The subprime meltdown of 2007- 2008 and the subsequent financial crisis wreaked havoc across the globe, leading to the world economy teetering on the edge of collapse. The major corporate disasters that ensued highlight the siloed approach to risk management that allowed gaps in controls to exist, and failed to preempt systemic risk (i.e., convergence of interrelated risks) that caused a ripple effect of negative consequences. In the aftermath, executive management, board members, and other stakeholders realize that ad hoc risk management is no longer viable. Indeed, Figure 1 highlights that the majority of companies have increased focus on risk management over the past 12 months and for more than 31%, this was a significant shift.
Embracing enterprise risk management (ERM), which provides a holistic top-down view of key risks facing an organization, can prepare companies to face today’s rapidly evolving business world.
The value of ERM is ultimately tied to the quantifiable results achieved in the organization. In the upcoming benchmark report, Executive Enterprise Risk Management Agenda: Mitigate Risks, Improve Performance, three key performance indicators (KPIs) were used to measure the progress and success of ERM initiatives. The top performers are notable for achieving the following aggregate results:
- 94% accuracy of cash flow forecast – 13% higher than their peers
- 17% improvement in effectiveness of risk detection and assessment year over year – 7% higher than all other companies
- 3% of revenue in financial loss over past 12 months – 10% less than their peers
I look forward to sharing more findings from the upcoming report in the coming days. Please feel free to contact me with your perspectives and feedback at firstname.lastname@example.org.