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Managing Risk for High Performancein Extraordinary TimesReport on the Accenture 2009 Global Risk
Management Study
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Develop integrated risk
management capabilities.
Risk management must be
institutionalized, integrated and
aligned with the operating model
of the business. To be effective, risk
management must be a normal and
expected component of the meetings
and reviews that are held and the
questions that are asked. Risk issues
must inform governance and decision-
making processes, the training people
receive, the management and leadership
cultural behaviors expected throughout
the organization and the reward
structures in place.
Effective integrated risk management
departs from the fragmented and
compartmentalized solutions already
in place at many companies. It offers a
holistic view of the enterprise, enabling
the identification and understanding
of a variety of risks, and then feeds that
understanding into the growth engine
of the company. An effective response
to any particular kind of riskstrategic,
market, credit, liquidity or operational
depends on rapidly and consistently
gathering, aggregating and making sense
of information from both internal and
external sources.
Improve the quality of information
and the frequency of risk reporting.
Companies that are more competent
in managing risk have a higher
frequency of risk reporting to different
stakeholders. They are also more likely
to have standardized risk reporting
procedures.
The quality of information and data
is also critically important. Effective
risk management and internal controls
depend on the information provided.
In our experience, companies that aremore advanced in their risk management
capabilities have attained a high degree
of granularity in the risk data that
supports their information reporting.
Attaining this level of granularity
and specificity is a direct result
of foundational risk management
processes that have been embedded
in these organizations. Management
needs the right information, in the
right granularity, at the right moment
to assess risks and take action.
years in developing more rigorous
risk management capabilities, survey
respondents highlighted two goals in
particular: better alignment with the
overall business strategy and more
effective collaboration with their
business units.
3. Integration of risk managementand performance management
is lacking. The risk management
capability in most organizations plays
an important role in strategic decision-
making but at this point is less involved
in objective setting and performance
management.
4. Increased regulation is expected.
Companies expect a more stringent
regulatory and compliance environment
in the coming years.
5. The costs of effective risk
management are increasing. The
cost of risk management has increased
significantly over the last three years,
driven primarily by increased business
complexity, as well as inefficiencies
in systems, data and processes.
6. Outsourcing of parts of the risk
management capability is being used
to improve efficiency. Outsourcing of
selected processes and systems is being
used to increase the efficiencies of the
risk management capability.
7. Companies are investing to improve
their risk management capability.
Despite the current crisis and shrinking
budgets, firms are increasing their
investments in their risk management
capabilities.
8. Optimism still exists about the
ability of strong risk management
to drive business performance.
Executives continue to believe in the
ability of a strong risk managementcapability to support profitable growth.
Implications for AchievingHigh PerformanceBased on this research study, and
on our experience working with
organizations across all industries
to improve the ability of their risk
management capability to drive
business value, the following
are especially important keys
to achieving high performance
through an improved,integrated
risk management approach:
Executive SummaryIn the wake of the global economic
meltdown, chances are there isnt a
boardroom or executive management
office anywhere today where the topic
of improving the organizations risk
management capabilities, processes,
tools and training isnt top of mind.
Companies have stared into the abyss
and they dont want to get that near
that ledge again.
The stakes are even higher given the
scope and seriousness of the economic
downturn. The business community has
seen global recessions before, but this is
arguably the first multi-polar recession.
That is, the multi-polar world has only
come into existence over the past
decade or soa world where both the
generation and consumption ofeconomic power is emanating from
multiple points around the globenot
just from traditional, Western and
industrialized centers of power. How a
multi-polar world reacts to prolonged
economic duress is still an unknown.
To better understand the challenges
companies within a multi-polar world
are facing with regard to their integrated
risk management capability, as well as
the approaches, tools and structures that
are helping some companies manage riskmore successfully, Accenture recently
conducted its 2009 Global Risk
Management Study. The research
involved a survey of the risk
management attitudes and capabilities
of more than 250 of the worlds largest
enterprises, represented by their chief
financial officers, chief risk officers and
other risk executives.
Major findings
The following are the major summary
findings of the Accenture 2009 GlobalRisk Management Study:
1. Risk management capabilities
are not currently equal to todays
challenges. The current financial
crisis has underscored the fact that
significant improvements in companies
risk management organizations and
capabilities are required.
2. Risk management is inadequately
aligned with business strategy and
poorly integrated into business
operations. Asked to name the biggest
challenge they face over the next two
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in protecting value or guarding against
failure. By optimizing both risks and
rewards, companies with effective
and integrated risk management
capabilities link risk and profitability
objectives; in this way they can improve
strategic capital decisions and increase
shareholder returns. They better
coordinate risk measurement, capital
allocation, performance assessment
and management across the enterprise.
performance management capabilities
as advanced.1 What that means
from a risk perspective is that many
companies cannot adequately focus
the risk management organization on
what exactly it should be doing to drive
risk-adjusted business performance.
