An edge through Risk Management
Date: 04-03-2008
Source: Channel News Asia
Risk management is the key to effective competitive advantage amid the current market volatility, according to global sector experts at Ernst & Young. They said a good risk management regime is key to improving business & shareholder value.
Accounting and consultancy firm Ernst & Young said more than 80 per cent of top global investors are willing to pay a premium for shares in companies that demonstrate effective risk management because these firms are seen as most likely to meet their earnings targets.
Michael Kaiser from Ernst & Young's business risk services said: "Those companies that are most successful are those companies that manage their risk better... (They) build the right competencies to manage risk for their organisation across the breadth of risk issues that they are dealing with. Those are the companies that are more likely to succeed, be more predictable to their earnings and be more aligned to their forecast and better achieve the objectives desired by their investors and stakeholders."
But the survey conducted by the firm also showed that 40 per cent of companies do not relate risk management to overall business strategy. Ernst & Young said firms need to appreciate the benefits of risk management activities.
Inge Boets from Ernst & Young's business risk services said: "Risk management has a number of benefits to the business. You need to go through a number of steps, a number of processes. You need to first understand what your risks are. You need to... look at who is responsible for which risk within an organisation... You need an approach, a model that allows you to determine where your organisation is, what you are doing today, how that compares to other organisations."
Industry players noted that a recurring problem for companies seeking to implement risk management is achieving alignment across departments. Ernst & Young said that this can be dealt with by ensuring better communication and approaches to risk in order to avoid overlapping and inefficiencies.
.jpg)
