More Boards Driving ERM, Study Finds

More corporate boards are driving enterprise risk management (ERM), but despite progress, it has yet to become embedded in most companies’ day-to-day activities, a new study by The Conference Board finds. 

 

The survey, sponsored by management consultancy Oliver Wyman, found that 55 percent of the risk, audit and finance executives from the nearly 200 companies that participated  indicate that their corporate boards are a top driver of their enterprise risk management program – a 6 percent increase from two years ago.

 

Still, ERM is not being integrated in corporate cultures on a daily basis, the study finds.  The progress has been mainly in early stage efforts like creating a risk inventory and assessment process.  As a result, the benefits of ERM – a strategic method of understanding and managing risks – have not yet accrued in most companies.

 

Among other highlights, the study also found that executives that were surveyed indicated that in 2006, 34 percent of their boards believe that ERM is significant or highly significant in carrying out their stewardship roles, an increase from 29 percent in 2004.

 

Meanwhile, there are substantial differences in ERM maturity across several industries, including financial services, energy and utilities, which have more developed ERM processes than other industries.  Still, there has been rapid growth in ERM in the healthcare sector over the past several years.

 

"Once adopted and implemented boradly throughout the firm, ERM becomes truly part of how companies do business," Ellen Hexter, head of The Conference Board Enterprise Risk Managment Center and author of the report, said in a statement. “The goal is to create greater awareness of risk and reward tradeoffs, and to drive risk thinking and appropriate risk management throughout businesses. Ownership is a critical operational and cultural component to enterprise risk management.”