So what's your EWRM rating?
Herman Schoeman, MD of Guardrisk

Enterprise wide risk management (EWRM) is one of today's business buzzwords, but many local companies, already burdened by new compliance and regulatory issues, tend to treat it as a "nice to have" rather than a critical facet of the business.

At the recent World Captive Forum in Arizona, USA, managing directors and financial directors of several large listed US companies said that they spend around 60% of their time on EWRM. There's no doubt that the requirement for top management to spend this amount of time on EWRM related issues will soon reach our shores, as this is becoming one of the key strategic factors that local companies have to deal with. In fact, it's not inconceivable that, in the not too distant future, investors and customers will be asking for EWRM credentials and companies will be rated for their EWRM programmes, much the way they are currently rated for financial stability and their black economic empowerment initiatives.

According to a Towers Perrin study, "A changing Risk Landscape", the way in which companies view and address risk is changing rapidly. Risk and risk management play an increasingly strategic role as companies struggle to optimize the risk/return relationship and to enhance corporate decision making. Governmental regulations like Sarbanes-Oxley have moved beyond compliance issues, heightening awareness of broader risks. Companies are also looking at traditional risk categories, for instance, operational, financial/capital markets and insurance-based risks, in new ways with the development of more advanced risk management tools and increasing popularity of EWRM.

Among the key drivers of risk identified by Towers Perrin are corporate governance issues, natural disasters and pandemics, and increased liability risks. Increased investments in complex and specialized facilities and infrastructure have also amplified companies' risk exposures. This at a time when the number of cross-functional stakeholders that must be engaged and coordinated has also increased. It's not surprising then that 63% of respondents say that they are concerned with how they manage risk today, most believe that there is significant room to better understand and manage their risks. And 85% report that their companies, emphasis on risk management will increase even more over the next five years.

Despite the fact that many US executives complained at the World Captive Forum that the focus on EWRM leaves them little time to take care of the company's core business, a recent string of jail sentences for erring executives will ensure that their attention remains firmly fixed on EWRM.

Similarly, local executives will be forced to be more serious about EWRM. Elements of Sarbanes-Oxley regulations have already been introduced in SA, and the impending revamp of the Companies Act and the introduction of international financial reporting standards will further entrench EWRM as a business imperative.

So the jury is in: whether EWRM is driven by regulatory and rating agency pressure or whether it's identified as a competitive differentiator, it's here to stay and companies should dispense with discussions about whether it will succeed and move on to finding ways to put it in place as quickly, simply and cost effectively as possible.

For the local alternative risk transfer (ART) industry the emphasis on EWRM is good news: risk identification and management is the cornerstone of the ART concept and heightened awareness of such issues will draw many new players into the market. Current users of ART facilities are already streets ahead in the risk management process and increased focus on EWRM will encourage them to expand their facilities even more.

For further information please contact:
Herman Schoeman, MD of Guardrisk
Telephone: +27 11 669-1001

Issued by:
Melanie Davis, PR@Work
Telephone: +27 11 615-3309 / +27 83 225 7450