February 17, 2016
Financial executive survey reveals more can be done to recognize and manage risk: CPA Canada/FEI Canada
TORONTO -- While many Canadian organizations are concerned with risk and have a documented management plan in place, a significant number (one in five) do not, according to a study by Chartered Professional Accountants of Canada (CPA Canada) and Financial Executives International Canada (FEI Canada).
More than 320 financial executives from across the country participated in an online survey for the study titled The State of Enterprise Risk Management in Canada. Robust, institutionalized enterprise risk management programs are common among large and public companies, where nearly half have one in place. The percentages decline for smaller and private companies.
The majority of respondents (66 per cent) describe themselves as only "somewhat confident" in their organization's ability to manage risk and the research also suggests there is a greater need for organizations to bolster oversight and operational responsibilities relating to risk.
"Having a risk management program in place isn't enough," says Carol Raven, a CPA Canada principal in Research, Guidance and Support. "You need to be putting it into practice and ensuring you have the right people overseeing it."
The 2008 financial crisis reinforced the need for risk management while highlighting the threat of unexpected occurrences. More recently, high profile cases of cyberattacks on corporations have raised awareness even further.
"With the speed of change in today's economy, identifying, understanding and addressing risks in a timely fashion is critical to an organization's success," says Laura Pacheco, vice president, Research, FEI Canada. "It's also essential to communicate these risks to employees. The study results indicate that a communication gap exists in companies today with regards to risk. FEI Canada increasingly sees this communication as part of the role of today's CFOs."
Among the study's highlights:
Nearly one-third of senior financial executives say their employees mostly or fully understand the risks to their organization, but the majority of respondents did say that their Board of Directors and senior management teams either mostly fully or fully understood the risks that were relevant to their organization (72 per cent and 80 per cent respectively).
When asked about the organization's strategy being aligned to its risk appetite, most felt that the company was either fully or mostly aligned. However, 24 per cent felt that the company's strategy was only somewhat aligned to its risk appetite and a further 4 per cent felt it was not very aligned at all.
For more information on the report and survey methodology, visit: cpacanada.ca/enterpriserisk