While many companies have taken financial hits because of unforeseen events, a significant number of executives don’t have a complete understanding of their company’s exposure to risk and are unable to identify their risk management strategies, according to a study conducted by Forbes magazine and sponsored by Zurich.
According to the 414 U.S. executive respondents — representing banking and financial services, construction, health care and real estate — unseen risks in the following areas have caused companies financial damages:
• Operational risk – 28 percent
• Regulatory/compliance risk – 27 percent
• Financial risk – 26 percent
When asked to identify the barriers to risk management, the biggest number of banking and financial executives (36 percent) said it was lack of understanding how best to mitigate risk; 25 percent blamed a lack of understanding of the sources of risk; and 25 percent cited their company’s insufficient risk management budget.
Also, according to the banking/financial industry respondents, the top five risks most deserving of personal attention — in order of importance are regulatory/compliance risk, strategic risk, financial risk, operational risk and technology risk
Given the swath of financial damage caused by unanticipated events, surprisingly 45 percent of all respondents still said they would manage risk no differently over the next three years – about twice the percentage of those who said they would make changes — and 32 percent didn’t know whether they would do things differently or not.
Among the remaining respondents who said they would do things differently, close to 40 percent said they would make some or all of the same four changes:
• View risk as interconnected
• Align risk management more closely to growth strategy
• Cover more risks
• Revamp the in-house risk management team
