Regulatory risk is a top priority for risk managers at major organisations, who now expect regulatory scrutiny to become more intense over the next three years, a new survey shows.

Top threats

The survey identified the top threats to a company’s reputation as miss-selling, loss of mandates, breach of client mandates/regulatory censure or fines. Nine out of ten respondents said their firm was aware of the risks posed by reputational damage and eight out of ten said the desire to avoid reputation issues was a key driver for their risk teams. However, while 49 per cent of firms consider that they actively measure reputational risk, 24 per cent are proactively looking at reputational risk as a separate line, and only 19 per cent have methodologies for measuring the likely impact of reputational risk.

The EY survey showed that tax was cited as a current risk by 38 per cent of firms, and as a key horizon risk by 64 per cent of firms. This year also saw a shift away from IT systems and onto data security and cyber-risk, with 49 per cent of respondents now focusing on the cyber threat from a risk function perspective, up from 19 per cent last year.

“The stakeholder community for risk management is increasingly demanding and is also now much wider than it used to be. In response a small group of managers are starting to push the boundaries of best practice. They have recognized the commercial and reputational benefits of being seen to have exceptional risk management and are looking at the regulatory regime being brought in for the banks to see if there is anything they can adopt,” Lofts concluded.

EY interviewed 54 companies between March and June 2013.