Mazars survey “Mid Cap risk management”: a familiar concept covering a variety of approaches

Paris La Défense, 25 April 2007

The Mazars survey, administered to over 200 French-based companies with revenues of over €100 million, shows that a majority of companies identify the same risks and are perfectly aware of the issues at hand. In fact, one of the survey’s major findings is that 65% of companies surveyed indicate that they do manage the risks they have identified, even when their financial impact is not measurable.
However, the resources dedicated to reducing these risks differ greatly from one company to another.
This survey follows on Mazars’s two previous surveys on internal control: a 2003 survey concerning companies’ awareness of and preparedness for the requirements of French financial security legislation, and in 2006 the international survey on the consequences of the Sarbanes-Oxley Act (SOX).

The notion of risk

A key aim of the survey was to determine whether risk is perceived differently with regard to personal situations, compared to that of the company. 
With 51% of those surveyed replying that they do not feel personally threatened by these risks, it seems clear that this notion has far greater relevance for the company than for individuals.
The most commonly mentioned types of risk were: negative market reactions (40%), client dissatisfaction (32%) and technical and operational risks (30%).

Fraud: a risk set apart

Fraud does not appear to be the risk which causes the most concern for managers surveyed. In a prompted response, fraud came in 8th place among risks cited.  
For companies surveyed, fraud involves embezzlement and misuse of assets (54%), IT fraud (26%), industrial espionage (19%), financial reporting fraud (18%) and bribery or kickbacks (10%).
However, while companies can easily identify in theory the different types of fraud which could impact their business, their estimation of this topic’s importance is moderate to low for the majority of them (59%).

Approaches to risk prevention and management:

Traditional tools…

The most commonly implemented risk management tools are organisational (82%), followed by more specific and technical tools.
Companies surveyed thus generally utilise traditional risk management tools.

…and a specialists’ domain

Only one company in five has a dedicated risk manager, and specific tools for risk prevention and management, such as dedicated working groups or risk mapping and modelling tools, are rarely mentioned.  Nonetheless, 56% of companies surveyed consider risk management to be a specialist issue.

Creating adaptable solutions for companies

As things stand today, the challenge for Mid Caps is to achieve the right balance in risk management, from concentrating responsibility within upper management to developing a more formal preventative approach, in which risk management can become a full-fledged management tool.

What companies need most, therefore, are formalised and well-documented operational tools offering a practical approach to risks of all types – risk management solutions which are both professional and pragmatic.

Mazars is an international audit and advisory organisation.

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