April 30, 2003—New research suggests that there are clear differences of opinion between financial executives and risk managers when it comes to assessing the greatest threats to business. As a result, a third are not adequately prepared for significant disruption.
The 2003 Protecting Value Study, conducted by commercial property insurer FM Global, the Financial Executives Research Foundation and the National Association of Corporate Treasurers, polled nearly 400 decision-makers at leading international companies.
Financial executives clearly had in mind recent high-profile cases of corporate mismanagement – Enron, for example—and cited “improper management and employee practices” as the single greatest threat to revenue sources. In contrast, an overwhelming majority of risk managers said property-related hazards, such as fire and natural disaster, pose the greater threat.
Commenting on this split, FM Global md Ken Davey said: “The study identified a rise in concern for non-property-related hazards over last year’s results, in particular, improper management and employee practices. Likely this shift is linked to the change in attention from the terrorist attacks of 2001 to the corporate scandals of 2002.”
Davey added: “The results suggest companies may be overly influenced by current events rather than focusing on more traditional, long-term risks.”
In the Protecting Value study, only 14% of participants characterized as “excellent” their preparations to recover from business disruption—echoing the limited preparedness at many companies recently highlighted in similar research. FM Global is optimistic about this, reporting that companies are increasingly looking beyond a simple reliance on insurance to safeguard the value created for shareholders and customers. Amongst those organizations in its survey, over half said any additional funding would go into business continuity and contingency planning as well as risk improvements.
“To best protect cash flow, competitive position and profit, companies need to assess the potential hazards that can impact top revenue sources and ensure business continuity planning is sufficiently aligned,” Davey advised.
—Elliott Chase
Reprinted with permission; copyright 2003 i-FM
