Risk Management

5 Barriers Restricting Risk Management Progress

A majority of people agree that the volume and complexity of risks has increased, and the trend is unlikely to reverse any time soon. In spite of this, organizations continue to be reluctant to implement enterprise risk management (ERM). Neil Amato, senior editor at the Journal of Accountancy, recounts the five top barriers to ERM progress, as taken from a survey by the ERM Initiative at North Carolina State University:

  1. Competing priorities, chosen by 51% of respondents
  2. Insufficient resources, 43%
  3. Lack of perceived value, 41%
  4. Perception ERM adds bureaucracy, 33%
  5. Lack of board or senior executive ERM leadership, 30%

Tearing Down the Walls

Amato listens to some thoughts from one of the survey’s authors, Mark Beasley, CPA, Ph.D., who has the following to say:

“When you think about risk and return, companies have to take risk to generate more profit, so it’s surprising they’re not seeing the connection of ERM when thinking about the strategy of the business,” he said. “We see that a lot. Organizations start the conversation about known risks to their operations, or known risks related to compliance or regulation, versus starting the conversation with strategy. ‘What are the risks to how we make money? What are the risks to the things that drive our value?’ They should position ERM from that perspective.”

The brunt of risk discussion occurs at larger companies, as opposed to entities like non-profits, though in any case, only 25 percent of companies have a mature ERM process in place. However, since the university first began taking surveys in 2009, the statistics have shown favorable improvement overall, which suggests progress is coming—just not at the speed we would like. To view more numbers, you can read Amato’s full article here: http://www.journalofaccountancy.com/News/201410315.htm

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