Fewer than a quarter of respondents rated their technology and systems as “extremely or very effective” with data management/maintenance, data process architecture/workflow logic, or data governance, according to “Global Risk Management Survey, Eighth Edition: Setting a Higher Bar,” a new risk management report from Deloitte.
The concern over data technology ties closely to risk management, as the quality of risk data was the top concern in the survey, cited by 40 percent of respondents.
Other notable concerns among risk managers were the ability of their risk technology to adapt to the quickly changing regulatory requirements, cited by a third of respondents, and the lack of integration among risk systems. It follows that the main priority for investing in risk technology systems is risk data quality and management (cited by 63 percent this year, 48 percent in 2010), followed by enterprise-wide risk data warehouse development (cited by 51 percent this year, 35 percent in 2010).
The global survey of 85 financial services institutions was 14 percent insurers, while the largest portion, 33 percent, were classified as integrated financial institutions.
Questions surrounding regulatory reforms and how companies have adapted to increased oversight appear throughout the report. As a result, compliance costs are on the rise, as 65 percent indicated that they’re spending more compared to 55 percent in 2010.
Regulatory changes also have caused a much larger number of institutions as of late (48 percent in 2012; 24 percent in 2010) to revise product lines and business activities. Lastly, 54 percent of the respondents said they are maintaining higher levels of capital as a result of regulatory reform; a fewer number (37 percent) said the same of liquidity holdings.
The question of chief risk officer (CRO) compensation plans, and whether they may inadvertently encourage excessive risk-taking, is also raised in the report.
The survey results depict an increasingly cautious approach to incentivized compensation; 49 percent said, as a safeguard, their board of directors reviews the compensation plan to consider the alignment of risks with rewards. In 2010, 35 percent of companies answered the same.
Similarly, 83 percent said they use multiple incentive plan metrics; 73 percent require that a portion be tied to overall corporate results and 58 percent defer payments linked to future performance.
Yet, CROs are still not quite ubiquitous, as 89 percent of respondents said their company holds that position, compared to 86 percent in 2010. Also commonplace is another layer of oversight beyond that; roughly 80 percent of companies surveyed said the board of directors reviews and approves risk management policy, enterprise risk management frameworks and the risk appetite statement.
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