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A majority of chief financial officers say their companies have faced various operational risks over the past five years, but more than half reveal they have no formal recovery plans, insurer FM Global says in a new report.
“Finance’s Role in Operational Risk Management: CFO Research on Building a Resilient Company,” based on a survey conducted by New York-based CFO Research Services and released Wednesday by FM Global, found that 66% of CFOs said their companies have been harmed by equipment failure.
Nearly 60% said their firms have been impaired by data breaches or cyber attacks, and 52% have had their operations affected by natural disasters.
However, despite these incidents, FM Global said that 54% of the respondents admitted their companies have not developed or tested formal loss-recovery plans.
The survey also found that only 34% of financial executives believe their firms are very well prepared to recover from an equipment failure. Thirty-three percent felt their organizations are very well prepared to recover from a natural disaster, while only 24% feel their companies are very well prepared to recover from a data breach/cyber attack.
“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, Plano, Texas-based operations vice president and global manager of business risk consulting for FM Global, said in a statement.
Nearly 70% of financial executives said they are concerned that their revenues or earnings will become more vulnerable to operational risk over the next two years, and nearly 60% say the need to manage operational risks will make it more difficult to meet revenue and earnings targets over the next two years, FM Global said.
Forty-one percent of financial executives said they focus more on preventing losses from operational risks over the next two years, with nearly the same percentage of respondents saying loss prevention and mitigation is more important than insurance coverage.
Eighty-six percent of respondents said their companies must be more resilient in the future.
“The findings reveal the opportunity for financial executives to implement stronger plans with increased data, to help move resilience forward within their organizations,” Mr. Jones said in the statement.
The research is based on responses received during late 2016 from 100 CFOs or senior most financial executives at U.S.-based companies, FM Global said.
Income inequality, climate change and societal polarization are key risk trends that will affect global developments over the next 10 years, according to the World Economic Forum’s Global Risks Report 2017 released on Wednesday.