Governance, Risk Management and Compliance: Significant Benefits Outweigh the Costs, According to PricewaterhouseCoopers’ Eighth Annual Global CEO Survey

Benefits Include Enhanced Brand Reputation and Shareholder Confidence, but CEOs Struggle with Implementation

NEW YORK, 26 JAN 2005 – Building robust corporate governance systems and processes, managing risk on a global scale, and complying with an increasingly vast web of regulatory requirements is difficult, costly and time-consuming work; however, according to PricewaterhouseCoopers’ Eighth Annual Global CEO Survey, CEOs, worldwide, think it is well worth the effort.

Of more than 1,300 CEOs, 43 percent consider governance, risk management and compliance (GRC) a value driver and a source of competitive advantage, and 56 percent believe that it has a positive effect on reputation and brand. However, responses indicate that effective governance, risk management and compliance are not easily achieved and that CEOs are struggling with their implementation.

“Over the last three and a half years, CEOs have focused on complying with new laws and regulations, putting new risk management processes in place and strengthening corporate governance procedures,” said Samuel A. DiPiazza, Jr., Global Chief Executive Officer of PricewaterhouseCoopers. “This has not been an easy task, but for CEOs who view these changes as investments rather than costs, the payoff has been well worth the effort – specifically, when measured in terms of performance improvement, greater transparency and movement toward a more sustainable enterprise.”

The survey shows that there are clear benefits to effective GRC; however, responses overwhelmingly demonstrate that CEOs face numerous challenges when it comes to implementation and, ultimately, to realising these benefits.

While a majority of CEOs surveyed are confident that they can respond to governance, risk management and compliance issues in their domestic operations, only one quarter say they can very effectively respond to foreign laws and regulations and to internal policies and procedures in foreign business units.

The survey also shows that CEOs are struggling with effective implementation. While 53 percent feel that codes of conduct are fully developed in their companies, far fewer believe that their compliance and ethics training programs meet the same standards. A third of CEOs feel that their measurement of performance in these areas is not well-developed if at all.

The majority of CEOs surveyed, however, recognize that governance, risk management and compliance have a positive effect on reducing legal liabilities (64 percent) and on enhancing reputation and brand. Additionally, the 58 percent of CEOs who consider GRC expenditures an investment see greater benefits than those who view it as a cost. These executives believe that GRC is a value driver, a source of competitive advantage, and an aid in enabling them to take risks to create value.

“There is no question that CEOs have a long way to go when it comes to effectively implementing GRC. And, while our survey shows that CEOs widely recognise the benefits, they must realise that only those who implement GRC in a meaningful way will see a clear return on investment, specifically as it relates to higher shareholder value,” said DiPiazza.

In this report, four global business leaders provided in-depth, personal perspectives on how they and their organisations are meeting the challenges of GRC. These leaders include:

  • Leif Johansson, President and CEO, Volvo Group
  • Michael McCallister, President and CEO, Humana Inc.
  • Fernando Roberto Moreira Salles, CEO, Companhia Brasileira de Metalurgia e Minera��o (CBMM)
  • Captain Wei Jiafu, President and CEO, COSCO Group

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