Human capital risks seen as the most significant threat companies face, says Economist Intelligence Unit

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2007-04-26 08:53

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Hong Kong--(뉴스와이어)--International risk managers surveyed by the Economist Intelligence Unit cite human capital risks as being the most significant threat they face to their global business operations. The findings show that human capital risks, such as skills shortages, succession issues and the loss of key personnel, were seen by respondents as being more significant than threats from reputational risk, information technology risk, political risk and regulatory risk. This represents a change from a year ago, when reputational risk was perceived in our quarterly risk barometer survey as being the biggest threat that respondents faced.

Despite acknowledging the importance of the skills issue, just 32% of the survey respondents say that they manage human capital risks effectively. The only areas where they feel less confident are risks associated with terrorism and climate change.

These results form part of Best Practice in Risk Management: A Function Comes of Age, a new Economist Intelligence Unit survey and report sponsored by ACE, IBM and KPMG. In addition to exploring specific categories of risk and the effectiveness with which respondents manage them, the report also examines the way in which companies from a wide range of sectors and regions organise themselves to manage the risk function.

“Our survey shows that human capital risks have emerged to be the most threatening that companies now face,” says Rob Mitchell, editor of the report. “Yet few respondents think that they are managing these risks effectively. It appears there is still much work to be done in determining a framework and establishing metrics for risks associated with issues such as skills shortages, succession issues and loss of key personnel.”

Other key findings of the report include:

· Corporate stakeholders are demanding improvement to risk management. Efforts in risk management are being driven by internal and external factors. The board is seen as the most important internal driver for strengthening risk management, while the main external drivers are the demands of regulators and investors.

· Risk permeates the organisation. The risk management function has evolved to become a core area of business practice, driven by the board but embedded at every level of the organisation. Respondents identify strong culture and awareness of risk throughout the organisation as the key determinant of success.

· Companies are creating a figurehead for risk. The practice of appointing a Chief Risk Officer (CRO) to carry responsibility for developing and implementing the risk management framework is reaching maturity, with most of those companies that favour the approach having already adopted it. The approach is most popular in the financial sector, where two-thirds of firms have appointed, or plan to appoint, a CRO.

· An increase in investment is predicted. Firms of all sizes and in all areas of the world are planning to increase investment in most areas of risk management over the coming years, suggesting that this business discipline, although evolving rapidly, will continue to expand and deepen its reach within organisations.

About the report

Best Practice in Risk Management: A Function Comes of Age is an Economist Intelligence Unit report, sponsored by ACE, IBM and KPMG. The Economist Intelligence Unit’s editorial team conducted the interviews on which the analysis is based and wrote the report. The survey consisted of 220 senior executives, from a range of industries, regions and company sizes, all of whom have responsibility for risk management.

About the Economist Intelligence Unit

The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. The Economist Intelligence Unit provides geopolitical, economic and business analysis on more than 200 countries, as well as strategic intelligence on key industries and management practices. With over 300 full-time professionals in 40 offices around the world, supported by a global network of more than 700 contributing analysts, the Economist Intelligence Unit is widely known for its unparalleled coverage of major and emerging markets. More information about the Economist Intelligence Unit can be found at www.eiu.com.

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