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Deloitte survey explores risk as a value creator and shines spotlight on overconfidence

  • Boards and C-suite indicate risk plays an important role in value creation.
  • 87 percent of survey respondents view risk as a value creator. Yet only 17 percent are actively harnessing risk to drive returns.
  • Senior stakeholders want chief risk officers to spend significantly more time playing the strategist role.

Toronto, May 25, 2017 — A new Deloitte report released today, Taking aim at value: Avoid overconfidence and look again at risk, surveyed board members and the C-suite to better understand how they view their organization’s capabilities in balancing risk and reward.

The report uncovered an abundance of confidence in risk awareness and capabilities. But are senior stakeholders overstating their organization’s risk prowess? The results of this survey show companies can use risk management to not only protect value, but as a competitive advantage to power performance. In fact, nearly nine in 10 survey respondents believe value creation should be a key focus of risk management, yet only one in five are taking the steps needed to implement the obvious improvements. And three out of five say their organizations are susceptible to the profound forces of innovation and disruption which the global business landscape faces today. This report explores these gaps and how organizations can use risk to create as well as protect value.

“We live in a world of unprecedented change. The CRO has a vital role to play and its incumbent on risk professionals to step up and meet these new demands,” said Jacqueline Bukaluk, Partner and Leader of Deloitte’s Risk Management and Governance practice in Canada.

Elevating the CRO to a business partner

In order for organizations to build closer alignment between value creation and risk, the role of the Chief Risk Officer (CRO) should be elevated to increase synergy between boards, C-suite executives and CROs.

As the role of the CRO is increasingly seen as a business partner moving forward, 58 percent of respondents say their CROs should spend significantly more time performing the strategist role in which they participate in setting the strategic direction of the company and align risk management strategies accordingly.

Key themes revealed by the survey include:

  • Companies need to build closer alignment between value creation and risk: Organizations whose risk management philosophies and programs focus on value creation cite a range of areas where their actions are delivering significant benefits. These areas include customer loyalty, increasing operational resilience, improving cost effectiveness, and identifying and exploiting new business opportunities.
  • Companies need to do more to establish and optimize the role of the CRO: A majority of business leaders surveyed – 63 percent – state that the firms they represent have a full-time CRO, with an additional 24 percent stating they believe the role is being performed by another executive. However, research suggests that organizations may not be defining this critical role accurately, or benefiting from it fully.
  • Companies must forge responses to their most strategic risks and opportunities: Companies say they are focusing on a wide array of both emerging and longstanding strategic and tactical risks – but are these the right issues? With only 17 percent of respondents citing cybersecurity and 9 percent viewing geopolitical issues in the top three risks to their business, it is crucial that organizations do not lose sight of these risks and opportunities at the perimeter.

In such a volatile and uncertain era, Deloitte believes that companies cannot afford overconfidence. “The roles and demands of the CRO are expanding in the context of an interconnected and more complex environment,” said Bukaluk. “Successful CROs are strategists, catalysts, stewards and operators for their organization. And through the elevated role of the CRO, companies can prioritize value creation and view disruption as an opportunity.”

About Taking aim at value: Avoid overconfidence and look again at risk
Forbes Insights, on behalf of Deloitte Touche Tohmatsu Limited, surveyed more than 300 C-level or board representatives excluding CROs across the Americas, EMEA and Asia/Pacific regions between November and December 2016. Key industries surveyed include Consumer & Industrial Products, Life Sciences & Health Care, Financial Services, Manufacturing, Energy & Resources and Technology, and Media & Telecommunications. The survey sampled a range of companies from USD$1 billion in revenue and up, including 23 percent over USD$20 billion. Interviews were conducted with three CEO/board level executives as well as a CRO to provide editorial perspective and interpretation of the survey findings.

About Deloitte
Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services. Deloitte LLP, an Ontario limited liability partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

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