Ask FERF (financial executives research foundation) about ... managing business risks. (Resources).

Where can I get information on managing business risks, disaster plans, and risk management policy statements?

Financial Executives Research Foundation (FERF), FM Global and the National Association of Corporate Treasurers (NACT) recently released the 2003 Protecting Value Study.

Building on the findings of the 2002 Protecting Value Study, the 2003 study asked nearly 400 CFOs, treasurers and risk managers at the world's largest corporations to identify:

* Their company's "top earnings drivers"

* The "top hazards" to those earnings drivers

* The impact a major disruption to each earnings driver would have on their company's earnings

* How well-prepared they are to recover from such a disruption

* How well their organization understands these hazards, their potential impact, and their company's level of preparation.

The key results indicate:

* Financial executives (CFOs and treasurers) view the challenges of protecting asset values differently from risk managers. Business continuity planning is not sufficiently aligned with top earnings drivers in many companies.

* Recent events may affect respondents' perception of top hazards to their earnings drivers, but have little effect on their firm's overall level of preparedness.

Twenty-eight percent of all respondents cited "personnel and customer support" as one of their top three earnings drivers, followed closely by "manufacturing plan, equipment and process." Financial executives were more likely to cite "personnel and customer support" as their top earnings driver, compared with risk managers, who were more likely to cite "manufacturing plant, equipment and process."

More than half of the respondents indicated that they were not well prepared to recover from a major disruption to their top earnings driver. This year, however, companies appear to be somewhat better prepared. Nevertheless, 34 percent said their companies are still not well positioned to protect their top earnings driver--a strong signal that financial executives and risk managers should assess their own level of preparedness.

Companies are looking beyond insurance to further enhance their risk management efforts. In particular, respondents indicated that more than one-third of any additional funding to protect a company's top earnings drivers would be spent on business continuity efforts (23 percent) and contingency planning (14 percent).

Both the 2002 Protecting Value Study and the 2003 Protecting Value Study are available at: www.protectingvalue.com.

On its homepage, www.fnglobal.com, FM Global has an entire section devoted to "How You Can Prevent Loss," including risk management strategies, loss prevention tips and related publications. The section on risk management strategies includes information on disaster planning, establishing a risk management policy statement, five ways to add risk management value to your organization and how to select a risk management training consultant.

In this section, FM Global provides a detailed discussion of all of the steps involved in each phase in a five-phase process for developing a strong disaster plan:

1. Planning

2. Prevention

3. Preparedness

4. Response

5. Recovery

Also in this section, FM Global describes what should be included in a written risk management policy statement:

Begin with a general description of risk management and its importance to the organization.

* Discuss the position of the risk management department within the overall organizational structure.

* Define reporting relationships.

* Outline the scope of the authority and responsibility of the risk management professionals in dealing with others within the organization.

* Clearly state senior management's objectives for making appropriate use of risk control and risk financing techniques.

* Specify particular decision rules for various risk management techniques, depending on the level of detail the organization typically uses in policy statements regarding other functions

FM Global then provides two sample risk management policy statements. The FM Global Web presentation of "Risk Management Strategies" can be viewed at: www.fmglobal.com/library/rmStrategies.html

William M. Sinnett ([e-mail]) is Manager of Research for Financial Executives Research Foundation, inc. (FERF).