How good are North America’s largest companies when it comes to detecting and dodging risks that can disrupt the hunt for growth and profit? It turns out that they have a long way to go before achieving a true standard of excellence. Indeed, BP is not the only firm that needs to head back to the risk management drawing board.

This view stems from the results of a survey that APQC (my firm) designed and executed in collaboration with IBM’s Institute for Business Value just after the Deepwater Horizon oil rig exploded in April. A full research report is in the works, but at this stage I can offer a few tidbits, along with a few words of caution: more

A survey by Symantec this past June revealed a significant gap between what managers say they want in terms of data retention and actual practices. In the survey, for example, 87 percent of respondents believe a retention policy should allow them to delete information without serious ramifications, mainly legal. However, less than 46 percent actually have an official retention plan.

Clearly there is a gap between what managers believe in regard to data retention and what they do, starting at the most basic level of having a data retention policy in the first place. In another example, just over half the respondents (51 percent) prohibit end-user (personal) archives. However, 65 percent report that end-users individually archive their data anyway.

Gaps or policy mismatches like these can lead to serious data retention mistakes that can have costly implications. wiredFINANCE has frequently argued that organizations simply keep too much data. The problem really comes down to a failure among business managers, legal, and IT to communicate around the issue of data retention. more

Karen DeToro, a senior manager with Deloitte Consulting LLP, is a fellow of the Society of Actuaries and a member of the American Academy of Actuaries. Her recent work focuses on the intersection of incentive compensation and risk management. During the past several weeks, I conducted an e-mail chat with DeToro to learn more about risks related to incentive compensation.

Eric Krell: Karen, thank you for taking the time to chat. You presented on the topic of incentive compensation at the Enterprise Risk Management (ERM) Symposium earlier this year. Compensation – especially incentive compensation – marks a topic that I’m seeing crop up more frequently in ERM-related discussions this year.

Can you share some high-level insights on compensation-related risks companies ought to recognize? Later, I also want to find out if you’re seeing any links between incentive compensation and risk-management-related measures.

Karen DeToro: In my experience as an actuary, I have found that there are various risks that companies need to consider when evaluating their compensation plans.

At the broadest level, companies need to consider the risk that poorly designed or overly generous incentive compensation may incent employees and management to take inappropriate risks in order to maximize their personal compensation. On the other hand, companies must balance this with the risk that an overly conservative incentive compensation plan will restrict the ability to attract and retain needed talent. The specific manifestations of these risks will vary, depending upon the company’s structure, business model, industry, and compensation plan design.

The first type of risk may manifest itself through events such as management misstatement of financials to achieve income targets; adoption of overly aggressive strategies to drive top-line growth; or excessive reduction of corporate expenses through headcount reduction in order to drive earnings, leading to compromised service and productivity levels. Unfortunately, it is not always clear that these events are being driven by compensation issues.

The second type of risk can be observed through high attrition levels, low hiring rates, and unfavorable comparisons against industry compensation benchmarks; these are more readily recognized as being tied to the level and type of compensation being offered. more