Changing rules in global economy forcing rethink on ways to succeed as competition spreads
More Hong Kong companies are becoming aware of risk management after the hard lessons of the economic crisis - something they should accelerate to compete in a changing economy, according to Arthur Andersen.
James DeLoach, a risk adviser based in the United States, said yesterday that executives globally were taking an increased interest in understanding how managed risk applied across a company's spectrum could affect the balance sheet.
Mr DeLoach said from meetings in Hong Kong that 'executives have been highly interested' in evaluating the role of what he terms 'enterprise-wide' risk management - aligning a particular organisation's risk strategy to avoid a fragmented approach to risk.
Risk management can be defined as creating strategies or corporate tools to deal with uncertainties in a business environment. For example, tools could deal with a currency crisis to minimise the potential effects on a company.
Suzie Gough, Andersen's senior manager for risk consulting in Hong Kong, said the attitude towards the management of risk had changed.
'The reaction pre-crisis was 'I know what's going on, I'm making money', until things started to look a little less rosy,' Ms Gough said.
'I think it is fair to say that Hong Kong companies are becoming more risk aware and they do realise that they need to make changes.'
In the past three years, Mr DeLoach has conducted studies of more than 60 companies worldwide to understand the way organisations approach their risk strategies.
His findings show that 50 per cent of senior executives lack confidence in the way they identify and manage risk.
Arthur Andersen believes that to compete successfully in the new global economy, companies need to change the way they think about risk.
'Risk is inherent in everything an organisation does,' he said.
'Our findings have indicated that to be successful . . . companies need to elevate their risk management strategy process so it becomes a source of competitive advantage.'
From the research, Mr DeLoach found that in successful companies, new views on risk management have heavyweight backing from the chief executive and the board.
Enterprise-wide risk management means it is on the agenda every day, not on an ad-hoc basis.
Mr DeLoach said that companies need to investigate the risk coming from computer hackers and competition from unauthorised groups accessing Internet sites which were an integral part of that company's business model.
As a result, Andersen has introduced technical risk consultants specialising in e-business risk.