Increase the involvement ofrisk management in driving
value creation.
Accenture believes that companies
have an opportunity to employ risk
management as a competitive
differentiator to create value while
also protecting the interests of
shareholders and other key stakeholders
in a cost-effective manner. Improved
compliance is an important goal, but
higher goals must also be pursued.
Today, effective risk management isalso a matter of using the information
derived from risk assessment and
analysis to make better decisions
and drive growth. In this way, risk
management becomes a proactive,
ongoing initiative tasked with creating
value, not simply a reactive exercise
Risk-adjust the companys
performance management processes
Risk management exists to support,
not stifle, the entrepreneurial spirit of
a company. If inadequate coordination
exists between risk management and
performance management, executives
may be improperly rewarded for the
risk/return outcomes of their decisions.
Therefore it is important to employ
risk-adjusted performance metrics
assessing potential rewards with
some adjustment for risks. Combining
risk-adjusted metrics with traditional
asset-liability management and
profitability-performance measurements
can provide a company with a more
balanced view.
One of the issues here is that
companies struggle just as much
to provide integrated performance
management capabilities as they do
to provide integrated risk management
capabilities. For example, only 20
percent of respondents to Accentures
most recent High Performance Finance
Study described their enterprise
The Accenture 2009 Global Risk
Management Study underscores the
fact that risk management can be a
competitive differentiator, helping
companies advance toward high
performance even in these uncertain
economic times. It is critical, however,
for risk management to be integrated
throughout the operating model of
the business, including its culture and
incentives as well as investment, financeand operational decision making.
In fact, risk management and
performance management are really
two sides of the same coin, and they
need to be held together in a kind
of constructive tension. This tension
frequently tests the limits of the
entrepreneurial spirit each company
needs to drive growth. To be sure, those
limits must be firm and unambiguous.
But there are times when a strong
risk management capability should
encourage a company to probe those
limits. With closer integration, the
risk and performance sides of the
organization are kept in sync, working
together toward a common goal:
supporting a companys risk appetite
while also protecting the interests of
shareholders and other key stakeholders
in a cost-effective manner.
The ultimate results of the effective
coordination of risk management
and performance management can be
higher economic returns, sustainable
shareholder value and increased
stakeholder confidence in spite
of an uncertain global economy.
Achieving these goals is a critical part
of driving toward high performance
in extraordinary times.
Risk management and performance management:
Working together to drive high performance
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The required changes will require
a long-term commitment set by
executive management and supported
by associated investments. The good
news emerging from the Accenturesurvey is that, although the executives
recognize that they will need to
make new investments in their risk
management processes, they also
expect the changes to deliver positive
bottom-line results. The compliance
demands caused by new regulations,
and the need to to coordinate and
link complex business systems, will
increase overall risk management
costs. Outsourcing part of the
risk capability can increase efficiencies
and help to counteract cost increases.
For many companies the investment
goes beyond compliance requirements
the survey reveals an emerging group
of companies that believe that strong
integrated risk management can drive
profitable growth.
About the research
The Accenture 2009 Global Risk
Management Study is based on
responses from more than 250
executives involved with theirorganizations risk management
capability. A high percentage of
C-level executives participated,
including chief financial officers
(34 percent), chief risk officers
(33 percent), chief executive officers
(13 percent) and chief compliance
officers (8 percent). Respondents
were from all major geographies
and industries (see graphics).
Many jobs and functions have changed
or are being looked at with increased
scrutiny since the 2008 collapse of
the global capital markets, but perhaps
none more dramatically than the fieldof risk management. The first truly
global financial crisis has revealed the
inherent weaknesses in the traditional
approach to risk management, and the
inadequacy of current risk management
processes to respond to the challenges
in the emerging economic order.
With the global economic crisis quite
fresh in everyones mind and experience,
Accenture recently conducted a global
risk management survey involving more
than 250 chief financial officers, chiefrisk officers and other risk management
executives across all geographies and
major industries. (See About
the research.)
Our purpose in conducting this risk
management survey was to assess
executives perceptions and plans for
their organizations risk management
capabilities in light of the economic
downturn. We also sought to gauge
respondents insights into how risk
management can be transformed froma controlling, compliance-oriented
capability to one that can effectively
support the entrepreneurial risk-taking
needed to achieve high performance.
Taken together, the survey results
show a strong commitment to using
the lessons of past failures to create
a new generation of integrated risk
management that can drive business
value. The surveyed executives were
close to unanimous in their belief that
current risk management practicesmust be substantially improved both to
correct deficiencies and to capitalize on
emerging opportunities. One widespread
perception that can be seen in survey
responses is that an organizations risk
management capability has been overly
isolated and not fully a part of the rest
of the organization. Risk executives
believe risk management must be better
aligned with the companys strategy
and goal-setting process and more fully
integrated into the companys businessunits, culture and performance
management processes.
