Survey Highlights

The following enterprise risk management statistics have been taken from PricewaterhouseCoopers’ survey of nearly 1,400 CEOs worldwide.

• Nearly half of the CEOs reported that they are more aggressive risk takers than in the past, and only 20 percent have scaled back their risk appetite.
• Seventeen percent of CEOs described competition as a very substantial threat, and another 46 percent viewed it as a significant threat.
• Eleven percent of CEOs viewed loss of key talent as a major threat, and another 34 percent viewed it as a significant threat. 
• Eighteen percent of CEO’s viewed over-regulation as a very substantial threat, with another 41 percent viewing it as a significant threat. 
• Forty-six percent of CEOs believe that the current business climate has made companies risk adverse, while another 41 percent feel the balance between risk taking and risk avoidance is about right under the circumstances.
• CEOs were asked, “Compared with 12 months ago, in accomplishing your business objectives, are you and your management team more or less aggressive in your risk taking?”  Their responses were: 12 percent significantly more, 36 percent somewhat more, 31 percent about the same, and 18 percent somewhat less.
• The survey lists the following as basis risk management processes: risk identification, risk assessment, agreed patterns of response, risk controls, risk monitoring, and regulatory compliance.  Three-fifths to three-quarters of the CEO’s surveyed affirm that these six processes are in place and functioning in their companies. 
• Broken down by country, the following percentages of CEOs reported that they are using a formal enterprise wide risk identification system:  42 percent in the US, 80 percent in Europe, 65 percent in South America, and 64 percent in the Asia Pacific regions. 
• US companies are most concerned with the risk management relating to regulatory compliance.
• The financial services sector has the best-developed basic process for enterprise risk management.
• Middle-market CEOs are consistently 10 to 15 percent behind (except in compliance processes) in enterprise risk management processes.  This suggests that ERM is being more actively pursued by companies with revenues in excess of 500 million. 
• Thirty-five percent of European CEOs and 28 percent of US CEOs agree strongly that risk management is a board priority.
• CEOs consider training people, availability of information, over-regulation as the three key challenges that restrict them from identify and managing enterprise risk.
• Forty-four percent of CEO’s strongly agree that enterprise risk management will enhance their ability to take appropriate risks that create value. 
• Thirty-eight percent of CEO’s consider that they already have effective and efficient ERM in place.  Among them, 48 percent of the European CEOs take that view, but only 29 percent of the US CEOs. 

• Thirty-five percent of CEOs expect to have effective and efficient ERM in place within the next two years (16 percent within one year and 19 percent within two years). 

Original Article Source: “Managing Risk: An Assessment of CEO Preparedness”, PwC, 2004