The latest report by AICPA & CIMA and North Carolina State University’s Enterprise Risk Management (ERM) Initiative finds that business leaders are not sufficiently investing in their organization’s risk oversight despite the hazards posed to business models by not doing so.
The survey-based report found that 66% of respondents sense that volume and complexities of risk increasing. However, only 32% describe their organization’s risk oversight practices as ‘mature’ or ‘robust’.
Additionally, 17% indicate that executives do not see the benefits of ERM exceeding the costs of it.
These results come as participants also revealed that their organization had faced a significant ‘operational surprise’ in the past five years with 48% indicating that their organization has experienced a major, unexpected risk event impacting the organization.
Additional key findings include:
- The volume and complexity of risks are increasing across the four geographic regions: Europe & UK (66%), Asia & Australasia (68%), Africa & Middle East (73%),and the US (64%).
- Organizations are recognizing the need to identify a risk management leader, with 47% of respondent organizations globally appointing a single individual (Chief Risk Officer or equivalent) to lead the risk management function. However, more organizations (64%) are likely to have a management-level risk committee in place versus a single individual risk management leader. Across the four geographic regions: Europe & UK (40% single / 67% committee), Asia & Australasia (48% single / 61% committee), Africa & Middle East (61% single / 76% committee), US (48% single / 60% committee).
- In all regions of the world, respondents who claimed their organizations had mature or robust risk oversight are in the minority: Europe & UK (38%), Asia & Australasia (25%), Africa & Middle East (32%), U.S. (30%).
- Only 47% of organizations describe their ERM process as a process that is ‘mostly’ to ‘extensively’ systematic, robust, and repeatable with regular reporting of top risk exposures to the board: Europe & UK (52%), Asia & Australasia (45%), Africa & Middle East (59%), US (44%).
The 2024 Global State of Risk Oversight: Managing the Rapidly Evolving Risk Landscape measured finance-related executives’ assessments of the level of maturity in their organization’s proactive management of all kinds of risks through adoption of enterprise risk management processes.
The report defines ERM as: a methodology that looks at risk management strategically from the perspective of the entire firm or organization, and aims to identify, assess, and prepare for potential losses, dangers, hazards, and other potentials for harm that may interfere with an organization’s operations and objectives and/or lead to losses.
