NZ companies not engaging fully with risk management

Press release

18 October 2012

NZ companies not engaging fully with risk management

New Zealand companies and organisations are well aware of risk management strategies and approaches, but for many it is just a box ticking exercise rather than a core management function.

Murray Chandler, partner for accounting and advisory firm Grant Thornton, said that this was one of the findings from the latest Grant Thornton New Zealand Business Risk Survey: Delivering value to your company through risk management.

“The survey looked at risk management in the public, private and not for profit sectors and showed that both the leaders in risk management and those lagging behind in risk management adopt the same approaches, indicating it is less about what organisations do and more about how well they do it.

“Some companies and organisations are very good at managing their risks, but too many do not realise the full benefit an active risk management strategy can bring,” he said.

Chandler said that there were several questions and actions around risk that New Zealand companies and organisations should incorporate into their business and strategic planning.

“Do they have key risk indicators? Do they analyse events to determine the impact on their risk profile?

“Those that ask these types of questions get significantly more value from risk management than those organisations that just ‘tick the box’.

“In fact, companies and organisations that just tick the box for risk management may be better off not having a risk management strategy at all. It can be more dangerous relying on ineffective risk management processes than not having any risk processes at all. This is not an area in which to be complacent.

“Organisations that do not have formal risk management processes are normally aware of this shortcoming which, in a strange way, can make it less dangerous for them.”

One thing that the survey did reveal is that those businesses and organisations that actively practice risk management are reaping the benefits and making increasing investment in it.

“This view is not only reflected but driven at boardroom level. It was noted that across all sectors, senior management do not value risk management as much as boards. Interestingly, the level of value risk managers feel they are able to deliver is dependent upon the attitudes of senior management to risk, reflective of the importance of the tone at the top.

“The survey clearly demonstrates that boards value more detailed risk reporting (operational, project and divisional/business risks) while senior management value strategic and top or largest risk reporting more. This seems contrary to the impression that boards are focused on the big picture and management on the detail.”

While New Zealand companies and organisations can take some comfort from the fact that many appear to appreciate the value risk management can bring to their organisation, Chandler believes many are not tapping into the full potential.

“But before many companies and organisations realise that they need help to get the full potential from their risk management strategies, they need to understand that ticking boxes is just not enough.

“And it is not an issue that is going to disappear. When organisations surveyed compared their current situations to 12 months ago, about half said they are now facing more risks or more severe risks,” he said.

To view the full report visit http://www.grantthornton.co.nz/Assets/documents/pubSeminars/GTNZ-Business-Risk-survey-2012.pdf

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