Enterprise Risk Management
| Date: | June 2010 |
| Author: | Clare Vincent-Silk and Alistair Byrne |
| Price: | £5000 to non-members of the Investit Intelligence Member service |
Market events over the last few years have driven some fundamental changes to the profile of risk management in terms of governance and focus. Investit Intelligence members voted for this report project in January 2010 and we have covered the following areas:
- How risk management has changed over the last two years, what have been the drivers for change and the resultant impact.
- A definition of the different risks managed by firms.
- Risk governance within investment management firms and the role of the Chief Risk Officer (CRO). We also explore the executive responsibility for risk, staffing of the risk function, objective setting and remuneration.
- Some of the key challenges faced in the practice of risk management are identified, particularly in the areas of risk assessment, risk monitoring, insurance and reporting.
- A section dedicated to investment risk explains how this risk type is incorporated into enterprise risk management. There is an update on risk systems, developments in risk measurement and management, and the opportunities for outsourcing.
- We discuss what we anticipate happening in the future of risk management.
- Best practice guidelines have been identified through the research and are outlined in the report.
Firms are confused as to what they should be doing to improve their enterprise risk management; how it should fit within the organisation, how to meet regulatory requirements such as ICAAP, with particular challenges around the definition of operational risk appetite. Risk management has some way to go to become embedded within the business. The role of the CRO is here to stay with 26% of roles having been created in the last two years, the role becoming more senior and influential. There has been a huge increase in the number of vendor operational risk systems implemented, up from 18 to 53% since 2007. Regulatory pressure will continue to drive risk management forward with firms continuing to adopt an enterprise wide approach.
Table fo contents
| Management Summary | 3 |
|
1 |
Introduction | 5 |
1.1 |
Methodology | 6 |
1.2 |
Previous research | 8 |
2 |
What is Enterprise Risk Management? | 9 |
2.1 |
What is ERM? | 10 |
2.2 |
The benefits of ERM | 12 |
3 |
How Has Risk Management Changed? | 13 |
3.1 |
Where were we two years ago? | 14 |
3.2 |
What have been the drivers of change? | 15 |
3.3 |
What has been the impact? | 18 |
4 |
Risk Governance | 21 |
4.1 |
The Chief Risk Officer | 22 |
4.2 |
Executive responsibility for risk | 25 |
4.3 |
Staffing the risk function | 26 |
4.4 |
Risk responsibilities in the business | 30 |
5 |
Investment Risk | 31 |
5.1 |
Risk management in the investment process | 32 |
5.2 |
Risk management for compliance purposes | 33 |
5.3 |
Risk systems | 34
|
5.4 |
Developments in risk management and risk measurement | 35 |
5.5 |
Investment risk outsourcing | 36 |
6 |
Risk Management in Practice | 37 |
6.1 |
Risk assessment | 38 |
6.2 |
Risk appetite | 40 |
6.3 |
Risk monitoring | 42 |
6.4 |
Insurance | 45 |
6.5 |
Reporting | 46 |
7 |
The Future of Risk Management | 50 |
7.1 |
Regulation | 51 |
7.2 |
The future of ERM and the CRO | 53 |
8 |
Best Practice Guidelines | 55 |
8.1 |
Governance | 56 |
8.2 |
Risk framework | 58 |
8.3 |
Reporting | 59 |
8.4 |
Where to go for further information | 61 |
- Press release - Investment managers identify their key priorities
- Press release - Investit and Stone House Consulting announce a strategic partnership
- Press release - Investment managers identify their priorities for the year ahead
- See all press releases, articles and event information here
Enterprise Risk Management Intelligence report now available to read via Intelligence Online.
