Qatar firms see risk management crucial to business growth

Abboud with al-Hajri. An Ernst & Young survey, conducted in co-operation with Qatar Foundation, says 94% of Qatari firms believe risk management performs an important role in current management priorities. But only 50% say they have sufficient resources to support risk management functions.

By Pratap John/Chief Business Reporter

A vast majority of Qatari companies consider risk management very important in current priorities, a new survey has revealed.
According to Ernst & Young’s 2011 Qatar Risk Management Survey conducted in co-operation with Qatar Foundation, 94% of Qatari companies believe that risk management performs an important role in current management priorities.
However, only 50% have reported that they have sufficient resources to support the activities and processes for risk management.
The survey was conducted to gauge the maturity of risk management practices in Qatar and to identify related challenges that national companies face. The survey seeks to help companies in evaluating and benchmarking their own risk management practices against their peers in the same industry or against the practices of other Qatari companies.
Robert Abboud, partner, Ernst & Young, Qatar, said, “The transformation to next generation market leading companies is based on sound and solid foundations of corporate governance and strong risk management principles. This transformation does not occur overnight. At the heart of achieving market leadership is the need for a move from following traditional risk practices into implementing robust risk management systems and embedding these into a company’s work ethics.”
Faisal R al-Hajri, Qatar Foundation chief financial officer said, “Companies with leading practices based on corporate governance and risk management stand out among their peers. At QF, we aspire to be a pioneer both locally and regionally, and as a result, continually strive to progress our risk management and corporate governance frameworks. There is a strong appreciation within QF’s senior management of the value added from well developed risk management and corporate governance frameworks.”
The two major challenges that Qatari companies face towards implementing an effective risk management system are ‘risk confusion’ and ‘lack of clear vision’. ‘Risk confusion’ (38%) pertains to internal misalignment with regard to risk terminologies or concepts and ‘lack of clear vision’ (35%) pertains to misguidance in the overall risk management effort with some organisations executing risk management just for the sake of regulatory compliance.
Companies need to step beyond regulatory compliance as well as visualise and capitalise on how risk management can be designed to improve their business or how they do business. On the other hand, the key enablers to effective risk management considered in the survey were all regarded as equally important (scoring in the high 7s out of 10). These included clear ownership of risk, active board involvement, internal mechanisms to communicate risk and processes identifying risks relating to objectives.
In terms of the formal structures governing risk management and its position in the organisation, approximately 50% to 75% of respondents said they have risk policies, charters and/or procedures in place.
Allowing respondents to provide multiple responses depending on the practices within their companies, the survey results show equal distribution of companies having their risk functions report to: CEO (almost 33%), the board of directors (33%), and a risk committee (33%). The survey also showed that 82% of respondents feel that their boards, rather than major investors, can influence the company’s risk management approach.
Respondents also indicated a relatively high degree of coordination (average score of at least 8 out of 10) with their organisation’s internal audit and/or compliance functions.
The basic value that risk management adds to the organisation is to help mitigate risk (8 out of 10) and enable the organisation to comply with internal policies/procedures and external regulatory requirements (7). Risk Management is also viewed as a source of competitive advantage (6).
Almost 80% indicate the involvement of their risk function with their organisation’s business continuity planning process.
“Qatari companies are evolving into robust market leaders, working effectively across global networks, balancing entrepreneurial spirit with corporate culture and optimising their internal corporate governance practices. The focus of their business challenges is shifting and so too needs to be their way of responding to internal and external risks,” Abboud said.