While 73 percent of executives feel that risks to their companies are on the rise, companies in general are not meeting the increased risks with improved risk management. In fact, only 12 percent of responding companies demonstrated qualities that marked them as true risk management leaders, according to a PwC U.S. risk review.
For everyone in a construction business, risk is like a hot potato and it’s handled that way. So construction has more than its fair share of companies taking responsibility for risks not directly under their control. But, there are ways to come out on top.
It’s All in How You Think About It
PwC’s report was based on responses from 1,200 senior executives and board members. Those companies described as risk management leaders viewed risk management as a strategic enabler of performance and growth, rather than as a damper to their businesses. Over three years, 55 percent of risk management leaders recorded increased profit margins, and 41 percent achieved an annual profit margin of more than 10 percent.
“Risks are increasing dramatically and executives are constantly faced with making decisions to protect their businesses, while also trying to improve their financial performance,” said Dean Simone, leader of PwC’s U.S. Risk Assurance practice. “By integrating risk management into the business life cycle, these two objectives can easily come together to work in unison. Developing an effective strategy requires investment, but the payoff and competitive advantage can be enormous.”
There are four ways these risk management leaders differentiate themselves.
- They clearly see how various risks interconnect with each other and how they cascade. So, they compile aggregated views of risks when making decisions.
- Far from being risk averse, these leaders are willing to take risks to enable growth. They examine both risks and opportunties to decide where to focus.
- Their risk management programs are closely aligned with their company wide strategic planning. Alignment with finance, internal audit and corporate compliance are especially well integrated.
- They use more sophisticated techniques so their time is spent calculating risk and preparing for it, rather than reacting to it. They also use a variety of tools to make their analysis effective. They identify and forecast emerging risks, they scan the horizon and early-warning indicators, and they build resilience to risk. They’re also using new analytics systems so it’s easier to bring disparate data together and get new insights.
To download a full copy of Risk in review: Decoding uncertainty, delivering value, please visit: http://www.pwc.com/us/riskinreview