Directors More Involved in Risk Assessment

In 2008, more than three times as many companies involve their boards in the risk assessment process, compared to 2007, according to a report by LRN. Overall, ethics and compliance programs are maturing to curtail risk.

Nine in 10 companies are performing formal ethics and compliance risk assessment, with more than half integrating it into other business risk assessments. Despite this growth, only half the companies surveyed indicated that their executive team or board become involved in the assessments.

The top two ethics and compliance risks for companies are compliance risks and electronic data privacy. Electronic data protection led the list and concerns for risk and data privacy was a close second. These concerns out ranked other risk factors such as sexual harassment, environmental safety and heath issues, anti-corruption, and bribery.

Companies remain challenged in engaging international locations and supply chains. Less than one-third of multinational companies are extending ethics and compliance efforts to parties that work closely with them, even though their violations could directly affect their company.

In terms of prevention, companies are making education a higher priority and are increasingly offering employees relevant education. Six in 10 companies admit to lack of resources as their biggest challenge in providing relevant education. More than four in 10 companies indicate making education relevant as their next most significant challenge, with engaging employees being a major concern.

Multinational companies are having trouble communicating with their regional management. Multinational firms gave themselves lower ratings for both accuracy and timeliness of their risk management efforts at their regional offices than at their headquarters. The further away from headquarters that a manager is located, the more difficult the company finds to to communicate risk management concerns.