Global survey reveals that risk function has lost status despite financial crisis

The survey, carried out by SimCorp StrategyLab in cooperation with The Nielsen Company, has revealed that since 2007 the number of organisations that have the risk management function reporting into the board of directors has dropped by 5% (from 36% to 31%) – a fall of 14% within that group. During this same period of time, the organisations that have moved the overall responsibility of risk to senior management level has increased by 5% (from 23% to 28%) – an increase of 22% within that group. This position is not expected to change.

When it came to looking into the future, however, the need for increased strategic influence of the risk function was cited as the most important factor to effect an improvement in risk management, as stated by 76% of interviewees. This implies a call from respondents for support from the most senior officers within the organisations.

Despite its loss of status, the role and responsibility of the risk function has been extended during 2008, as reported by 58% of the respondents. Key areas of future investment are expected to be in staff, staff competencies and the implementation of new models and methods.

Of serious concern is that when asked: ‘Does your current risk function contribute to efficient use or allocation or capital and resources within the organisation?’, 14% of the respondents replied ‘Not at all’.

Also of concern is the lack of monitoring of strategic risk. This area of risk covers the long-term strategic objectives of an organisation. It includes capital availability, sovereign and political risks, legal and regulatory changes and changes in the physical environment. A third of the respondents did not actively monitor strategic risk on a frequent and systematic basis.

“Much has been learned about the failures of risk management during the ongoing financial crisis,” says Professor Ingo Walter, director of SimCorp StrategyLab. “It is, therefore, disturbing that the findings of this survey suggest some of the needed reforms and the degree of urgency – notably about the resources needed for effective risk management and its role in overall senior management and strategy development – is not perceived by the respondents as compelling and in some ways is moving in the wrong direction.”

The 2009 global investment management risk survey was initiated and prepared by SimCorp StrategyLab. The interviews were conducted by The Nielsen Company. The survey was based on 90 CATI interviews with respondents, randomly selected from investment management institutions, around the world, with only one contact person per company being interviewed. All contacted persons had risk management as their primary field of work, and/or strategic responsibility, and/or decision-making with risk management; they were either executive or general management. The interviews were conducted during February and March 2009.

The global risk management survey results are available for download at www.simcorpstrategylab.com. Other significant publications of SimCorp StrategyLab in 2009 will include two books and a range of additional surveys.

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Enquiries regarding this announcement should be addressed to:
Lars Falkenberg, Assistant Director of SimCorp StrategyLab
lfalkenberg@simcorpstrategylab.com Phone +45 35 44 88 00/+45 26 30 01 27

Professor Ingo Walter, Director of SimCorp StrategyLab
iwalter@simcorpstrategylab.com

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Notes to editors
SimCorp StrategyLab: has been founded and is sponsored by SimCorp as a private and independent research institution. The aim of the institution is to identify ways to mitigate risk, reduce cost and enable growth in the global investment management industry. This is intended to support the market SimCorp serves with input to market participants' business strategies as well as to provide independent information for the future development of appropriate IT architectures. SimCorp StrategyLab is headed by Ingo Walter, who is the Seymour Milstein Professor of Finance, Corporate Governance and Ethics at the Stern School of Business, New York University.

SimCorp StrategyLab will conduct independent market research, publish authoritative books and organise seminars on issues pertaining to mitigating risk, reducing cost and enabling growth in the investment management industry. The material will focus on identifying, understanding and suggesting solutions for these areas and its development will be carried out in conjunction with renowned academic institutions, individual academic researchers and industry experts. The solutions will apply to the top strategic institutional levels of the investment management industry.

Professor Ingo Walter: is director of SimCorp StrategyLab. Professor Walter holds the Seymour Milstein Professorship of Finance, Corporate Governance and Ethics and is the Vice Dean of Faculty at the Stern School of Business, New York University. He has served on the faculty at New York University since 1970 in many different capacities and he has had visiting professorial appointments at the Free University of Berlin, University of Mannheim, University of Zurich, University of Basel, the Institute for Southeast Asian Studies in Singapore and various other academic and research institutions. He also held a joint appointment as Professor of International Management from 1986 to 2005 and remains a Visiting Professor at INSEAD in Fontainebleau, France.

Ingo Walter’s principal areas of academic and consulting activity include international trade policy, international banking, environmental economics, and economics of multinational corporate operations. He has published papers in various professional journals in these fields and is the author, co-author or editor of 26 books. In addition to his new position as a director of SimCorp StrategyLab, Professor Walter has served as a consultant to various corporations, banks, government agencies and international institutions, and has held a number of board memberships.