Many European firms still regard risk management as an exercise in simply satisfying regulatory requirements and ensuring their process controls are effective, according to a new report published today by Marsh.
The broker said that in the wake of increased global perils, understanding the interconnected nature of the risks their organisations face and adopting a more dynamic approach to risk management should be key priorities for European boards.
Marsh’s report, Risk and the Boardroom Agenda, focuses on the key political, supply chain, cyber and regulatory risks which European organisations face in 2011-2012.
It also outlines the actions boards should take to reduce the impact these risks may have on their firms’ competitiveness and profitability.
Eddie McLaughlin, managing director, Marsh Risk Consulting, saidd: “Current economic conditions, continuing political unrest and natural disasters mean that boards of directors now face a maelstrom of fluctuating and interconnected risk exposures.
“These risks have to be addressed under the ever-increasing scrutiny of investors, employees and regulators, who want to know how decisions are being made and that the relevant risks are being given due consideration in the decision-making process. Non-executive directors in particular now regard proactive risk management as a crucial component in informed decision-making.”
The report notes that disregarding key risk exposures and the interconnected nature of the risks organisations face was a key reason behind the credit crisis.
By focusing on the key risk issues and applying them to their own organisations, European boards can manage their risk exposures more effectively, meet their regulatory obligations and improve their bottom lines, the report added.
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