Risk management: learning from recession mistakes

Wednesday, September 22, 2010 | Posted by: Fiona Cullinan
Categories: Risk | Tags: business, governance, recession, report, survey, risk, strategy, data, business models, Simon Lowe, risk management, questionnaire, tools, Business Risk Services

Why did so many risk processes fail to protect companies from the worst of the global downturn? And how can senior managers approach risk management afresh to help protect their business in future? Our latest research report has the answers. Plus, check out our tool to assess your own company’s risk maturity.

Risk management in business is, essentially, acting in the face of uncertainty to maximise potential benefits and minimise dangers. But still, the global recession found many companies ill-prepared with risk processes that weren’t robust enough to respond effectively.

Our new report on risk, A new risk equation? Safeguarding the business model, looks at the risk management practices of more than 450 companies over the past 18 months and considers how they may fare in the future.

Written in collaboration with the Economist Intelligence Unit, it canvassed 465 senior managers (more than half at C-level) between Oct 2009 and April 2010.

Key findings of the research indicate:

• Today’s heightened attention to risk management is probably temporary
• Companies’ risk appetite will change little in the near term as worries about the economy persist
• Current risk management systems are failing to provide what companies need.

Simon Lowe, Partner, Head of Business Risk Services at Grant Thornton UK, added:

“A key finding of the research indicates a poor perception of current risk processes, with the majority of respondents believing they do not genuinely influence decision-making or add value to the business.

“While many companies were able to identify their key business risks, a failure to effectively stress test their business model left them unprepared for managing the impact of risks.

“We believe that this report will stimulate boardroom discussions about the importance of risk management in shaping the business model to reduce risk and maximise opportunity.”

We’ll be pulling out some of the relevant issues and analysis and posting it here on the Boardroom blog, but you can read the full report by downloading a PDF version of the research.

Assess your own risk processes
Also, for a snapshot assessment of your own organisation’s risk processes and effectiveness, complete Grant Thornton’s online Risk Maturity Assessment at http://riskquestionnaire.grant-thornton.co.uk/

The questionnaire consists of just 14 questions and takes no more than 5-10 minutes to complete.

You might also like:
* Do business models still deliver the goods? An earlier report in this series revealed a high level of complacency among British and Irish companies about the need to change their business models.

* A typology of UK business model behaviours (infographic) - Showing the six different ways (two postive, four negative) that UK companies have been reacting to the economic downturn and how well-placed they are to take advantage of opportunities post-recession.

* FTSE 350 Corporate Governance Review – in December, we will launch our ninth review highlighting trends in compliance with the UK Code of Corporate Governance and including principal risk reporting. Our report can be used by companies to benchmark performance and inform preparation of annual reports.