Amid the current crisis, most companies have identified an increase in financial, strategic, compliance and operational risks, highlighting the importance of having efficient risk management strategies in place. But according to Ernst & Young’s ‘Future of Risk’ survey, published recently, a large number of companies possess misaligned and fragmented risk functions, which can substantially hinder their performance.

The report found that 96 percent of the 500 senior executives interviewed for the survey believed they have an opportunity to improve their risk management functions, and almost half recognised that committing additional resources to risk management could give them competitive advantage moving forward. Despite this awareness, the study suggests that more needs to be done to improve risk management.

“Although many organisations have boosted the size and reach of their risk management functions, this does not always equate to an increase in effectiveness,” pointed out Paul Kennard, UK & Ireland head of risk at Ernst & Young.

The survey also found that coverage and focus of multiple risk functions has become increasingly difficult to manage, and is compounded by a lack of alignment. Fifty percent said they have gaps in coverage. In addition, 73 percent indicated they have seven or more risk functions, while 67 percent have overlapping coverage with two or more risk functions.

“Risk management functions within an organisation often exist in silos that are disconnected from one another and the wider business strategy,” Mr Kennard explained. “As a result, risks identified in one area may not be connected or recognised by another. Moreover, different areas within an organisation may have different views on the severity or importance of certain risks,” he added.

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