Risk management : to Avoid the excess of confidence, and empower stakeholders

Etude Deloitte “convergence of risk management and value creation”

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Neuilly-sur-Seine, Tuesday, 20 June 2017

The companies have too much confidence in their risk management ? The latest global survey by Deloitte, conducted by Forbes Insight survey of more than 300 members of boards and officers, is a figure of warning : they are many to manifest a too great optimism as to their knowledge of the risks and their ability to cope with it. The optimism is almost unanimity among the leaders of the Fast 50 : 90% on their sector and 92% for their business
Nearly nine in ten managers recognize the need to see the risk management focus on the management of value in addition to the prevention of risk, but only 18% of them take actively advantage of the risk in the management of their result.
3 respondents out of 5 consider that their organization is expected to be affected significantly by new innovations, and other factors disruptive
82% of the companies consider taking the “good” level of risk
3 companies in 5 consider their ability to balance risks and benefits as being superior or very superior to the average
63% of companies certify from a Chief Risk officer to full-time in their teams, when nearly a quarter will ensure that the function is carried by another officer
82% believe that their risk management activities to optimize very strongly (23%) or strongly (59%) the results of the entire company.
Towards a risk management-generating value ?

While 87% of managers interviewed believed that risk management should stimulate the creation of value, only 18% of them take actively advantage of the risk in the management of their result.

Companies are generally convinced of the quality of the decisions taken in respect of key risks : 82% of them believe they take the right level of risk and three out of five consider their ability to balance risks and benefits superior or very superior to the average.

“The financial crisis of 2008-2009 has helped to automate the attention given to the management of risk, but the process is not for the time being not yet sufficiently opportunist to, or integrated into the overall strategy of the company,” says Marc Duchevet, Partner Risk Advisory at Deloitte. “This is all the more worrying when we consider the major transformations that we see today in most sectors. Regulatory risks, technological or commercial multiply and this provides opportunities to support the growth and development of businesses “.

Better define the role of the Chief Risk officer

“63% of the respondents said they have a Chief Risk officer to full-time in their teams, it is a figure surprising. Even if some industries are subject to regulatory constraints, more severe in terms of risk, the trend seems to be overvalued, ” notes Marc Duchevet. This overvaluation can be explained by a poor definition of the role of Chief Risk officer.

If we consider that the Chief Risk officer should be part of the leadership team, be the guarantor of the application of the risk management program of the company, raise awareness at all levels of the organization to the risks and to ensure alignment between risk management strategy and creation of value, the percentage displayed of 63% would drop considerably.

Finally, this role is likely to change profoundly, since the managers interviewed want to see the Director of Risk bear more of its costume of strategy, dedicating more than half of his time to the definition of the strategic direction of the company and the alignment between risk and strategy.

Risks and opportunities strategic : prepare for better respond

The sustainable development and CSR, represent the strategic risks the most cited (34%), in particular by the increasing visibility of the impacts (potential or actual) of these risks on the financial results.

In second position come the risks of “disruption” or innovation (33%). The respondents, however, show rather confident in the ability of their risk management programs to leverage innovation and ” disruption “. Thus, 70% of respondents felt that their risk management function that effectively contributes to the adjustment of strategies and 69% of them claim to assess the factors disruptive to help better identify development opportunities and mergers/acquisitions.

Forbes Insight, commissioned by Deloitte, conducted interviews with more than 300 c-level executives. All respondents perform functions of management ; the Directors of the Risk being purposely excluded from this survey. The answers are divided equally between three regions : Americas, EMEA (Europe, Middle East and Africa) and Asia – Pacific. The industries surveyed are the following : consumer & industrial Products, Health & life Sciences, financial Services, manufacturing, Energy & Resources, and Technology, Media & Telecommunications. The investigation has focused on a sample of companies recording a turnover of more than US$ 1 billion (and exceeds 20 billion US$ in 23% of cases).

About Deloitte

Deloitte refers to one or more member firms of Deloitte Touche Tohmatsu Limited, a company incorporated under English law (” private company limited by guarantee, and its network of member firms incorporated and independent entity legally separate. For more information on the legal structure of Deloitte Touche Tohmatsu Limited and its member firms, visit www.deloitte.com/about. In France, Deloitte SAS is the member firm of Deloitte Touche Tohmatsu Limited, and professional services are rendered by its subsidiaries and affiliates

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