Finance Execs Worry Most about Risk Management

September 24, 2008 ( - Senior Finance executives scrambling to cope with the slowing economy are more likely to worry about their company's risk management than an array of other typical finance officer issues such as pension asset allocation.

A news release from CFO Research Services and Towers Perrin about the joint poll said 72% put risk management practices at the top of their agenda these days while four out of 10 said pension investment trends were top of the mind for them.

Further, the economic woes have 55% of respondents saying their companies are likely to change risk management practices at their companies at either the board or the employee level, or both.

According to the announcement, also high on the finance officials’ worry list were long-term debt financing (65%) and short-term financing (61%), relationships with their financial institutions (59%), or securing equity financing (40%).

“The majority of reports have characterized the crisis as a financial crisis, and clearly on one level it is, because companies’ access to capital—whether they are in the financial sector or otherwise—is severely strained right now, and the end is not yet in sight, said Prakash Shimpi, Towers Perrin Principal and head of the firm s Enterprise Risk Management practice, in the news release. On another level, however, this crisis exposes material gaps in risk management—particularly operational risk—and the companies surveyed acknowledge that they will need to retool their risk management practices.”

Additionally, while the majority (62%) acknowledged that the crisis would dampen profit expectations and leave a potentially lasting dent in the world economy, only 4% said they feared a major negative impact on their financial results, according to the survey.

Investment Complexity

Among financial services CFOs, 78% cite the complexity of financial instruments as being responsible for the current economic environment, while 53% viewed banks risk management practices as a reason for the downturn—the same percentage that viewed financial market speculators and irresponsible homebuyers as crisis contributors.

Some 66% of nonfinancial service CFOs saw the banks risk management practices as a chief cause of the current economic situation, followed by financial market speculators (58%), and the increased complexity of financial instruments (53%).

Some 49% said they are likely to change their cash management practices and a similar percentage is likely to change long-term investment strategy, according to the announcement. On the other hand, 26% said that they were considering changing relationships with customers and suppliers, and even fewer (15%) said that they were likely to change their incentive packages.

The survey, Senior Finance Executives on the Current Financial Turmoil, was conducted by CFO Research, and launched Friday, September 19. Some 125 survey responses from CFOs and other senior finance executives were secured and tabulated.