I choose to only highlight some of the key data points of the survey rather than the whole results, to encourage more to sign up as sustaining members to be able to access the full survey results and benefit from such value added offerings from PRMIA.
Broadly the survey covered the following aspects - ERM program and methodology, Success factors in ERM rollout and implementation, Reporting structure, staffing, Costs, and relation to economic capital.
Overall, 90% respondents confirmed that ERM is very much a part of their current or future business process, with 41% confirming that their organization has a well-defined ERM program, 49% are in various stages of development. There are still 10 % of respondents whose firms are not engaged on ERM, which means still lot of work cut out for Risk mgmt deptt.
A fair majority of firms have adopted or will adopt internally developed ERM frameworks and methodology. In my opinion most would of these would still map quite closely to established standard frameworks in some areas.
Amongst the type of risks, business strategy risk was cited as the key risk opinion rankings, followed closely by credit, market and operational risks, although when asked to rank risks quantitatively, business strategy fell to fourth place.
Reporting structure is always a key indicator of how important the Risk management function is in an organization. Consistent with this, on the reporting structure question, over 80% of respondents opined that the Chief Risk Officer ought to report directly to the Board.
With respect to ERM implementation and adoption, training and top-down support were cited as the most critical factors for a successful ERM program. The other factors were ease of use and familiarity with ERM tools. For most risks not currently captured by the ERM process, the vast majority were on schedule for implementation within the next two years. Over 70% cited "industry best practices" as the goal of their ERM program; most of the rest targeted "above regulatory minimums" in various degrees.
On average, participant companies are allocating about 3-3.5% of operational costs to their ERM programs, but identify 4.5-5% as what is needed for a successful and meaningful ongoing program. 75% of participants used their ERM risk measurements in the setting of target capital for their firms.
From a holistic ERM requirements perspective, 34% thought that Basel II (CRD) could be more easily fulfilled with a sound ERM program in place, whereas 22% chose the Sarbanes-Oxley Act. 30% of respondents from AMERICA opted for the Sarbanes-Oxley Act as opposed to 18% from EMEA & 19% from APAC.
PRMIA chapters around the world also hosted a series of global events to discuss these ERM survey results. In Seattle we hosted a roundtable to share and validate the global ERM data points. The interactive session facilitated ably by Co-RD Seth Shapiro stimulated some animated and interesting insights from a cross section of Risk practitioners from various industry sectors on their perspectives on the state of ERM. Especially of interest were the implementation and adoption. related findings.
The ERM survey results along with the industry roundtable insights provided a good validation of some of the common issues that I personally have seen during implementation of ERM initiatives and blueprints, for example in the area of ease of use, familiarity of ERM tools and ERM as part of everyday workflows and business processes.
The success of any global study or survey depends on the quality and scale of participation, so let me end by thanking all of you who participated in this survey. Also a big thanks to Robert Reitano, Professor of Finance, Brandeis University, International Business School for his contributions to the PRMIA survey content. Last but not the least a sincere word of thanks for the PRMIA secretariat team of Kattie Gittins, Cheryl Bucks, David Millar, Janet Tritch, Christina Severson and others from PRMIA team who worked tirelessly to support this and all the other global event efforts.
Happy reading everybody !
