UK corporates urged to adopt stronger risk management practices
28 November 2011
Despite risk management and corporate governance ranking high on the corporate agenda, less than half (42%) of large UK corporates have a Chief Risk Officer (CRO) or equivalent, according to new joint research by Deloitte, the business advisory firm, and executive search specialists, Hedley May.
The report focuses on non-financial companies and surveyed 36 large corporates, including 30 of the FTSE 100 and representing around 70% of the Index’s market capitalisation excluding financial services firms. It found that while many organisations are on a ‘journey’ in terms of developing risk management capabilities, few had a clear view of their destination. Organisations highlighted a lack of uniformity on the role of the CRO and risk function, indicating a possibility that some boards and Executive Committee (Exco) level CROs may not be as well supported as they could be in terms of strategic risk management and risk-return evaluation. Similarly, several non-executive directors questioned whether time allocated by boards to debate risk is sufficient both at Audit Committee and main board level.
Interviewees believe there should be a shift in focus towards upside risks and risk-return trade-offs that have the greatest impact on business performance. Here, respondents highlighted the need to identify and build resilience to the emerging risks and high-impact ‘Black Swan’ events (Tsunami/Fukushima, Eurozone Crises, etc) that can seriously threaten business performance.
Hans-Kristian Bryn, risk partner at Deloitte, commented: “The findings of the report are encouraging in terms of the progress made to date in the areas of risk processes and controls. However, the focus on the downside of risk has prevented companies from maximising the value they can get from good risk management. There is a great opportunity for companies to increase the value of risk management by putting it in a more strategic context and incorporating risk-return more explicitly into decision-making.”
The survey also asked critical questions around the need and desire for an Exco level CRO role similar to those found in financial institutions, and whether such a role would strengthen strategic risk management and enable enhanced performance.
Nick Hedley, Co-founder Hedley May, said: “This is the first report to thoroughly explore the need for a dedicated CRO in corporates. While the responses suggest that companies do not feel they need to replicate the financial services model, it is clear they will need to cultivate and attract new talent to meet ever more demanding risk management challenges.”
Professor Ian Goldin, Director Oxford Martin School, Oxford University concluded: “It is clear that corporates are facing unprecedented challenges in terms of the scale, complexity and interconnectivity of the risk landscape. The report highlights approaches and solutions that address the critical competitive advantage and resilience issues that should be top of mind for Executive and Non-Executive Directors.”
Note to editors
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities.
Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms. The information contained in this press release is correct at the time of going to press.
About Hedley May:
Hedley May delivers senior level executive search and consultancy services across the critical functional roles which safeguard the smooth running of its clients’ businesses. Hedley May specialises in legal, compliance, risk, company secretarial, internal audit and human resources roles. www.hedleymay.com
Member of Deloitte Touche Tohmatsu Limited