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NEWS IN BRIEF NEW YORK: Despite poor results, insurance companies continued to compete vigorously for business in the second quarter, according to a new Risk and Insurance Management Society (RIMS) Benchmark Survey. General liability and workers’ compensation policies both posted average decreases in renewal premiums. Directors and officers liability (D&O) policies renewed at higher premiums on average, but the increase was due to financial sector companies, a segment that has been bloodied by the sub-prime mortgage meltdown and credit crisis. “Insurance capacity is disappearing at a startling rate, but the market, nonetheless, remains competitive,” said Advisen executive vice president and editor-in-chief of the report Dave Bradford. “As a result of the recession the demand for insurance capacity has also decreased, which has kept pressure on rates. Companies are downsizing, which means there is simply less to insure.” RIMS board of directors member Daniel Kugler concurred: “If the gloom of the global recession has a silver lining for risk managers, it is the competitive insurance market.” HYDERABAD, India: Software solutions provider SoftPro Systems has acquired 100 per cent of Cura Software Solutions. Established in 1994, SoftPro provides a wide range of solutions to the banking, finance, insurance, retail, telecom and manufacturing industries. Cura has its HQ in South Africa and was established in 2002. It offers companies around the world solutions aimed at improving governance, risk management, compliance (GRC) and performance management. It has 100 staff members in four countries, distributors in another 10, serves more than 200 customers and has achieved year-on-year revenue growth for the past four years. “It has taken us months of searching to find a partner that will help us grow our business internationally and inject the funding we require to achieve our long-term goals,” said Cura chairman David Frankel. “After considering approaches by competitors, acquirers and venture capitalists, we settled on SoftPro as their culture, ethics and strategic approach was in line with all our stakeholders’ interests.” SoftPro’s intent is to grow Cura into a company with more than $US150 million ($185 million) in revenue by 2014. Cura will retain its brand. LOS ANGELES: Bank of Tokyo Mitsubishi’s senior vice president of corporate data security, Emil D’Angelo, has been elected international president of ISACA – a global association serving 86,000 IT governance, assurance and security professionals in 160 countries – at its 37th annual International Conference in Los Angeles. D’Angelo also assumes the role of international president of the IT Governance Institute (ITGI), the non-profit, independent research affiliate established by ISACA in 1998 to help enterprise leaders ensure that IT supports the enterprise’s mission and goals. A member of ISACA for more than 30 years, D’Angelo has served on its Strategic Advisory Council and Governance Advisory Council and chaired the Security Management Committee. He is a recipient of ISACA’s Eugene Frank Award, awarded by the board of directors for outstanding contributions to ISACA or ITGI. Local firms upbeat on growth prospects While most companies around the globe remain intent on simply surviving the economic crisis, it seems their Australian counterparts are now gearing for growth – but they are not out of the woods yet. SYDNEY: Australia may well prove to be the “lucky country” for businesses emerging from the global financial crisis. According to the results of a new survey of 380 C-suite and board level executives from corporate Australia, compared to results of a similar world study, local businesses have been more confident and more aggressive in responding to the crisis and the changing business landscape than global players. The study, The lucky country looks forward – Opportunities in adversity for Australian business, conducted by Ernst & Young, appears to confirm that the impact on Australian businesses has not been as severe, with 76 per cent of respondents believing the effect on profitability of the current crisis will be temporary. “Australian businesses are cautiously optimistic for the 2010 financial year, with far more proactive plans over the next 12 months,” said E&Y corporate accounts leader Patrick Winter. “Access to capital is still difficult, particularly for small and mid-cap companies, however organisations have implemented initiatives to reduce costs and manage cash and working capital more effectively. “Many have introduced flexible working practices to help them avoid substantial headcount reduction, with a view to retaining the talent they will need when the market recovers.” He said that while global respondents were primarily concerned with surviving the downturn, Australian businesses are focused on growth. In the next 12 months, 78 per cent of Australian businesses placed the greatest importance on improving the performance of current assets, 70 per cent are restructuring their business to meet new conditions, and 66 per cent are prioritising taking advantage of the situation to pursue new market opportunities. However, the question now is whether they have done enough to prepare for growth and capitalise on the upswing when conditions improve. While 70 per cent are restructuring their business, this is primarily centred on cost-cutting rather than fundamentally realigning business structures and operations. “The limited availability of debt has led to a gap in buyer/vendor expectations and a stagnant M&A market,” Winter said. “These factors are inhibiting the ability of companies to truly restructure by divesting non-core businesses, products or divisions.” While 53 per cent of respondents saw access to capital deteriorate over the past six months, 34 per cent of those with $10 billion or more annual revenue reported improved access to capital in the same period, reflected in the record capital raisings dominated by the larger ASX-listed companies. “Australian businesses are cautiously optimistic for the 2010 financial year, with far more proactive plans over the next 12 months” “Many of our discussions with clients in recent months have focused on working capital and liquidity, as the pressure on management has intensified,’ Winter revealed. “Our survey respondents agree – only 15 per cent say that cash is not an issue for their business.” The study shows Australian businesses have been more proactive than global respondents around debt finance, including reviewing, monitoring and renegotiating debt covenants and considering alternative sources of liquidity. However, they have been slightly less proactive in building working capital measures into management performance objectives and having an emergency plan for cash release. 10 RISK August 2009
