Risk managers take on strategic role in face of ongoing crises, finds Ferma survey

The seemingly neverending set of crises during the last two years have provided a shot in the arm for risk management and seen a big jump in the number of European risk managers involved in corporate strategy, according to Ferma’s latest member survey.

The survey of 556 European risk managers between January and April this year found that 91% are now either fully, mostly or partially involved in corporate strategy. This compares with 55% of respondents when the biennial survey, now in its 11th edition, was previously carried out in 2020.

A presentation detailing the survey findings shows that 61% of respondents are involved in reviewing strategic risks, 40% contribute to strategy definitions, and the same percentage work on sustainability risks and their impacts. Meanwhile, 33% work on scenario business planning and 28% analyse opportunities from strategic risks. 

Covid effect

It is clear from the survey results that Covid-19 has played a big part in boosting the standing of risk management. 

It found that the pandemic increased the frequency of risk discussion at board and top management level for three quarters of respondents. Some 13% said the frequency has risen by a large extent, 37% to some extent and 26% to a small extent. The remaining 24% said Covid-19 hasn’t had any affect at all on risk discussions at board level at all. 

Charlotte Hedemark, Ferma board member and chairwoman of its survey committee, said: “The Covid crisis has actually brought risk management closer to the boardroom and it is more involved now in strategic processes. This finding is in line with a survey Ferma recently conducted on corporate resilience, which also found that Covid-19 has raised the profile of risk and insurance management and the profile of corporate resilience.”

Karl Johan Rodert, president of Swedish risk and insurance management association Swerma, who also spoke on a webinar to discuss the survey’s findings, added that risk management has moved up the agenda during the last two years, spurred by the pandemic. 

“It is good that Covid-19 has impacted how top-line management engages with risk management,” he said. Risk managers must now ensure that the focus remains at all times and not just during crises, he added. “I hope that is the way we are moving,” said Rodert, who is also head of the group risk captive and insurance at Autoliv.

For his part, Marco Terzago, board member of Italian risk management association Anra and risk and insurance manager at SKF, said Covid-19 forced companies to engage with the risk management function and helped risk managers get more time with the board. “Boards are now more aware we live in a fragile world and that we need to have more risk management in our thinking,” he said.

Ferma’s latest survey found that 39% of respondents can contact the CEO directly and indirectly. A further 36% present to the board once or several times per year, and 18% meet the board as requested. 

The research shows that the risk management function sits on 56% of risk committees at respondent firms and 39% of audit committees. The risk function contributes to 34% of executive committees and 32% of board committees.

ESG role

The latest Ferma poll also found that a growing number of risk managers are playing or planning to play a specific role in ESG-related risks within their organisations, up to 56% from 40% two years ago.

Some 79% of European risk managers are currently involved in analysing and mapping ESG risks, 74% in risk mitigation and 70% in prevention and adaption measures. Meanwhile, 60% are involved in non-financial corporate sustainability reporting, which Hedemark said is a growing concern for European risk managers.

The survey results show that 82% of risk managers collaborate with the CSR/sustainability department. Some 32% reported close collaboration with CSR, up from 20% in 2020, while the percentage with no relationship has fallen from 29% to 18%.

Ferma then asked its members what they see as the greatest challenges facing risk managers wanting to integrate sustainability into the risk management process. The biggest hurdle is difficulty in quantifying sustainability, according to 54% of respondents. Difficulty qualifying sustainability risks came next on 35%, followed by limited knowledge of sustainability risks on 29% and focusing on different time horizons at 24%. Some 19% of risk managers said the biggest barrier is limited collaboration between ESG and risk management specialists.

Terzago said sustainability is a fantastic opportunity for many organisations and risk managers. “It’s a true risk under the definition of ISO Guide 73. It is really something that is threatening company objectives and it is also an opportunity. There is only one way to deal with this risk and that is strategically. You need to map ESG risks onto the risk register,” he said. 

Rodert said cooperation between risk management and ESG teams must go both ways. “The ESG teams can teach us about ESG risks in general and we can help with our ability to assess risks in general, but also with the different tools that we can access from insurance companies and brokers that look at how climate change will affect different areas and risks,” he said. 

The survey, produced in collaboration with PwC, also found that more than half of the risk managers polled either work closely with IT and information security on cyber risks or are responsible for them directly. Ferma said this shows that risk managers are consolidating their role in managing the cyber threat.