The Accenture 2009 Global Risk
Management Study: Major Findings
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Financial Services28%
Public Services1%
Communications& High Tech21%
Resources23%
Products27%
Industries of participating organizations.
Geographical location of participating organizations.
North America31%
Europe, Africa,Latin America48%
Asia Pacific21%
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overwhelmed the traditional thinking
and fragmented processes at the heart
of most corporate risk management
processes and systems. Companies
tracked risk, though often in a siloed
manner. This rendered them incapable
of assessing the compounding and
interrelated issues until the situationgot entirely out of hand.
The economic crisis was the ultimate
stress test for a companys risk
management capability. No financial
simulation could accurately capture
the dismal performance and the
increasing correlated reactions of
the financially engineered products.
No scenario planning exercise could
realistically depict the global markets
extreme reaction and many companies
fumbled responses.
Lessons from the crisis
The survey respondents were frank
in their assessments of the overall
strengths and weaknesses of their
internal risk management capabilities.
About half believed that their company
was well prepared to face the current
level of economic turmoil, while the
other half believed that their companywas not well prepared. (See Figure 1.)
Somewhat similar numbers resulted
when executives were asked to assess
their confidence in dealing with future
risks and negative events. On a scale
of 1 (low) to 5 (high), forty-two percent
assessed their preparedness at 3
or lower, while 58 percent ranked
themselves as prepared or very prepared.
Together these findings are a candid
admission that mistakes were made
and that changes must occur inrisk managements approach.
A unique and unprecedented aspect
of the market collapse of 2008 was
the speed at which events occurred,
outpacing the ability of companies
internal systems and risk management
capabilities to keep up. Market events
Figure 1: How prepared was your company from a risk management
perspective to deal with the current economic and financial turmoil?
Level of preparedness to face current economic and financial turmoil
4%
7%
35%
45%
8%
Not Prepared 2 3 4 Extremely Well Prepared
Increasing levelof preparedness
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More specifically, the Accenture 2009
Global Risk Management Study found
evidence for eight primary lessons to
be learned from the manner in which
most current risk management capability
performed against the current economic
crisis.
In the postmortem assessment of this
real-life stress test, executives have
identified a number of components
which did not adequately perform or
integrate. (See Figure 2.) These include:
Inadequate availability of timely
risk, finance and business data.
Lack of integration and aggregation
across all risk types.
Ambiguous risk responsibilities
between corporate and the
business units.
Inability to integrate risk, return
and capital issues in decision
making at both the strategic
and operational levels.
Insufficient enterprise-wide
risk culture.
Lack of alignment between a
companys strategies and its
risk appetite.
7
Figure 2: Lessons learned from the current financial and economic crisis.
In time availability of integrated risk, finance and businessdata has to be improved
Risk transfer to insurers or capital markets will be more important
Tools, methods, models are not enough to reflect and evaluate thecomplexity and dynamics adequately - a human factor needs to be(re)institutionalized in risk management for evaluation
Remuneration/Bonuses have to support prudent risk management andlong term business perspective
Effective integration of subsidiaries and/or business units into corporaterisk management processes and look through on exposures andunderlying risk drivers has to be implemented
The integration of risk across all relevant risk types will be increased
Risk management responsibility between group and business unitshas to be sharpened
Systematical and recurring evaluations of integrated risk situation includingmacro economic scenario analysis, look through on risk drivers and riskconcentration and systematic deep-dive analysis is required
Risk management needs to move out of compliance function into abusiness partner role
Operational decision making has to integrate more effectively risk,return and capital management views.
Strategic decision making has to integrate more effectively risk, returnand capital management views
Enterprise wide awareness for risk (risk culture) has to improve
The strategic alignment between business strategy and risk appetitehas to be improved
80% Divider
80% 20%
55%
75%
75%
75%
78%
78%
68%
68%
78%
85%
82%
85%
45%
25%
25%
25%
22%
22%
32%
32%
22%
15%
18%
15%
Agree Disagree
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The foundational elements of an
effective integrated risk management
programconsistent risk processes,
governance, measurement and
taxonomy.
The desired outputsrisk reporting;
risk aggregation and integration;
risk-adjusted performance and
executive compensation; and
better alignment of strategy
and risk appetite.
Lesson 1:
Risk management capabilities are not
currently equal to todays challenges.
Although about half of the survey
participants believed their companys
risk management approach was well
prepared for the economic crisis,
executives nevertheless overwhelmingly
agreed that improvements are needed
in companies ability to manage risk in
pursuit of better business performance.
