THE GLOBAL FINANCIAL CRISIS HAS REVEALED BIG 1 holes in risk management practices, even in industries that were once thought to be the leaders, such as banking and insurance. Now, as signs of an economic recovery are slowly beginning to emerge, managing risk is becoming a higher priority for internal auditors--but not necessarily for boards and management.
A recent IIA Knowledge Alert provides a snapshot of current risk management practices at large corporations. In a survey of chief audit executives (CAEs) at 321 corporations, 60 percent say that risk management will be a higher priority for their internal audit department in the next 12 months. These CAEs see much work to be done: Only 31 percent say their company has a formal, written risk management process in place, whereas 36 percent have an informal process. The percentage is higher for the largest companies from the survey--nearly half of Fortune 250 companies have a formal risk management process.
CAEs say risk management integration efforts face many obstacles. Nearly two-thirds say managers in their company believe they are doing a good job managing risk. Decentralized organizational cultures and internal politics also hinder risk initiatives. The end result is that only 10 percent of respondents report that all risk assessments conducted within their organization are well-aligned.
The biggest obstacle to improving risk management processes, though, may be management and the board. On the upside, half of respondents say an executive-level risk committee oversees risk management efforts, but just...