Business Advisory Blog Business management information from Robert Griffin.

September 27, 2010

Managing Risk – Who’s doing what?

There has been a lot of talk in the past two or three years about businesses managing risk, for obvious reasons. So what’s being done? Well the popular term is ERM or Enterprise Risk Management, which is the establishment of a system that if done properly and all inclusively would help manage, minimize or otherwise control the risks to your business.

Good, so we supposedly know what to do, are we doing it? Well if you look at a recent survey quoted on done by the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA), “45% of U.S. respondents — many of whom are CFOs — report having no ERM framework in place and no plans to implement one.”

“What’s more, of companies with ERM systems in place, only 1.5% characterize their company’s risk-oversight processes as “very mature” or “robust.” The bulk, 84%, rate their company’s risk-oversight processes as ranging from “very immature” to “moderately mature.”

Did we not learn our lesson? it appears to me we do know what is needed but ERM is a complex undertaking, whether your big or small, requiring lots of resources.  So in a tough economy with the emphasis on generating cash companies are opting to keep the cash as a hedge against future risks. This, rather than spending the money to “hopefully” reduce that future risk, by implementing some complex ERM. It appears to me the simplified ERM plan is to maximize cash generation and then keep it. Do not hire, do not invest in plant and equipment, just keep the cash. It seems that is supported by the huge amounts of cash companies are keeping on their balance sheets, continued high unemployment and stagnant economic growth. So maybe we have learned our lesson, we are reducing/managing risk, but at the price of a painfully slow recovery and almost zero job growth.

If you want to read the entire article go to my web site at under Recent News and Information.

Robert Griffin

Griffin Advisory services

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