VideoMore Than a Number
Some users of risk-management software say the systems have helped them spot hazards created by the current financial crisis. Last May, UHY Advisors Texas began using SAP risk-management software to monitor financial and operational risk. Previously, E-mail "was the most ubiquitous risk-management tool we used," says Norman Comstock, a managing director at the tax and business advisory firm. "We decided it was time to take our own advice" and begin using risk-management software, just as UHY advises its customers to do, says Comstock.
Still, it would be foolish to depend on any single source to monitor and mitigate enterprise risk, says Greg Zaffiro, managing director with Platinum Partners Value Arbitrage Fund. "At the end of the day, you certainly wouldn't want to rely completely on one output number from a risk-measurement system," he says. The software "tells you what might happen in the future," says Kim Balls, vice president of life product development at software vendor DFA Capital Management. "It tells you what you should do, but it doesn't take action for you."
Despite indications of robust sales, corporate shoppers are cautious, and sales cycles are longer than they were a year ago, notes McClean. The cost to buy and install an operational-risk-management system can range from $75,000 to $3 million, depending on the number of users and the functionality of the system, with most deals falling in the $300,000-to-$350,000 range. Installing a system can take as little as one month for a small company to several months for larger companies with more-complicated reporting structures.
Thomas Hoffman is a freelance writer in Warwick, New York.
A Universe of Risks
As one example of how broad "risk management" is, consider that the World Economic Forum's Global Risk Network analyzes 36 distinct types, encompassing everything from biodiversity loss to a collapse of the nuclear nonproliferation treaty. Among the risks scoring highest this year in terms of both likelihood and severity:
• Asset price collapse
• Slowing Chinese economy
• Chronic disease
• Global governance gaps
• Fiscal crises
• Retrenchment from globalization
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