Tuesday, 11 September 2007

We must do better than this

A recent study by PCW as reported by the Financial Times in their September 10th special report on Risk Management stated: ( my comments in italics)

"400 senior financial services executives of which almost a quarter (so in the range 95-98) increased their annual spending year on year on risk management by more than 25% year on year for 3 years ( which means they doubled it).

Many companies (not quantified, why not, when everything else is?) do not appear to think they are getting best value for money - (the insinuation appears to be that those who doubled their spending were not getting good value- but there is no data in the article to back this up).

Only half of the risk managers ( how many risk managers were there in the 400?) questioned said the function contributed substantially ( no quantification) more value than it did 3 years ago - and just 23 percent of executives in other disciplines ([400-RM]*23%) believed the same (perhaps these were the ones who doubled their spending on risk management).

Fewer than one in 10 ( no information as to which group, the 400, the non-risk managers or the risk managers is being recorded here) believed that risk management was very effective at enabling managers to make better decisions (does this include financial risk management, before or after the sub prime developments?)."

My gripe is that the writer didn't allow us to see a much wider and linked section of the data so we could make up our own minds as to their importance. Instead confusion was created by selecting from different groups, some with numbers and percentages and some not.

There is no denying though that if only 10% of any of the groups believe that risk management is very effective at enabling managers make better decisions then there is a need for clear and measured examples of how risk management has been effective. Paul Hopkin at AIRMIC is working with DNV on just such a project to quantify the benefits of enterprise risk management in companies with embedded ERM and it will be ready in the first quarter of 2008.

In the meantime you must make do with garbled statistics.

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