Risk Ventures

FedEx has launched its first unified global advertising campaign, with “Access” as one tagline — “This is the World. And this is how the world does business.”  

From FedEx’s website:

““Access – Success – Growth”  These concepts are the creative force behind a new advertising campaign launched by FedEx today in key markets around the world, including: Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Korea, Mexico, Singapore, Taiwan and the UK.  The new ads take you “behind the scenes,” communicating some of the ways FedEx helps customers’ access opportunities in the marketplace – whether those prospects are in their local communities or around the globe.” 

Advertisement by the CME Group (tagline = ideas that change the world): “A risk tamed is a reward captured“

Lion pictured with Michael Platt, CEO and Founder of BlueCrest Capital Management Limited.

As taken from the ad, the CME Group (which offers futures and options products on interest rates, equity indexes, foreign exchange, commodities and alternative investments) reduces the threat of risk through complete price transparency, liquidity and central counterparty clearing.

According to a October 24, 2007 IBM Global CFO study, “Balancing Risk and Performance with an Integrated Finance Organization,” in the past three years 62 percent of enterprises with over $5 billion in revenue encountered a major risk event. When a major risk event did occur, such as strategic, operational or geopolitical, 42 percent of these enterprises were not well prepared for the event.

The Global CFO Study was developed by IBM Global Business Services’ Financial Management practice and the IBM Institute for Business Value (IBV), with assistance from the Wharton School at the University of Pennsylvania and the Economist Intelligence Unit.  

Some excerpts:  

*The Rise of the Integrated Finance Organization (IFO).  “Another key component of the study is the emergence of Integrated Finance Organizations (IFOs) which are defined as entities that, at minimum, mandate standards enterprise wide with a standard chart of accounts, common data definitions and standard common processes. The study concludes that enterprise wide common data definitions, a standard Chart of Accounts, common standard processes and globally mandated standards are the components of good governance and what the study calls the Integrated Finance Organization (IFO). Fewer than one in seven enterprises govern and manage the integration of their Finance organization by the combination of these four criteria. The study finds that IFOs provide greater resiliency, better decision support and help to drive outperforming enterprises. Additionally, the study shows that enterprises with IFOs are more likely to perform better financially than non-integrated finance organizations and are more likely to proactively manage risk.” 

*Who owns Risk?  “CFOs are increasingly becoming “owners” of risk management within their enterprise and sharing ownership with the CEO. The study found 61 percent of CFOs are expected to lead risk management within their organization, followed by CEOs (50 percent), Chief Technology Officers (27 percent) and Chief Risk Officers (19 percent).  The study lends credence to observations that globalization opens up significant opportunities for companies but exposes more risks for the enterprise. The IBM Global CFO Study found that in the past three years enterprises encountered a range of risks including strategic (32 percent), geopolitical (17 percent), environmental/health (17 percent), financial (13 percent), operational (13 percent) and legal and compliance (8 percent).” 

*Formal Risk Management is Immature.  “While risks are prevalent, many companies do not have a formal risk management program in place. At many organizations formal risk management is still fairly immature. By their own admission, only 52 percent acknowledge having any sort of formalized risk management program. Moreover, only 42 percent of respondents do historic comparisons to avoid risk, just 32 percent set specific risk thresholds and only 29 percent create risk-adjusted forecasts and plans.”

Ernst & Young’s recent report on “Risk Management in Emerging Markets,” arrives at some interesting conclusions with respect to emerging markets and how companies manage their risks in doing business there.  Perhaps unsurprisingly, for companies based in developed markets, and with business interests in emerging markets, political risk looms large.  The survey defines political risk and goes on to address what companies are doing about it. 

Some key findings from the survey: *The main goal in emerging markets is growth. Companies have moved on from the traditional view that the primary objective of investment in emerging markets is cost saving.  *Risk priorities differ by location. Developed markets focus on political, operational, and supply chain risk. Emerging markets are more likely to focus on market, competitive, and pricing risk.  *Board focus does not always translate into strategy. There is a consensus that Boards are giving enough attention to risk in these markets. However, only 41% of developed market companies have a risk strategy for emerging markets. *Opinion differs on risk communication. While 71% of emerging market subsidiaries feel they provide sufficiently regular and robust information on risk, only 44% of the parent companies would say the same.  *Opinion also differs on internal audit. Developed market companies have less confidence in the quality of the internal audit testing of their subsidiaries than the emerging market subsidiaries themselves do.