(See Figure 3.) More than 85 percent
of respondents (see above, Figure 2)
indicated that changes must occur in
their risk management capabilities if
the lessons from the economic crisis
are to be learned and then leveraged
to produce better business results.
These changes must address all
the major components of risk
management, including:
Figure 3: Level of changes required to take full advantage of the lessons learned
from the economic downturn.
No changes required Slight changes required Significant changes required
15% Divider (Average of No changes required)
In time availability of integrated risk, finance and businessdata has to be improved
Risk transfer to insurers or capital markets will be more important
Tools, methods, models are not enough to reflect and evaluate the complexityand dynamics adequately - a human factor needs to be (re)institutionalizedin risk management for evaluation
Remuneration/Bonuses have to support prudent risk managementand long term business perspective
Effective integration of subsidiaries and/or business units into corporaterisk management processes and look through on exposures and underlyingrisk drivers has to be implemented
The integration of risk across all relevant risk types will be increased
Risk management responsibility between group and business units has tobe sharpened.
Systematical and recurring evaluations of integrated risk situation includingmacro economic scenario analysis, look through on r isk drivers and riskconcentration and systematic deep-dive analysis is required
Risk management needs to move out of a compliance function into abusiness partner role
Operational decision making has to integrate more effectively risk,return and capital management views
Strategic decision making has to integrate more effectively risk, returnand capital management views
Enterprise wide awareness for risk (risk culture) has to improve
The strategic alignment between business strategy and risk appetitehas to be improved
12%47%
42%
27%44%
28%
13%48%
38%
15%44%
41%
14%51%
35%
11%
52%37%
16%51%
33%
18%46%
35%
22%42%
37%
12%53%
35%
11%48%
41%
14%48%
38%
11% 49%40%
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Eighty-two percent of executives agreed
that improvements in risk culture are
necessaryenterprise-wide awareness
of risks and how to mitigate them in
the name of better overall business
performance.
assessments about risk, return and
capital management, as well as better
alignment of business strategy and
the risk issues that affect, positively
or negatively, the achievement of
goals and strategies.
Integration of risk management acrossall relevant risk types is also important,
according to 78 percent of respondents
(shown above in Figure 2). The goal
of a new generation of risk management
solutions must be the full integration of
risk management with the operating
model, performance goals and decision-
making frameworks of a businessthe
layers of day-to-day accountability
within the organization as well as the
bigger rules and governance structures
by which it operates.
Integration of risk management into a
companys organization structure and
culture is also essential. Both good and
bad news needs to be communicated
across, up and down the organization in
an open, transparent and timely manner.
Lesson 2:
Risk management is inadequately
aligned with business strategy
and poorly integrated into
business operations.
Asked to name the biggest challenge
they face over the next two years
in developing risk capabilities that
are more rigorous and effective, surveyrespondents highlighted two goals in
particular: better alignment with the
overall business strategy and more
effective collaboration with their
business units. (See Figure 4.) For
example, 85 percent of survey
respondents agreed that one of the
lessons of the current economic crisis
is that the strategic alignment between
risk management and business strategy
must be improved.
As shown above in Figure 3, 42 percent
of respondents pointed to the need for
better integration of risk, finance and
business data. Similar numbers of survey
participants looked to better integration
of strategic decision-making with
9
Figure 4: Primary challenges for the risk management organization over the next two years.
Significant Important Not Really Important Not Important At All
Availability ofcomprehensivetechnologicalsolution to meetyour needs
Being alignedwith the overallbusiness strategy
Collaborationwith businessunits
Cost reduction Resources/talent
Identificationof the bestservices to meetbusiness needs
Integrationin the firmsprocesses/culture
1%
30%
50%
18%
37%
56%
4%
3%
36%
53%
7%
3%
38%
39%
21%
2%
33%
55%
9%
2%
30%
50%
18%
2%
37%
52%
9%
3%
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The challenge of the next generation
of risk management is to better
integrate and align risk taking
with performance measurement
and executive remuneration. This
fact was affirmed by 75 percent of
the executives surveyed. Forty-one
percent of respondents felt that
significant changes are required to
remuneration and bonuses, which
need to more effectively support
prudent risk management and a
long-term business perspective.
Lesson 3:
Integration of risk management and
performance management is lacking.
How involved is risk management in
some of the critical aspects of managing
the business and making decisions?
For a significant number of survey
respondents, integrated risk
management is essential to effective
strategic planning. Forty-eight percent
of executives said their risk capability
is involved to a great extent in such
planning, and 92 percent indicated risk
was involved at least to some extent.
Similarly high numbers pointed to
the importance of risk managements
involvement in investment and
divestment decisions: 45 percent
say risk is involved to a great extent
and 87 percent say there is involvement
to some extent.
