Making smarter risk decisions

Reinventing risk

Seventy-three percent of CEOs surveyed for PwC's 10th Annual Global CEO Survey rated over-regulation as one of the critical limiting factors in their struggle to enhance business performance. But is it regulation or how organisations have reacted to regulation that is the real challenge?

One of the most negative overhangs of the post Sarbanes-Oxley era is the corporate perception of risk as something that can be processed away through layers of silo-ed functions. Each new potential risk tends to bring additional functions that only add complexity, cloud accountability and obscure the upside of risk taking. In reality, risk will never be eradicated by this process. Rather, it will be driven underground along with the appetite for the type of risk-reward based performance model required to create lasting growth and value.

Reinventing risk shows that long-term business success in this environment hinges on the ability to reinvent risk management both from of a process and cultural standpoint. The paper looks at how the most successful organisations define their risk appetite and integrate this appetite into business strategy and culture so that all facets of the business consistently apply the desired risk thresholds, top down, to decision making, an organisation can achieve optimal performance and compliance and avoid investing in redundant or ineffective functions, processes and technology.

Sure, organisations can continue to focus on efforts to "process away" risk and ignore the upside, hoping that risk avoidance will one day be a differentiator. But at PwC, we think that’s a pretty risky proposition.