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While the vast majority (80%) of large corporations have a formal enterprise risk management (ERM) program, more than half (54%) have yet to adopt any external standard for implementing this process.
A new study of 149 large global corporations by Marsh's Risk Consulting Practice in collaboration with GovernanceMetrics International (GMI) found corporate governance to be the primary driver for three of four businesses that are implementing ERM programs. The Marsh-GMI study examined how public companies in various parts of the world are handling their approach to identify, prioritize, and manage risk, as well as communicating about these initiatives.
Notably, 75% of the survey participants do not regularly communicate about their ERM initiatives to investors. Of these firms, 73% have no current plans to change their practices in this area. Meanwhile, businesses that communicate externally about their ERM programs typically do so in their annual report and investor presentations.
Of all the firms surveyed, nearly half (46%) cite a lack of integration and overcoming corporate silos as the biggest challenges to their ERM programs. According to the study, this may stem partly from a combination of insufficient or ineffective communication between a company’s risk function and the rest of its business, as well as a lack of influence by the risk function or a lack of risk expertise at the board level.
In addition to the survey data, the report examines Tyco International’s risk management efforts and understanding of its risk profile as well as the clear correlation with steadily improving credit and governance ratings.
To read the Marsh/GMI Report entitled, The Importance of ERM During Economic Upheaval, please register.
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