Contrast those results, however, with risk
managements involvement in objective
setting and in performance management.
For both those types of activities, only
27 percent of survey respondents said
the risk capability was involved to
a great extent. (See Figure 5.)
Figure 5: Inclusion of risk management in decision-making processes.
To A Great Extent To Some Extent Not Included Not Applicable Lower inclusion
Strategic
Planning
Mergers and
Acquisitions
Investment &
Disinvestment/FinancingDecisions
New product/
Process/SystemIntroduction(Incl. Designand Pricing)
Objective
Setting andIncentives
Performance
ManagementProcess
Budget &
Forecasting
Procurement Definition of
Health &Safety/EnvironmentalControlRequirements
Definition of
InsuranceRequirements
Outsourcing/
MultisourcingDecisions
48%
2%
37%
43%
12%8%
45%
2%
36%
48%
12%
3% 2% 2%
33%
50%
16%
1%
28%
47%
21%
5%
30%
45%
22%
3%
40% 42%
13%
5%
29%
47%
20%
5%
12%
6%
44%42%
54%
27%
17%
27%
18%
53%
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Several factors are leading to these cost
increases. One is fairly obvious: increased
regulation leads to the need for more staff
and more investments in compliance-
monitoring processes. Other factors are
more technological in nature. For example,
more than 80 percent of respondents
indicate that poor data quality, inefficientreporting processes and fragmented
systems are increasing the cost of risk
management. Inefficiencies may be linked
to the absence of a good infrastructure.
Fewer than 25 percent of the companies
surveyed have an integrated and scalable
IT infrastructure to help manage risks.
The inability of many companies to create
and sustain an integrated risk management
approach is also a factor. Insufficient levels
of integration lead to redundancies and
errors, which in turn lead to increasedcosts. According to our survey, most risk
managers spend only about 20 percent
of their time advising business units.
Almost 60 percent of their time is spent
on data cleansing, data management
and compliance needs. (See Figure 8.)
But compliance alone cannot effectivelydefine risk management, nor derive itsoptimal value. Compliance tends tobreed a command-and-control riskmanagement environment. It can alsoproduce a merely reactive culturefocused on ticking boxes on a checklist
rather than on working togetherproactively to find ways to improveperformance through bettermanagement of risks.
Lesson 5:
The costs of effective risk
management are increasing.
The complexity of the risk environment
has cost implications that are a concern to
companies, given the financial constraints
under which they are already operating.
For about four out of ten respondents,
risk management costs have increased bymore than 25 percent. For 14 percent of
respondents, costs have risen more than
50 percent. About seven in ten companies
have experienced cost increases in excess
of 10 percent. (See Figure 7.)
Lesson 4:
Increased regulation is expected.
High-profile financial mismanagement
examples in the past usually precipitated
major changes in financial reporting.
The current crisis, on the other hand,
will generate new regulations affecting
risk management. Almost half of our survey
respondents across all industries believethat regulations will become more
stringent, and more than one-third say
they are already experiencing such an
effect. For 45 percent of respondents,
that formation of new regulations is,
itself, actually exacerbating risk problems
making the environment more risky and
not less so. (See Figure 6.)
Regulatory compliance is certainly
a critical component of good risk
management. But if compliance
becomes the only or dominant mindsetof a company when it comes to risk
management, it may impede a companys
ability to anticipate and respond to todays
marketplace risks. Our survey found that
most executives see regulatory compliance
as one of the top benefits of the risk
management capability.
11
Figure 6: To many executives, more regulation increases rather than decreases risk exposure.
45%
34%30%
35%
14%
24%
69%
5%
The ongoingfinancialmarketsinstability
Formationof newregulations
Rapidtechnologicalchange
Politicaland socialinstability
Commoditypricefluctuations
Competitionfor talent
Missing financialliquidity (missingcredit capacitydue to currentcrisis)
Others
What change in the business environment has the potential to cause maximum increase in risk faced byyour firm and its peer group?
Note: Percentages may not add to 100 as respondents could make multiple selections
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Figure 8: Percentage of time employees within risk management spend
on a variety of activities.
15.28%
21.97%
18.81% 19.55%
21.51%
Data Management/Data cleansing andReconciliation
Customizing andMaintenance ofRisk Related ExpertEnd-User Tool
Risk ReportsFor Internal Use
Compliance andMandatory RiskDisclosure
Advise toBusiness Units
Average percent of time spent on different activities.
N=260 (May not add up to 100% due to others)
Figure 7: Different levels of cost increases experienced by companies over the past three
years to manage risk effectively.
27% 28%
17%
8%
1%5 %
14%
VerySignificantIncrease(Over 50%)
SignificantIncrease(Between25 and 50%)
ImportantIncrease(Between 10and 25%)
LimitedIncrease(< 10%)
No Change Decrease Do Not Know
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Lesson 7:
Companies are investing to improve
their risk management capability.
