Closing the Communication Gap
How Institutional Investors Are Building Risk-Aware Cultures
This is the age of the risk-aware organization. Private and public entities across the globe have scrambled to improve their approach to risk in the wake of the worst financial crisis in 80 years. Investment institutions — for which risk assessment is a fundamental role — are particularly enthusiastic proponents of the risk-aware enterprise.
But what does risk-awareness mean to asset owners and asset managers? To what extent are risk processes actually embedded in organizations and communicated across them? Are corporate officers responsible for risk effectively conveying information across the organization? Do business managers and risk officers view the performance of the risk function, and the value it delivers, similarly?
This report discusses the actions they are taking and how they are performing. Based on a study of 297 executive board members, C-level executives and senior-level employees from institutional investors across the globe, the report explores:
- The quality of information businesses receive from their risk functions
- How effectively risk functions communicate with other business areas
- Whether risk functions are well understood
- How well managers and staff are incentivized to achieve risk objectives
- How these findings compare globally
It also reveals how risk functions can improve and how those with strong frameworks and integration within the business produce better investment outcomes.
About the Research
The findings are based on a survey conducted in the first quarter of 2013 of 297 employees of investment institutions. Some 52 percent of respondents were either executive board members or C-level executives, and 30 percent were vice presidents, senior vice presidents or department heads. Asset managers formed the largest group, with 48 percent of respondents, while asset owners accounted for 35 percent and intermediaries for 18 percent.
A shift in mindset and communication across investment institutions is now required to raise firm-wide risk-awareness even further, ensuring the enterprise as a whole can fulfill its responsibilities towards its shareholders, clients and regulatory