NEWS FEATURE Downturn prompts risk review A majority of corporate executives have reported a need to overhaul their approach to risk management. NEW YORK: An overwhelming majority (85 per cent) of corporate executives have conceded they need to overhaul their approach to risk management if the lessons of the economic crisis are to be used to improve business results, according to a new study by Accenture. The 2009 Global Risk Management Study – based on responses from 260 chief financial officers, chief risk officers and other executives with risk management responsibilities at large companies in 21 countries – also found that 40 per cent said their companies already have increased or will increase their investments in broader risk management capabilities in the next six months. Nearly another third (31 per cent) said their companies are currently considering increasing their future investment in such capabilities. The analysis pointed to a lack of integration of current risk management and performance management processes. While nearly half the respondents said their company’s risk management function is involved to a great extent in strategic planning (48 per cent) or in investment and divestment decisions (45 per cent), only 27 per cent said it was involved to a great extent in objectivesetting and performance management. “Executives could improve their organisation’s performance and position themselves for economic recovery by linking and balancing risk management and performance management to aid their decision-making and increase shareholder returns,” said Accenture Finance and Performance Management practice managing director Dan London. “Being effective at this also requires companies to integrate their risk management capabilities enterprise-wide.” Respondents identified a number of common problems with their risk management functions, including: • Ineffective integration of risk, return and capital issues in decision-making (85 per cent); • Lack of alignment between the company’s strategies and its risk appetite (85 per cent); • Insufficient enterprise-wide risk culture (82 per cent); • Inadequate availability of timely risk, finance and business data (80 per cent); • Lack of integration and aggregation across all risk types (78 per cent); and • Ambiguous risk responsibilities between corporate and business units (78 per cent). However, executives also identified the benefits they anticipate as a result of addressing their companies’ risk management shortcomings. For example, while nearly three-quarters (72 per cent) said their companies’ risk management function has a significant impact on their ability to comply with regulations, nearly two-thirds (61 per cent) said the same about its impact on the company’s ability to sustain profitability, and 58 per cent said risk management has a big impact on its ability to manage liquidity and cashflow. Further, the study found that broader and better integrated risk management capability can have a variety of impacts on companies, including: ability to achieve competitive advantage (cited by 53 per cent of respondents); reputation with the public and media (53 per cent); rating agency ratings (53 per cent); ability to secure positive analyst commentary (50 per cent); and ability to reduce cost of capital (47 per cent). “The current economic downturn is the ultimate stress test of a company’s risk management function, and the lessons learned can be leveraged to restore confidence and create a stronger, better integrated and aligned platform for improving performance under a variety of business conditions,” London said. “Leading companies recognise that an expanded, integrated risk management program supported by technology that allows management to monitor risk management-related factors across a company is not just a protective tool – but one that can provide companies with a competitive edge in a constantly changing world.” The study also found that companies expect new risk-related challenges as a result of the current economic environment, including more stringent regulations and increasing costs associated with growing complexity in the risk environment. For instance, 41 per cent of respondents reported their risk management costs had increased by at least 25 per cent in the last three years, while 14 per cent cited a 50 per cent rise. Asked to identify the biggest challenges they face over the next two years as they develop more rigorous risk management capabilities, respondents pointed to difficulty aligning with the overall business strategy (93 per cent); need for more effective collaboration with business units (89 per cent); need for greater integration in the firm’s processes and culture (89 per cent); and inadequate resources and talent (88 per cent). R “The current economic downturn is the ultimate stress test of a company’s risk management function, and the lessons learned can be leveraged to restore confidence and create a stronger, better integrated and aligned platform for improving performance under a variety of business conditions” RISK August 2009 11
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Page 6 and 7: NEWS COMPILED BY MARK PHILLIPS Mark
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Page 12 and 13: SPECIAL REPORT: BUSINESS CONTINUITY
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Page 19 and 20: SPECIAL REPORT Breakthrough on Blac
Page 21 and 22: REGULATION NINE KEY PRINCIPLES FOR
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Page 25 and 26: Risk = opportunity TRANSITION TO IS
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