Despite the current economic downturn
and shrinking budgets, companies are
increasing their investments in risk
management capabilities. More than
70 percent of respondents have either
increased or are planning to increase
investments to improve risk management
capabilities. Seventeen percent of the
executives say the level of investment
has already been increased, and another
23 percent expect such an increase in
the next six months. (See Figure 10.)
Almost half the firms in our study
(48 percent) invest in risk management
expecting enhanced profitability and
sustained growth as the primary
benefits. Thirty-seven percent expect
improvements in capital allocation.
Other benefits mentioned by at least
25 percent of respondents include
an improved capacity to enter new
markets and regions; enhanced process
efficiency; and better early warning
capabilities about future ensuing
crises. (See Figure 11.)
of the overall risk management
capability can be outsourced
with application development, IT
infrastructure and hosting of risk-
related reporting tools and data
warehouses leading the way.
(See Figure 9.)
Cost considerations are the top reason
for outsourcing, noted by 68 percent
of survey respondents. Other important
reasons include:
Advantage of unified risk procedures
across units of the same company
(55 percent).
Process improvements and better
turnaround time of risk responses
(50 percent).
Improved ability to deal with regula-tory requirements (46 percent).
Enhanced scalability (45 percent).
Lesson 6:
Outsourcing parts of risk
management capability is being
used to improve efficiency.
As a result of the need to substantially
improve the effectiveness of the risk
management capabilityas well as
factors such as increasing costs and
data integration challengesoutsourcing
is emerging as a significant option for
many companies. Its primary attraction
is the elimination of the need for
time-consuming management of IT
applications, allowing risk professionals
to provide more strategic oversight on
behalf of their companys business units.
Companies that have a fully integrated
risk management process but lack the
capabilities to collect, aggregate and
utilize the risk-based information
efficiently can accelerate their effortsby considering the outsourcing option.
Sixty-three percent of survey
respondents stated that some portion
13
Figure 9: The majority of executives believe some aspects of risk management
can be outsourced to deliver better efficiencies.
37%
24%
18%
29%
20%
23%
20%
None
IT infrastructure for Risk Management
Model validation and back testing processes
Application development of expert tools
Hosting/Maintenance of Risk related expert tools
Hosting/Maintenance of Risk related ReportingTools/Data Warehouse
Report production for standardized riskreports and disclosure
63%
Note: Percentages may not add to 100 as respondents could make multiple selections
Risk activity/processes that organizations think can be outsourced
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14
Figure 10: The majority of companies are increasing their investments in risk
management capabilities.
Impact of the current financial turmoil on companies investment decisions to improve their risk management capabilities
13%
15%
31%
23%
17%
72%
No real impact
General budget constraints and cost cuttingprograms may reduce the level of investmentsin risk management
The increase of the level of investment is currentlyin discussion
The level of investment to develop risk managementcapabilities will be increased in the next six months
The level of investment has already been increased
Figure 11: Potential business benefits of investing in improved integrated risk
management capabilities.
Not applicable/no planned investments
Reduced market losses
Reduced credit losses
Reduced operational losses
Anticipation of crisis/early warning capabilities
Enhanced process efficiency
Enhanced market reputation/perception
Avoidance of intervention by regulator
Avoidance of intervention by government
Capacity to enter into new markets/regions
Enhanced profitability and sustainability
Regulatory capital reduction
Improved capital allocation
2%
11%
16%
20%
27%
26%
21%
19%
14%
25%
48%
18%
37%
Note: Percentages may not add to 100 as respondents could make multiple selections
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An integrated risk management approach
is the exception today and not the rule.
Most companies struggle to derive
insights from their internal information
systems and to evaluate the impact of
external events on their operations and
business. Other Accenture researchour
most recent High Performance Finance
Study2found that only 8 percent of
all companies surveyed indicated they
have a fully integrated risk management
capability that is used uniformly across
the enterprise.
Successful companies are more likely to
include risk management as a key input
to making organizational decisions. The
degree of inclusion is particularly high
for business decisions such as strategic
planning, new-product design and
investment/divestment.
Improve the quality and relevance
of information and the frequency
of risk reporting.
An effective response to a certain kind
of riskstrategic, market, credit, liquidity
or operationaldepends on rapidly and
consistently gathering, aggregating
and making sense of information from
both internal and external sources. To
be successful, companies must increase
the frequency of risk reporting to
different stakeholders, and should
also have in place standardized risk
reporting procedures.
broad reach covers both the layers of
day-to-day accountability within the
organization as well as the bigger rules
and governance structures by which
it operates. Based on our research,
and on our experience working with
organizations across all industries
to improve their risk managementcapability to drive business value,
the following are especially important
keys to success:
Develop more integrated risk
management capabilities.
