Risk Management in Canada: Moving Beyond Assessment, Ernst & Young, 2006

This report is one in a series dealing with attitudes to risk and its management. The report focuses on risk assessment in Canada and is based on the results of a telephone survey of senior management conducted from October to December 2005. The results of the survey suggest that senior management recognizes risk management as a critical part of business operations but that corporations face serious challenges in implementing adequate risk management systems. The report suggests that although 85% of respondents identify clear risk ownership as the most important determinant of success in managing risk, only 2% of those respondents believe that their company is achieving this objective. The vast majority of respondents (94%) indicated that they plan to maintain or increase investment in risk management in the coming years. The areas of priority managers identify include: strategic (20%), compliance (20%), operational (15%) and building a dedicated risk management function (15%).

The report also highlights the relationship between risk management and organizational structure. The survey indicates that while 78% of managers acknowledge that it is important to identify risk throughout the company, only 11% have actually achieved it. According to the survey, one of the reasons for the lack of effective enterprise risk management is the failure of management to use and inform Boards in risk management decisions.

Another interesting issue raised in the survey is the fact that only 49% of respondents link risk management with business strategy. Compared with their global counterparts, the report suggests that Canadian senior management may not be allocating adequate weight to risk management as a business strategy.

This survey is a useful contribution to earlier reports from firms such as Ernst & Young and Deloitte Touche that address the importance of risk management and the failure of most firms to adequately manage risk. What this and other reports have not yet adequately surveyed, however, is the specific risk management techniques used by senior management and the specific pros and cons of those techniques. Although there is increasing attention given to the importance of risk management, including enterprise-wide or integrated risk management, there is much less debate on the specific types of risk management tools and protocols that are most effective for managing an increasingly global and complicated corporate risk profile.