New research finds only 31% of Europe and UK based organisations believe their risk management oversight model is “mature” or “robust”

• 47% Europe and UK based organisations described their key risk indicator metrics for monitoring risks as “mostly” to “extensively” robust
• 48% of UK and Europe based respondents said Covid-19 had “mostly” or “extensively” changed the nature of top risks affecting their organisation

As global organisations face an increasingly complex risk environment, a new report indicates that a very significant proportion have insufficient approaches to risk management and immature ERM processes.  AICPA & CIMA, along with NC State’s Enterprise Risk Management (ERM) Initiative, surveyed 747 global senior finance and business leaders and published the findings in their report “2022 Global State of Risk Oversight: Managing the Rapidly Evolving Risk Landscape”.

The survey measured finance-related executives’ assessments of the level of maturity in their organisation’s proactive management of risks through adoption of enterprise risk management (ERM) processes. This is a methodology that looks at risk management strategically from the perspective of the entire firm or organisation and aims to identify, assess, and prepare for potential losses, dangers, hazards, and other potentials for harm that may interfere with an organisation’s operations and objectives and/or lead to losses.

Increased uncertainty and rapidly evolving events, including geopolitical shifts, supply chain disruptions, competition for talent, and the lingering effects of a global pandemic are continuing to drive the risks that senior executives must navigate. Even when faced with these complex risks, only 31% of respondents from the UK and Europe said they believe their risk management oversight model is “mature” or “robust”.

Other key findings from the report include:

• Only 13% of European and UK based executives believe their organisation’s risk management processes provided a unique competitive advantage
• 64% of Europe and UK based organisations claim to have a standardised process for identifying risks.

Business leaders understand their organisations must take risks to generate returns. But there was a noticeable variation between regions among respondents when asked if their risk management processes provided a competitive advantage. 40% of respondents in Asia and Australasia and 34% in Africa and the Middle East believe their risk oversight is providing an important competitive advantage, while the figure was only 13% in Europe and the U.K.

Mark Beasley, KPMG Professor of Accounting and Director of the ERM Initiative at NC State, said:

“Globally, organisations face the realities of an increasingly complex risk environment while realising their current approach to risk oversight may be insufficient. Interestingly, even prior to the massively disruptive Covid-19 pandemic, business leaders have sensed an overwhelming volume and complexity of risks impacting their organisations. As this and our previous studies suggest, risk management does not appear to be getting easier.”

Ash Noah, CPA, CGMA, Vice President & Managing Director of Management Accounting at the Association of International Certified Professional Accountants, representing AICPA & CIMA, said:

“Business leaders that embrace the reality that risk and return are related are likely to increase their investment in enterprise risk oversight to strengthen their organisation’s resiliency and agility when navigating the complex and uncertain risk landscape. Organisational value goes beyond the balance sheet. Along with providing protection for businesses, embracing ERM supports the creation of value and long-term viability and sustainability.”

AICPA & CIMA