Tuesday, 4 October 2011
Big improvements reported on Nordic ERM processes
Enterprise risk management (ERM) is improving in the Nordic region as companies catch up with their European counterparts, according to a recent survey by Swerma, the Swedish risk management association. But there remains a lack of cooperation and coordination with internal audit and governance processes that needs be addressed, warned Torgny Bogärde, Deputy Chairman of the association.
According to a similar ERM survey conducted by Ferma of its broader membership earlier this year such relationships with internal audit are more advanced across the continent.
Comparisons also show that ERM is predominantly driven by management in the Nordic region as opposed to regulation in Europe as a whole.
“The main finding of our survey is that coordination and cooperation with governance and assurance processes makes the difference between the top and medium performers,” said Mr Bogärde, who is also partner at Allevo, experts in design and implementation of Enterprise Risk Management.
“The basics are there when it come to methods, risk practices and frameworks for Nordic companies. But cooperation and coordination is a shortcoming and if you focus on addressing this issue you will be even more successful going forward,” he added.
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According to Swerma’s survey of 37 companies from all four Nordic countries, almost 30% of respondents said they have no relationship at all with internal audit.
“We should not be afraid of internal audit. (with their help) We can obtain backing and support and bring about a better risk management process,” said Mr Bogärde.
“In [the rest of] Europe there is much more coordination and cooperation between internal audit and risk management than here in the Nordic countries,” he added.
All of the top six rated companies said their relationship with internal audit was excellent and that they carry out work with the function as a partnership.But Swerma’s survey findings predominantly painted a rosy picture for ERM development in the Nordic region.
Ninety five percent of respondents said that risk management is an integral part of their company’s governance process and that ERM is here to stay. Forty five percent of respondents said that their ERM process is mature, an improvement of previous surveys of a similar nature.
There was a clear correlation between the size of the company and the complexities of its ERM approach. Energy companies and conglomerates are the most advanced. “They are the risk masters,” said Mr Bogärde.
But he added this is hardly surprising given that they are high risk sectors that deal with a lot of capital and regulation.
According the survey, alignment of ERM and governance within organisations is ‘well underway’. Sixty two percent of respondents said that management is the primary driver of ERM within their company.
Risk and responsibilities are clearly defined in 75% of the companies and 50% have a dedicated risk executive. Over 60% have adopted an ERM standard with 21% now using the ISO 31000.
The 31000 is more widely used in the Nordic region than Europe as a whole, said Mr Bogärde, which he welcomed. “Most Nordic users have really appreciated this tool and it gives you legitimacy for the process,” he said.
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