasis on risk modeling as a result of the financial crisis:

- 62 percent of respondents' organizations have increased modeling
efforts
- 37 percent reported no change
- One percent noted decreased modeling efforts.

The survey was conducted by the Society of Actuaries and its Joint Risk Management Section, along with the Canadian Institute of Actuaries and the Casualty Actuarial Society. It garnered input from more than 450 respondents in the insurance, consulting and management services and financial service industries.

www.soa.org

•Date: 15th Dec 2009• Region: US •Type: Article •Topic: Operational risk
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