The Economic Benefits of Improved Strategic Risk Management and Governance are Substantial
As Ittner and Keusch find in their research paper, "The Influence of Board of Directors' Risk Oversight on Risk Management Maturity and Firm Risk-Taking", directors' risk oversight involvement significantly reduces firm idiosyncratic volatility and tail risk. Moreover, these reductions "do not come at the expense of firm performance…and are positively associated with buy-and-hold equity returns."
In “The Mortality of Companies”, Daepp et al identify a roughly constant hazard rate of about 5.80%/year for the failure of public companies between 1950 and 2009. If a company can reduce this hazard rate, the benefits to its shareholders, employees, and the communities in which it operates are very substantial.
Moreover, as Ormerod and Roswell showed in “How Much Can Firms Know?”, even a slight improvement in an organisation’s ability to acquire knowledge about the sources of competitive success and failure can dramatically improve its survival rate.
To learn more about the economic benefits we can provide to your organization, please contact us.