BY Fraser Tennant
Companies that effectively manage their business risks proceed to an upsurge in performance and faster revenue growth, according to the results of a new PwC annual risk survey.
In ‘Risk in Review: Decoding uncertainty, delivering value’ (April 2015), over 1200 global business executives and leaders share their views on how they assess the risks they face in their markets – the risk climate, their companies’ risk management practices and the key risks, both now and in future.
The survey found that: (i) 73 percent of respondents agreed that risks are increasing, particularly in the areas of regulatory complexity and data security and privacy; and (ii) 76 percent of respondents expect revenues to rise over the next two years and are undertaking a variety of strategies to make that growth happen.
“Integrating risk management into the life cycle of your business gives you the opportunity to do two things," suggests Dean Simone, a PwC risk assurance leader. “It helps you understand the implication of risk at the point of decision rather than afterward and it allows you to move very quickly and confidently, knowing that you’ve anticipated the risk and are less likely to have made a mistake that could slow you down.”
The importance to companies of being able to anticipate risk is highlighted by the survey’s focus on the benefits of having a dedicated risk management leader available to prevent expensive misjudgements, enable fast decision-making and drive efficiency. The survey exemplifies this importance when it states that only 12 percent of respondents demonstrated the qualities of "true risk management leaders".
One such risk management leader is Ryan Zanin, chief risk officer at GE Capital. He said: “We understand that both companies and economies run through cycles and you better be prepared to live through a down cycle and weather the storm. Part of our job is to make sure that people understand the choices in the harsh light of day, that there are really no free risks.”
Fellow survey respondent, IBM chief risk officer Luis Custodio, said: “One of the biggest risks is missing opportunities if you are not agile and fast. We do not slow down our business units. The last thing that business leaders want is bureaucracy. Risk management is viewed as an enabler and a support function to the business."