DuPont: 75% of companies have inadequate ORM
Three in every four executives believe operational risk management (ORM) is inadequately managed at their organisation, according to an alarming new global survey from DuPont Sustainable Solutions (DSS).
Specifically, DSS highlighted two key findings from the research that suggested current ORM processes are insufficient:
- Executives do not feel their firm devotes enough resources or capabilities to effectively manage risk; and
- There is a significant disconnect between management and employees regarding ORM, which increases the likelihood of a catastrophic event.
The survey also revealed organisations are potentially failing across a number of areas of risk management.
While 44% of respondents chose leader/workforce misalignment as their biggest risk management challenge, performance management (43%), ORM capabilities (40%), mindsets and behaviours (39%) and processes (36%) were all close behind.
In fact, 40% of executives said all of these factors are a problem for their business, suggesting many firms worldwide are ill-prepared for large-scale risk incidents.
ORM becomes a bigger focus for firms in 2019
The survey paints a worrying picture, but ORM is a fast-growing discipline and our own research reveals risk departments are conscious of the operational risks on the horizon for their business.
Barclay Simpson’s Risk Management Market Report 2019 found that 43% of risk departments aim to recruit people with ORM skills this year. This was almost double the proportion who planned to hire credit risk specialists (23%), which was the next most in-demand skillset.
We have seen an increasing number of senior individuals make the jump from market risk to ORM over the last two years. This could be because employers are beginning to see the value of hiring market risk professionals, who have traditionally come from more quantitative backgrounds than operational risk candidates. We predict this trend to continue as ORM calculations become more sophisticated.
Our results also showed which ORM skillsets employers are focusing on in 2019. IT and cyber risk are the key targets, with 33% of risk departments hoping to secure these capabilities. Enterprise risk skills (20%) and candidates with second line of defence experience (20%) are also highly sought-after.
How to overcome ORM challenges
DSS has offered businesses tips on how to better manage operational risk and improve organisational performance. These recommendations can be split broadly into three key areas:
- Business performance;
- Understanding risks; and
- Corporate culture.
Within these categories, there are specific actions that DSS believes optimise ORM capabilities.
- Business performance
- Align risk processes to business objectives
- Use data to more effectively identify and manage risk
- Prioritise operational risks with maximum impact
- Institutionalise operational risk processes
- Understanding risks
- Connect operational risks to business operations
- Enhance operational risk management processes
- Elevate risk awareness among staff
- Look at risk holistically across departments and functions
- Corporate culture
- Demonstrate leadership commitment
- Increase executive accountability
- Link organisational culture into daily operations
- Advance risk capabilities
Many of these elements are not possible without having a strong ORM team in place to establish crucial processes and ensure the organisation’s risk management objectives are identified and accomplished.
As the war for ORM talent intensifies, businesses must do everything they can to attract professionals who have the right skills and experience to excel in today’s complex risk environments. If you are looking to build your ORM capacity, please contact me on 020 7936 2601 or via email at email@example.com to find out how we can help you.
Image credit: Robert Bye via Unsplash