It is not just smaller businesses or even middle-ranking firms that are unprepared for disruption to their systems, according to a new survey from IBM.

A study of over 1,200 chief financial officers (CFOs) and senior finance executives from 79 countries worldwide, concludes that a surprising number of enterprises are not well prepared to handle the impact of a major risk event to their organisation.

According to the report, in the past three years 62% of enterprises with over £2.5 billion in revenue encountered a major risk event. When a major risk event did occur -- such as strategic, operational or geopolitical -- 42% of these enterprises were not well prepared.

 The Global CFO Study, entitled "Balancing risk and performance with an Integrated Finance Organisation" was developed by IBM Global Business Services' Financial Management practice and the IBM Institute for Business Value (IBV), with the Wharton School at the University of Pennsylvania and the Economist Intelligence Unit.

IBM says that a key component of the study is the emergence of integrated finance organisations (IFOs) which it defines as: “Entities that, at minimum, mandate standards enterprise-wide with a standard chart of accounts, common data definitions and standard common processes”. But fewer than one in seven enterprises govern and manage the integration of their finance organisation by the combination of these four criteria.

CFOs are increasingly becoming owners of risk management within their enterprise and sharing ownership with the CEO. The study found 61% of CFOs are expected to lead risk management within their organisation, followed by CEOs (50%), chief technology officers (27%) and what are described as chief risk officers (19%).

At many organisations formal risk management is still fairly immature. By their own admission, only 52% acknowledge having any sort of formalised risk management programme. Only 42% of respondents do historic comparisons to avoid risk, just 32% set specific risk thresholds and only 29% create risk-adjusted forecasts and plans.

The study findings suggest that CFOs at what IBM calls integrated finance organisations are more proactive at supporting and managing risk management than their counterparts in non-IFOs. 60% of those surveyed in the study say they are more effective at managing risk versus only 43% at non-IFOs. IFOs are also twice as likely to be prepared for major risk events. When IFO respondents were asked to measure their own risk preparedness, 62% of said that they were well prepared, versus only 29 % of non-IFOs in the same situation.

An integrated finance organisation improves performance and increases responsiveness. IFOs spend more time (21%) on analytical activities (decision support and control activities), report on 20% more dimensions and are more likely to focus on customer, industrial and channel activities. They also access data more quickly and provide confidence in data veracity.

IBM says that although many enterprises are currently non-integrated, the future is evolving towards more globally integrated enterprises. More than two-thirds or 69% of finance executives believe greater integration is difficult to execute but an imperative.

Seamus Quinn