#United States #Lake Mary #ERM #Baker Tilly #Internal Audit Foundation

Enhancing Enterprise Risk Management through Improved Collaboration

A recent joint study conducted by Baker Tilly in collaboration with the Internal Audit Foundation unveils significant opportunities for organizations to enhance their enterprise-wide risk management capabilities. As the demands of managing risk evolve, this report emphasizes the critical need for closer cooperation between internal audit functions and risk management strategies.

Insights from the Study

The findings stem from a thorough survey involving 567 industry professionals, revealing that while significant strides have been made in establishing formal enterprise risk management (ERM) processes, challenges remain. Since 2010, the number of organizations implementing complete ERM systems has increased dramatically, growing from 9% to 34% in 2023. Given the complexities posed by geopolitical tensions, technological advancements, and economic uncertainties, the global market for risk management is projected to expand from $9 billion in 2025 to over $32 billion by 2033.

Despite these advancements, the study found that less than half of participants reported that risk awareness permeates their organizations, with only 60% acknowledging the use of risk intelligence in strategic organizational planning. These findings indicate a pressing need for refining current ERM practices.

Key Strategies to Advance ERM Maturity

1. Improving Communication Across Risk Teams

The report highlighted a crucial discrepancy in knowledge sharing among various risk management functions. Although 60% of respondents claimed to share risk information across compliance, risk, and internal audit teams, only about half engage in this practice outside of the yearly risk assessment cycle. Furthermore, nearly 36% indicated uncertainty regarding standardized terminologies in risk management.

To address this, the study advocates for establishing more regular risk meetings and creating specialized committees tasked with overseeing distinct risk areas. Engaging in cross-functional training and knowledge exchange could further bolster the alignment of these critical functions.

2. Conducting Regular and Timely Risk Assessments

Over 25% of surveyed organizations admitted to not conducting a risk assessment in the last three years, citing insufficient resources as a barrier. Alarmingly, just 25% connected these assessments to their business planning cycles, and fewer than 40% aligned ERM insights with overarching risk initiatives. Baker Tilly and the Internal Audit Foundation strongly recommend that organizations commit to annual risk assessments and integrate these into existing business planning processes. This approach will facilitate improved risk mitigation strategies and identify areas requiring enhancement.

3. Embracing Technological Advancements

The report reveals significant opportunities for enhancing technology adoption in ERM practices. Approximately 60% of organizations continue to rely on basic tools such as Word documents and spreadsheets, while only 21% have adopted governance, risk, and compliance (GRC) platforms. To address this technological gap, Baker Tilly and the Foundation suggest positioning internal auditors as advocates for integrating new technologies. They propose educating organizations on the benefits of GRC platforms and introducing simple automation tools to ignite the transition to more sophisticated systems.

Conclusion

As organizations navigate an increasingly volatile risk landscape marked by geopolitical challenges and rapid technological changes, the necessity for seamless collaboration between risk management and internal audit functions has never been more critical. Anthony Pugliese, the President and CEO of The Institute of Internal Auditors, emphasizes the urgent need for these two areas to work closely together. Such collaboration is essential to proactively identify emerging risks, embed risk intelligence in strategic planning, and enhance overall organizational resilience.

Baker Tilly and the Internal Audit Foundation are dedicated to guiding risk management practitioners as they adapt to these evolving challenges. The complete report provides valuable benchmarking data, allowing organizations to identify improvement opportunities and best practices in ERM.

In a world where the landscape of risks continues to shift, organizations must invest in enhancing their ERM capabilities to safeguard their future and ensure sustainable growth.