Clifford Chance

European companies grapple with balance between risk and reward

European board members are lagging behind their international counterparts in risk-preparedness, with only 26% confirming they have clear crisis management procedures in place for a major risk incident or scandal, according to a new report commissioned by leading international law firm Clifford Chance. This compares with 40% of North American board members and 43% in Asia-Pacific.

These findings are featured in View From The Top: A board-level perspective on current business risks, a report drawing on a global survey conducted by the EIU which canvassed the views of 320 board members of companies each with over half a billion dollars in annual revenue.

Yves Wehrli, partner at Clifford Chance comments: "European boards understand the growing importance of risk management, especially having been particularly hard hit by the global financial crisis with a great deal of political intervention at European and national levels. However, Europeans are perhaps less accustomed to dealing with risk and compliance than other regions of the world.

“The US presents an interesting comparison, where companies are accustomed to a highly regulated world in which criminal action results in jail time. The consequence is that they have a clear roadmap for crisis planning and so have a more sophisticated infrastructure in place to deal with risk events. Increasing criminalisation of board and business behaviour in Europe, however, should force European boards to reconsider their positions.”

View From The Top: A board-level perspective on current business risks considered attitudes to other areas of risk and found further disparities between European attitudes and those of respondents from the rest of the world. These include:

• Cyber risk: Only 12% of European board members include this risk in their top three areas of focus, compared with 23% of North American boards. This highlights that US companies are at the forefront of awareness and prevention. But European boards are also starting to focus on this, driven by the globalisation of security concerns and proposed European regulation that could dramatically change the European data privacy and cyber security landscape.
• Corporate culture: only 12% of European respondents have implemented a review of corporate culture from a risk perspective. This compares with 26% in North America and 29% in Asia-Pacific.
• Measuring risk management: only 20% of Europeans in our survey have made risk management a measurable element of key personnel/staff rather than just the role of the compliance function. This compares with 33% in North America and 44% in Asia-Pacific.

To read about the global findings revealed inView From The Top: A board-level perspective on current business risks, please visit http://www.cliffordchance.com/content/cliffordchance/thought_leadership/global_risk_report.html.