Actionable Insights into Implementing your Advanced ERM Program
We conducted the first-ever ERM diagnostic survey for the Middle East with the objective to help regional companies evaluate their ERM preparedness and sensitize them about the need to invest in and integrate ERM. Responses from C-suite-level respondents were assessed for several ERM best practices and the companies were mapped into four Protiviti ERM Readiness Quadrants - Initial Adopter, Actionable, Influencer, and Leader, each representing a higher sophistication of ERM programs and integration with strategy setting and performance management within the organization.
The Protiviti ERM Readiness Quadrant analysis provides a high-level overview of the current ERM landscape in the region. The key findings from the survey are detailed below:
1. Significant increase in adoption of ERM
The survey results showed that 44% of the respondents fell in the ‘Initial Adopter’ cluster (the highest), while 47% fell in ‘Actionable’ and ‘Influencer’ categories. This evidences the fact that the concept of ERM is being embraced by a significant number of companies in the region although they are in early stages of adoption. This is a very welcoming move overall.
2. Risk Governance is the most mature pillar across all respondents
In each of the quadrants, the risk governance is the most mature ERM pillar, which shows that one of the first steps companies take towards setting up the ERM function has been initiated. The overall risk governance maturity is 43%, followed by risk appetite at 34%. For leaders risk governance maturity stands the highest at 87% and while it is the lowest for Initial Adopters at 25%.
3. ERM has become a value added enabler than mere compliance
There is an even mix of listed and non-listed companies in all the four quadrants. Overall, the ratio of listed to non-listed companies in the respondents is 43% : 57%. This suggests that linking corporate governance requirements for companies with the status of their ERM programs adoption may not necessarily be correct.
4. Majority of respondents are Initial Adopters with no specific industry dominance
A deeper look at the ‘Initial Adopter’ quadrant shows a holistic mix of all industry verticals. Further, in most industries, over 40% of the respondents fall in ‘Initial Adopter’ cluster. This points out that none of the industries across the spectrum have moved beyond the ERM function's initial set up.
5. ERM is still to be enabled for Business Strategy and Decision Making
Maturity Level for the pillars ‘Business Execution’ and ‘Evaluation of Strategic Options’ is 35% and 25% respectively. This signifies that whilst the organizations do deploy an adequate governance mechanism on ERM, they still do not leverage ERM in effective execution of business activities and as a strategic enabler. Linking risk to decision making and strategic options evaluation is absent.
6. Leaders in the ERM adoption are a minority
Only 9% of the total respondents were categorized as leaders with representation from Financial Services, Energy & Utilities and the Government sectors. This shows that most organizations are still far away from reaching maturity in establishing a robust ERM function that adds value to the overall achievement of strategic objectives.
Please download the detailed report below.