Effective risk management departs from
the fragmented and compartmentalized
solutions usually in place at many
companies. It offers a holistic view
of the enterprise designed to identify
and understand a variety of risks, and
then feed that understanding into the
growth engine of the company.
Risk management must be
institutionalized, integrated and
aligned with the operating model
of the business. To be effective, risk
management must be a normal and
expected component of the meetings
and reviews that are held and the
questions that are asked. Risk issues
must inform governance and decision-
making processes, the training people
receive, the management and leadership
behaviors expected throughout the
organization and the reward structures
in place.
Lesson 8:
Optimism still exists about the
ability of strong risk management
to drive business performance.
Executive confidence in the business
value of an integrated risk management
capability remains strong. The highest
number of executives (72 percent) listed
improved compliance with regulations
as an important outcome of improved
risk management capabilities. However,
other business benefits also rose to the
fore: 61 percent of executives stated
that an improved integerated risk
management capability can support
and sustain business profitability,
and 58 percent said that they will
be able to more effectively manage
liquidity and cash flow. More than half
of the respondents affirmed that better
risk management can help them achievecompetitive advantage. (See Figure 12.)
Implications of theresearch for achieving
high performanceTaken as a whole, the survey results
constitute a road map for developing
the next generation of integrated
risk management. The promise of
a new generation of risk management
solutions lies in part in the full
integration of risk management with
the operating model, performance goals
and decision-making frameworks of a
business. Integrated risk managements
15
Figure 12: Impact of risk management on identified outcomes.
No Impact Minor Impact Major Impact
Compliance
with Regulations
Competitive
Advantage
Reduction
in the Cost
of Capital
Sustainability
of Profitability
Enabling
Profitable
Growth
Managing
Liquidity &
Cash Flow
Positive Rating
from Rating
Agencies
Positive
Comments
from Analysts
Reputation in
Public and Media
72%
27%
1%
53%
42%
5%
47%
47%
7%
61%
35%
4%
53%
43%
4%
58%
37%
5%
53%
34%
13%
50%
38%
12%
53%
40%
7%
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ConclusionThe executives we surveyed as part
of the Accenture 2009 Global Risk
Management Study are aware of the
potential business value waiting to
be unleashed from improved integrated
risk management capabilities.
They also know that a new and moreeffective approach to integrated risk
management must simultaneously be
both comprehensive and cost efficient.
It must have the kind of reach and
specificity needed to restore public
trust and enable business growth,
while also delivering the cost
savings that are critical during
these challenging economic times. It
must support the constructive tension
needed to simultaneously set limits on
entrepreneurial activities and encourage
that sense of entrepreneurshiphelping
executives take reasonable risks to
fuel growth and improve business
performance.
The extraordinary circumstances of
the current financial crisis and global
economic downturn present daunting
challenges, but also unique opportunities
to rethink risk management strategies
and practices and run day-to-day
operations better than ever. Despite
intense scrutiny from many quarters,
executives can now exploit the levers
of managing in a downturn to maximum
effect. Cost management, customer
retention, operational excellence
and flawless execution of mergers and
acquisitions are especially important
when uncertainty is greatest.
Accenture believes that the goal of
a new generation of integrated risk
management solutions and capabilities
must be the reestablishment of trust
by which we mean two essential things.First, investors and other stakeholders
must be able to trust that robust risk
management capabilities are in place
to mitigate against the kinds of risks
that eventually undermined the global
economy. Second, however, companies,
entrepreneurs and innovators must
be able to trust that a sound risk
management platform is in place that
enables them to launch new venturesto
grow and expand, to enter new markets,
develop new products and sell to new
customers around the world. Ultimately,effective risk management is about
achieving and sustaining high
performance.
Companies that are successful
in keeping risk management and
performance management in a state
of constructive tension have higher
expectations for what their risk
management capability can accomplish
from a business perspective. They
believe that risk managment has asignificant impact on delivering business
value. That is, effective integrated risk
management can improve the business
at multiple levelsfrom cost control to
compliance to profitability. Successful
companies from a risk perspective are
more likely to indicate that integrated
risk management has a major impact
on areas such as competitive advantage,
enabling profitable growth, sustained
profitability and better ratings and
reputations.
Increase the involvement of
risk management in driving
value creation.
Accenture believes that companies
have an opportunity to employ
risk management as a competitive
differentiator to create value, while
also protecting the interests of
shareholders and other key stakeholders
in a cost-effective manner. As we have
noted, improved compliance is an
important goal, but higher goalsmust also be pursued.
