Governance & risk management

In the face of an increasingly complex and uncertain commercial, regulatory and geopolitical environment, financial services organisations are looking to develop a more proactive, systematic and integrated approach to governance and risk management.

However, governance, risk management and compliance (GRC) are still primarily seen as a regulatory obligation rather than a value driver. Bold ambitions, careful choices, a global survey of CEOs from across industry sectors carried out by PricewaterhouseCoopers in 2005, found that most respondents felt that effective GRC can have a positive impact on their legal liabilities and their brand and reputation. Yet barely a third of CEOs believe that GRC can provide significant benefits for financial performance, operational excellence or relationships with business partners.

A further problem is that many financial services organisations are finding it difficult to build reputational and other such hard-to-measure risks into conventional risk monitoring, analysis and mitigation procedures. As a result, many organisations are continuing to focus on the more familiar, data rich credit, market and other financial risks, often at the expense of less tangible, but equally hazardous threats. Uncertainty tamed?: The evolution of risk management in the financial services industry, a survey of more than 100 financial services executives carried out by PricewaterhouseCoopers, found that respondents now regard reputational risk as the greatest threat to their market value. However, reputational risk was seen as the least effective risk management capability, with business/strategic risk, operational risk and IT/technology risk also near the bottom of the list.

Effective enterprise-wide risk management can help to underpin sound governance and related compliance requirements by providing a comprehensive framework of internal controls and reporting procedures. The enterprise-wide approach focuses both on familiar financial risks and harder-to-measure strategic, operational and reputational risks. The results are enhanced stakeholder confidence and sustainable value creation. A global CEO survey carried out by PricewaterhouseCoopers in 2003 revealed that among companies where enterprise-wide risk management is a priority, with most including both quantifiable and hard-to-measure risks in their programmes, more than two-thirds believed that it had improved their ability to take appropriate risks to help create value.

How PwC is assisting financial services organisations

PricewaterhouseCoopers has a global network of specialists that can provide solutions to all matters related to risk management including policy and strategy, risk-based capital management, benchmarking, systems selection and development, enterprise-wide risk management and integrated governance, compliance and risk management solutions.