FM Global: Study reveals top concerns of CFOs

A STUDY COMMISSIONED by FM Global showed that top operational risks, as reported by chief financial officers, include equipment failure, data breaches/cyber attacks and natural disasters. / COURTESY CFO RESEARCH/FM GLOBAL
A STUDY COMMISSIONED by FM Global showed that top operational risks, as reported by chief financial officers, include equipment failure, data breaches/cyber attacks and natural disasters. / COURTESY CFO RESEARCH/FM GLOBAL

JOHNSTON – The top operational risks that have harmed companies in the past five years include equipment failures, data breaches/cyberattacks and natural disasters, a study commissioned by FM Global that polled senior financial executives has shown.

FM Global, a business property insurer, released the results of the study, Finance’s Role in Operational Risk Management: CFO Research on Building a Resilient Company, this week.

“It’s surprising the number of companies that have been harmed by operational risk events, coupled with the relatively low number of companies that feel they are very well prepared for a disruption event,” Eric Jones, operations vice president and global manager of business risk consulting, FM Global, said in a statement. “The findings reveal the opportunity for financial executives to implement stronger plans with increased data, to help move resilience forward within their organizations.”

Sixty-six percent of financial executives surveyed reported their organizations have been harmed by equipment failure, nearly 60 percent say their firms have been impaired by data breaches or cyberattacks, and more than half – 52 percent – have had their operations affected by natural disasters.

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The study, conducted by CFO Research Services, also discovered that the majority – 54 percent – say their organizations have not developed or tested formal loss-recovery plans.

The study also showed that only 34 percent of financial executives believe their firms are very well prepared to recover from an equipment failure, 33 percent feel their organizations are very well prepared to recover from a natural disaster and only 24 percent feel their companies are very well prepared to recover from a data breach or cyberattack.

Nearly 70 percent of financial executives are concerned that their revenues or earnings will become more vulnerable to operational risk over the next two years, and nearly 60 percent say the need to manage operational risks will make it more difficult to meet revenue and earnings targets over the next two years.

Other findings:

  • Forty-one percent of financial executives say they will focus more on preventing losses from operational risks over the next two years.
  • Nearly the same percentage of respondents said loss prevention and mitigation is more important than insurance coverage.
  • Eighty-six percent of respondents said their companies need to be more resilient in the future.

“The role of the CFO is being increasingly challenged by serious risk events, which drive volatility and will make it more difficult for them to meet revenues and earnings if these risks are not properly managed,” Jones said. “The pathway to a successful risk management program must include an effective loss prevention program, combined with resilience planning in order to deal with constantly evolving technological, political and environmental risks.”

Responses received during late 2016 from 100 chief financial officers or senior most financial executives at U.S.-based companies, the majority of which are from Fortune 1000 organizations, were used for the research.

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