The research report, “Risk Management for an Era of Greater Uncertainty” – based on a global survey of 446 executives in seven industries and two government sectors – also noted that exactly half of responding executives said their risk management functions were challenged by weak recruiting strategies and insufficient training programs.
As a consequence of the talent shortages, the study found large gaps between senior management expectations for risk mitigation outcomes and their risk function’s performance. For example, 95 percent identified the importance of reputation management, but only 28 percent said their risk team had provided support in that area. Managing volatility was considered important by 70 percent of respondents, but only 21 percent said the risk team contributed to such initiatives.
The report also noted that organizations need to deal with talent shortages at a time when they are facing increased risks, with legal risks (named by 62 percent of respondents); business risks related to changing volumes, margins or demand (52 percent) and regulatory requirements (49 percent) projected to rise most in the next two years.
“Risk management is being pushed up the list of organizational priorities by external factors, from the political upheavals in Egypt and Syria, to the supply chain issues triggered by natural disasters, to Dodd Frank and Basel III regulations, as well as ongoing volatility in customer and financial markets,” said Steve Culp, global managing director, Accenture Risk Management. “While these factors have led to increased internal demand and greater integration of risk management into decision making, talent shortcomings are hindering organizations’ ability to successfully execute and mitigate the risks to achieving business objectives.”
Risk Analytics Skills Hard to Find
Although 58 percent of the respondents said that they had grown their risk management team over the last two years, they report shortages of talent in a number of areas, including risk business and data analytics (61 percent), risk technologists (60 percent), and regulatory change program management (58 percent). Shortages of pricing and risk quantitative skills (46 percent) and risk operations specialists (41 percent) were also noted.
Fifty percent of respondents said they lack skilled staff to develop analytical models; 44 percent have difficulty embedding risk analytics in management processes; and just as many (44 percent) are working with outdated legacy systems, while 42 percent said their systems integration is lacking.
“We are concerned that many organizations appear to be particularly struck by analytics skills shortages in the risk management area,” said Culp. “Technology plays a critical enabling role but highly qualified talent is needed to ensure the successful application of these tools to improve risk management capabilities. Those who excel tend to nurture a range of analytics skills that are specialized in the various aspects of risk management.”
Risk Masters Lead in Both Risk Management and Financial Performance
The report identified a key subgroup of companies – termed “risk masters” – distinguished by highly developed risk capabilities and financial performance above their industry’s average. Risk masters, comprising about 8 percent of the survey population, tend to perform better at dealing with talent issues than non-masters. For example, only 36 percent of risk masters report that weak recruitment strategy as an impediment to keeping or obtaining needed skills, versus 51 percent of non-masters; and only 39 percent of risk masters said that insufficient training programs made it harder for their organization to keep or obtain staff, versus 51 percent of non-masters.
Risk masters also tend to include risk considerations in the decision-making process in such areas as strategy, capital planning, and performance management. In addition, they do a better job of integrating their risk organization into operations by establishing risk policies based on their organization’s appetite for risk.
“While many organizations have made great strides in risk, there are those that stand apart from the rest – the ‘risk masters’ who have stronger risk management capabilities and performance results to show for them,” said Culp. “Generally achieving financial performance above the industry average, risk masters offer lessons for others as they consider how to improve their risk management outcomes.”
The study documents that growing external pressures are causing organizations to place more senior management focus on risk management. The proportion of organizations having a chief risk officer, either with or without the formal title, has risen from 78 percent in 2011 to a near-universal 96 percent in 2013. Significantly, organizations recognize that an effective risk management function will most likely have a direct line to top management, and, as a result, 96 percent of risk management owners now report directly to the chief executive officer.
Organizations are also more effectively integrating risk management, with 92 percent of respondents saying risk management is part of the decision-making process for budgeting and forecasting; 87 percent for financing and merger and acquisition decisions; and 84 percent for strategic planning.
More information is available about the 2013 Global Risk Management Study at: www.accenture.com/globalriskmanagementresearch2013
Accenture is a global management consulting, technology services and outsourcing company, with approximately 266,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com
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