QATAR. According to Ernst & Young’s 2011 Qatar Risk Management Survey conducted in cooperation with Qatar Foundation, 94% of Qatari companies believe that risk management performs an important role in current management priorities.
However, only 50% have reported that they have sufficient resources to support the activities and processes for risk management.
Ernst & Young’s 2011 Qatar Risk Management survey was conducted to gauge the maturity of risk management practices in Qatar and to identify related challenges that Qatari companies face. The survey will help companies in evaluating and benchmarking their own risk management practices against their peers in the same industry or against the practices of other Qatari companies.
Robert Abboud, Partner, Ernst & Young, Qatar, said: “The transformation to next generation market leading companies is based on sound and solid foundations of corporate governance and strong risk management principles. This transformation does not occur overnight. At the heart of achieving market leadership is the need for a move from following traditional risk practices into implementing robust risk management systems and embedding these into a company’s work ethics.”
Faisal R. Al Hajri, QF’s Chief Financial Officer, concurs with Mr. Abboud. He says: “Companies with leading practices based on Corporate Governance and Risk Management stand out among their peers. At QF, we aspire to be a pioneer both locally and regionally, and as a result, continually strive to progress our Risk Management and Corporate Governance Frameworks. There is a strong appreciation within QF’s senior management of the value added from well developed Risk Management and Corporate Governance frameworks.”
Risk management implementation challenges
The two major challenges that Qatari companies face towards implementing an effective risk management system are ‘risk confusion’ and ‘lack of clear vision’. ‘Risk confusion’ (38%) pertains to internal misalignment with regard to risk terminologies or concepts and ‘lack of clear vision’ (35%) pertains to misguidance in the overall risk management effort with some organizations executing risk management just for the sake of regulatory compliance.
Companies need to step beyond regulatory compliance as well as visualize and capitalize on how risk management can be designed to improve their business or how they do business. On the other hand, the key enablers to effective risk management considered in the survey were all regarded as equally important (scoring in the high 7s out of 10).
These included clear ownership of risk, active Board involvement, internal mechanisms to communicate risk and processes identifying risks relating to objectives.
Risk management governance
In terms of the formal structures governing risk management and its position in the organization, approximately 50% to 75% of respondents said they have risk policies, charters and/or procedures in place.
Allowing respondents to provide multiple responses depending on the practices within their companies, the survey results show equal distribution of companies having their risk functions report to: CEO (almost 33%), the Board (33%), and a Risk Committee (33%).
The survey results also showed that 82% of respondents feel that their Boards, rather than major investors, can influence the company’s risk management approach.
Respondents also indicated a relatively high degree of coordination (average score of at least 8 out of 10) with their organization’s internal audit and/or compliance functions.
Benefits of managing risk
The basic value that risk management adds to the organization is to help mitigate risk (score of ~ 8 out of 10) and enable the organization to comply with internal policies/procedures and external regulatory requirements (score of ~ 7). Risk Management is also viewed as a source of competitive advantage (score of ~ 6).
Almost 80% indicate the involvement of their risk function with their organization’s business continuity planning process.
“Qatari companies are evolving into robust market leaders, working effectively across global networks, balancing entrepreneurial spirit with corporate culture and optimizing their internal corporate governance practices. The focus of their business challenges is shifting and so too needs to be their way of responding to internal and external risks,” concluded Robert.
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