Today, effective risk management is
also a matter of using the information
derived from risk assessment and
analysis to make better and more timely
decisions. In this way risk management
becomes more than just a matter of
mitigation, compliance and control,
as important as those processes may
be. Risk management can become
a proactive, continuous initiative
focused on creating value and drivinggrowth, not simply a reactive exercise
in protecting value or guarding
against failure.
By optimizing both risks and rewards,
companies with an effective and
integrated risk management capability
link risk and profitability objectives,
improve strategic capital decisions and
increase shareholder returns. They better
coordinate risk measurement, capital
allocation, performance assessment and
management across the enterprise.
Leading organizations today are also
looking to more effectively monitor
external events to evaluate contagion
riskthings happening with markets,
business partners or other companies
whose problems might then ripple into
their own organization.
Effective risk management and internal
controls depend on the quality of the
information provided. In our experience,
companies that are more advanced in
their risk management capabilities have
attained a high degree of granularity
in the risk data that supports their
information reporting. Attaining this
level of granularity and specificity is
a direct result of the foundational risk
management processes and capabilities
that have been embedded in these
organizations. Management needs
the right information, in the right
granularity, at the right moment
to assess risks and take action.
Risk-adjust the companys
performance management
processes
Risk management and performance
management must work together
if a company is to stay on the path
toward high performance. Risk
management exists to support, not stifle,
the entrepreneurial spirit of a company.
If inadequate coordination exists
between the two capabilities, executives
may be improperly rewarded for the risk/
return outcomes of their decisions.
Performance management is equally
important in terms of providing
guidance and incentives to individuals.
One pervasive problem in organizations
is that performance targets are focused
on the short term and thus do not
encourage behaviors that create
long-term, sustainable value.
One answer is to achieve a greater
level of specificityactually charting
a new set of desired, risk-focused
behaviors against the operating
procedures needed to encourage those
behaviors. In this way, risk management
becomes every employees responsibility,
and strong risk management becomes
synonymous with good management.
The total rewards package can then be
recalibrated to reflect a better balance
of base and at-risk pay, lengthening the
timescale over which deal quality is
assessed and rewards are paid out.
16
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17
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18
Glossary of terms
The following definitions were used inthe survey:
Risk ManagementThe process of
identifying, categorizing, measuring,
monitoring and mitigating risks in
an organization.
Risk CapabilityThe ability of risk
management in an organization to
perform the activities it was instituted
for. It is a combination of the available
people competencies, methodologies
and technology assets.
Risk IT StructureThe IT systems and
architecture underlying the functioning
of risk management in an organization
for example, a risk IT architecture
integrating the different expert tools to
support time-efficient risk measurement
and management processes as well as
increased data and report consistency
across all risk types, or an enterprise-
wide governance, risk management
and compliance software platform
to support internal process controls.
Risk Operating ModelThe way
that risk management constructs itscapabilities to execute its strategies.
The model shows what capabilities
are needed to form an end-to-end
risk value chain.
Risk Management OrganizationThe
people component of risk management.
It includes the governance mechanism,
as well as the roles and responsibilities
of the risk capability.
Enterprise Performance Management
The capabilities required to manage and
optimize business performance across
a single enterprise or business network.
These capabilities include strategic
planning, goal setting, budgeting,
planning, forecasting, and performance
management and reporting.
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Copyright 2009 Accenture
All rights reserved.
Accenture, its logo, and
High Performance Delivered are
trademarks of Accenture.
About AccentureAccenture is a global management
consulting, technology services
and outsourcing company.
Combining unparalleled experience,
comprehensive capabilities across
all industries and business functions,
and extensive research on the worlds
most successful companies, Accenture
collaborates with clients to help them
become high-performance businesses
and governments. With more than
181,000 people serving clients in over
120 countries, the company generated
net revenues of US$23.39 billion for
the fiscal year ended Aug. 31, 2008.
Its home page is www.accenture.com.
About Finance &Performance ManagementThe Accenture Finance & Performance
Management service line helps clients
on their journey to high performance
by identifying critical issues relative to
the office of the CFO, setting strategic
direction and successfully delivering
innovative solutions to transform their
finance management capabilities. We
offer a range of financial consulting
services, focusing on the areas
of corporate finance, enterprise
performance management, finance
operations and risk management.
We have the breadth of experience,
global resources, superior assets
and deep knowledge and insights
to help the CFO create new forms
of value. Our extensive research,
insight and innovation, global
reach and delivery experience
have made us a worldwide leader,
serving thousands of clients everyyear, including many of the Fortune
500 companies across virtually all
industries. For more information, visit
www.accenture.com/fm or contact:
1The Changing Role of the Finance
Organization in a Multi-Polar World:
Accenture High Performance Finance
Study 2008.
2The Changing Role of the Finance
Organization in a Multi-Polar World:
Accenture High Performance Finance
Study 2008.