Thursday, May 29, 2008

Survey: Enterprise risk management still a blind spot for insurance CFOs

The drumbeat for the use of enterprise risk management processes at major companies is getting louder thanks to the credit crisis.

Federal Reserve Chairman Ben Bernanke said yesterdayThursday that the credit crisis has exposed weaknesses in many financial firms’ risk-management practices. “For risks to be successfully managed, they must first be identified and measured,” Mr. Bernanke noted in a speech. “Recent events have revealed significant deficiencies in these areas.”

Apparently, those deficiencies exist at businesses which specialize in identifying and measuring risks. A new survey conducted by consulting firm Towers Perrin found CFOs at insurers are still woefully behind in weighing enterprise risk when making business decisions.

“Although many life companies have made progress in such areas as risk identification, prioritization and measurement, few are achieving the desired full potential of enterprise risk management (ERM) as a management tool,” concluded Towers Perrin, which surveyed CFOs at 38 large and midsize North American life insurance companies.

For example, 83% of those CFOs said their company lacked the tools necessary to measure value creation from ERM. More than 70% said they had not yet aligned ERM with performance incentives.

Survey: Enterprise risk management still a blind spot for insurance CFOs

Labels: ERM, life insurance companies, measuring risk, Towers Perrin survey

Tell us what you think. (0) comments.
Send to a friend:

Tuesday, April 08, 2008

Standard and Poor's - Use of ERM in Credit Rating

Maybe so much of the Sarbanes Oxley legistlation has been to simply bring US filers up to par with governance and risk management practices that have been maturing around the globe.

Standard and Poor's, one of the leading credit rating agencies for capital markets, has begun their analysis of incorporating enterprise risk management (ERM) practices into credit rating - in Australian and New Zealand companies (with one of the longest lived bodies of risk management practice, dating back to 1995).

Though the comment period is now closed, the S&P ERM Criteria as issued for comment in November 2007 (period closed Feb 1, 2008).

editor note: I could not find conclusions on the comments on the S&P website, originally scheduled to be published around March 1, 2008. Please share if you happen upon it.

Labels: credit rating, enterprise risk management, ERM, Standard and Poors

Tell us what you think. (0) comments.
Send to a friend:

It's time to embrace Risk Management

Since the advent of Sarbanes-Oxley, non-financial corporations have faced increasingly strong regulatory and compliance requirements aimed broadly at increasing transparency in their business practices. Risk management has been addressed at times, but usually as an afterthought.

All this is about to change.

In November 2007, Standard and Poor's announced plans to introduce enterprise risk management into its credit ratings criteria for non-financial companies, a move meant to bring a level of consistency to evaluating not only the resilience and profitability of these firms, but also the quality of management.

S&P has been evaluating ERM in the financial sector for some time; now it will apply its ERM ratings criteria to industries as diverse as airlines, pharmaceuticals and retail. While S&P plans to tailor its proposed ERM analysis based on individual companies' unique risks, structure and culture, all companies will be rated against four major criteria that will serve as the framework for analysis—risk management culture and governance, risk controls, emerging risk preparation and analysis of strategic management.

It's time to embrace Risk Management

Labels: credit rating, enterprise risk management, ERM, Standard and Poors

Tell us what you think. (0) comments.
Send to a friend: