Boards of directors worldwide are being urged to step up their risk management practices - a process that has gained more traction in the wake of a $2 billion loss at Swiss bank UBS at the hands of a single trader.
The Chartered Institute of Internal Auditors surveyed 141 heads of internal audit and found 32 percent believe non-executive's diligence on risk management was inadequate. The research also found 28 percent of boards lack a formal process to determine how much risk an organization should embrace, and that operational risks were given too little attention. Among two-thirds of surveyed companies, only audit committee members had contact with their company's internal audit team. "Boards' scrutiny of risk management still needs to become more robust," said Ian Peters, chief executive of the CIIA, according to the Financial Times. "This must be the number one lesson from the financial crisis." Non-executive directors also need to become much more critical and involved in their approach to risk management if they are to meet the expectations of investors and company heads, Peters added.