By Gabriel Chen

COMPANIES have beefed up their risk management departments, but the improvements have not translated into more effective performance as the information is not circulated well around the organisation, according to an Ernst & Young survey.

The findings show that companies do commit resources to manage many kinds of risk to keep up with compliance requirements.

For instance, a company could equip itself with staff or divisions to deal not only with treasury risks but also those stemming from internal audits, health and safety as well as compliance and regulatory requirements.

But the survey also reveals that while companies arm themselves with many of these resources, managing risks has become increasingly difficult, mainly because the people who deal with them are 'disconnected from one another'.

Mr Gerry Dixon, Ernst & Young's global risk leader, explained that risk management functions within an organisation often exist in silos that are 'disconnected from one another and the wider business strategy'.

'Risks identified in one area may not be communicated or recognised by another,' he said.

'Moreover, different areas within an organisation may have different views on the severity or importance of certain risks.'

The survey, which was conducted in June and July among more than 500 senior executives across the world, showed that 73 per cent said their organisations have seven or more risk functions.

It also found that 57 per cent reported having overlapping coverage with two or more functions dealing with areas of risk. Half of the respondents reported gaps in coverage.

The survey also found that 96 per cent of organisations believe they have an opportunity to improve their risk management functions.

Also, nearly half said that committing additional resources to risk management could create a competitive advantage.

Mr Dixon said leading companies are creating a 'competitive advantage' by using the economic downturn as an opportunity to make practical yet valuable improvements to the way that risk is managed.

'More than ever, organisations need to have a comprehensive and coordinated risk management approach with strong executive oversight and board of director governance,' he added.

This article was first published in The Straits Times.