Companies That Link Risk to Strategy Likelier to Reap Rewards, PwC Study Finds

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By Yin Wilczek

April 21 — Companies that integrate risk management into their business decisions are more likely to experience better margins and growth, according to a new PricewaterhouseCoopers LLP report.

The report, which surveyed 1,229 senior executives and board members, found that while risk to corporations continues to rise, companies generally are not improving their risk management practices.

In fact, only 12 percent of companies are taking a holistic view of risk and using risk management to enable their businesses, the survey found.

Companies that do this are reaping the rewards, the paper suggested. It found that over the past three years, 55 percent of such companies—which the report dubbed “risk management leaders”—recorded increased profit margins, compared to 43 percent of non-leaders.

It also found that 41 percent of risk management leaders achieved annual profit margins of more than 10 percent, compared to 31 percent of non-leaders.

Effective Strategy 

“By integrating risk management into the business life cycle, these two objectives can easily come together to work in unison,” Dean Simone, leader of PwC’s U.S. Risk Assurance practice, said in an April 15 release. “Developing an effective strategy requires investment, but the payoff and competitive advantage can be enormous.”

The report observed that four key characteristics distinguish risk management leaders from non-leaders. Leaders:

• understand that risks are interconnected and how they impact their businesses;

• align risk management across their business units;

• try to be proactive—not reactive—and arm themselves with sophisticated tools and techniques to anticipate and address risks; and

• know their risk appetites and are willing to take chances.

 

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Kristyn Hyland at khyland@bna.com