THE recent downturn, shocking as it is, has failed to jolt many companies into managing their business risks systematically.
KPMG, which conducted a survey among 203 companies late last year and early this year, found that just 51 per cent of them had an enterprise risk management (ERM) programme in place. Those which did not have such a system include financial institutions. This is surprising 'in light of the turmoil which confronted the financial sector these past two years', said KPMG's enterprise risk management head Irving Low.
Even among the companies which had an ERM programme, not all are putting it to optimal use. Most, or 77 per cent of respondents, saw risk management as a way to protect their assets. Just 26 per cent of them viewed it as a tool for identifying business opportunities. 'Most companies are still missing out on the more strategic benefits of ERM,' Mr Low highlighted. 'Efforts are still focused on using ERM to manage downside risks.' KPMG found another shortcoming: efforts to manage risks remain concentrated within silos in many companies. Often, senior management bear the responsibility for controlling risks. Just 34 per cent of respondents said that they communicate ERM initiatives to all employees.
Several factors are keeping risk management stuck at the bottom of the agenda. According to KPMG, 58 per cent of companies said that they lacked time and effort, and 52 per cent blamed senior management for not giving enough support.
Some 37 per cent of them even revealed that their risk management oversight committees did not have adequate experience and knowledge for the job.
Although the survey results are less than satisfactory, they reflect an improvement from 2002. Then, just 4 per cent of companies polled said they adopted ERM. The figure rose to 35 per cent in 2006.
A notable number of firms which had practised ERM for more than three years also said in the latest survey that they were able to manage their key risks 'to a large extent'.
Still, Mr Low pointed out: 'While the level of adoption of ERM in Singapore continues to increase, more must be done to bring the market to the next level. Companies need to move beyond having ERM only in form and not in spirit.'