NEW YORK--(BUSINESS WIRE)--Today’s companies face a wide array of increasing and complex risks. In this environment, businesses are putting themselves in danger by neglecting or avoiding formal risk management processes, according to a new CGMA® report. In fact, 60 percent of boards are seeking more involvement from senior management in order to position their organization for a strong future and prepare for potential crises. However, many organizations, especially small and medium enterprises, have not dedicated resources to ensure a risk management process is in place.
The report, which included the results from a study of more than 1,300 executives worldwide, found that about 60 percent of organizations are facing increasing and more complex risk issues than they were five years ago. Despite that, fewer than 35 percent of organizations have implemented a formal enterprise risk management program (ERM) – a framework to identify and prepare for future threats to an organization’s core business model and strategic plan.
The American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA) commissioned the study, which was conducted by the Enterprise Risk Management Initiative at North Carolina State University on behalf of the Chartered Global Management Accountant® (CGMA®) designation.
“With three-in-five companies facing increasing risks, and regulators, boards and shareholders beginning to demand more effective risk management from organizations, it’s critical for management teams to take a closer look at their risk management programs and make them more robust,” said Ash Noah, CPA, FCMA, CGMA, Vice President of External Relations, AICPA. “Rigorously identifying and addressing potential threats is paramount for ensuring the long-term success of a company, pressure testing the effectiveness of risk mitigation plans and providing a competitive advantage in the market.”
Additional findings from the study include:
- About one third, or 34 percent, of executives in the U.S. are experiencing increased demands from regulators for more effective risk oversight and 19 percent report similar demands from shareholders
- Internationally, more than 70 percent of firms are formally assigning management's risk oversight to their board of directors in contrast to only 46 percent of U.S. firms
- About 70 percent of organizations felt that their risk management processes were not mature
- Approximately 80 percent have not invested in risk management training for executives in the past few years
- Only 20 percent of organizations integrate risk management activities with performance compensation/remuneration
With the risk environment presenting companies with greater challenges than ever before, having an effective enterprise-wide risk oversight program is crucial. Steps organizations can take to improve include:
- Take an honest and open assessment of the efficacy of the organization’s current approach to risk oversight in the light of the rapidly changing risk environment.
- Organizations generally implement risk oversight using a siloed risk management approach. Instead, consider the extent to which critical risks may occur and not be detected by silo risk managers and implement greater cross-collaboration throughout the organization.
- Many executives view risk management as mostly focused on compliance and loss prevention with little connection to strategy and value creation. Assess the extent to which risk management is an important input to the strategic planning process and adjust risk management processes accordingly.
- Move from a casual, ad hoc way of thinking to implementing a structured and explicit set of risk identification, assessment and monitoring processes that requires focus and accountability at the board and senior management levels.
By following these four steps, senior management can gain a better view of the organization’s most pressing risks, be better prepared for issues before they arise and adjust company strategies as needed in order to navigate challenges that may impact the success of the business.
For more information on the AICPA and CIMA report, “Global State of Enterprise Risk Oversight 2nd Edition” or the Chartered Global Management Accountant® (CGMA®) designation please visit www.cgma.org.
About the Chartered Global Management Accountant (CGMA)
Two of the world’s most prestigious accounting bodies, AICPA and CIMA, have formed a joint-venture to establish the Chartered Global Management Accountant (CGMA) designation to elevate the profession of management accounting. The designation recognizes the most talented and committed management accountants with the discipline and skill to drive strong business performance. Currently, more than 150,000 management accountants worldwide hold the CGMA designation.
About the Chartered Institute of Management Accountants (CIMA)
The Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body of Management Accountants, with more than 227,000 members and students operating in 179 countries, working at the heart of business. CIMA members and students work in industry, commerce, the public sector and not-for-profit organizations.
About the AICPA
The American Institute of CPAs (AICPA) is the world’s largest member association representing the accounting profession, with more than 412,000 members in 144 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.
The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialty credentials for CPAs who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. Through a joint venture with the Chartered Institute of Management Accountants (CIMA), it has established the Chartered Global Management Accountant (CGMA) designation which sets a new standard for global recognition of management accounting.
The AICPA maintains offices in New York, Washington, DC, Durham, NC, and Ewing, NJ.
Media representatives are invited to visit the AICPA Press Center at aicpa.org/press.