Few large organizations disclose ERM initiatives

Although a vast majority of global corporations surveyed by Marsh have a formal enterprise risk management (ERM) program, only a small minority of these organizations actually communicate their ERM initiatives to shareholders.Marsh’s Risk Consulting Practice teamed up with GovernanceMetrics International to survey 149 large public companies around the world to find out how they are identifying, prioritizing and managing risk. They also collected data on how well they are communicating these initiatives to shareholders.Eighty per cent of those surveyed reported having a formal ERM program in place, but 54% of those have yet to adopt any external standard for implementing this process, a Marsh release says.Forty-six per cent of survey respondents said a lack of integration and the need to overcome corporate silos were among the greatest challenges to their ERM programs. The study suggested this might stem partly from a combination of insufficient or ineffective communication between a company’s risk function and the rest of its business. It could also represent a lack of influence by the risk function or a lack of risk expertise at the board level.Researchers also found 75% of survey participants do not regularly communicate about their ERM initiatives to investors. Of these firms, 73% have no current plans to change their plans in this area, a Marsh release says. Businesses that communicate externally about their ERM programs typically do so in their annual report and investor presentations.“We believe there is a correlation between a company’s capacity to demonstrate an understanding of risk and both its credit and governance ratings,” said Howard Sherman, president and CEO of GMI and a co-author of the report. “ERM has become a cutting-edge governance issue. We hope this report will help widen attention for ERM and lead to a more standardized disclosure of ERM best practices.”