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Businesses ignore risk management

Update: July, 11/2012 - 10:22

HCM CITY — More businesses in the country should employ risk management strategies to avoid sudden losses in profits and struggles with liquidity, a state securities official said on Monday.

Nguyen Doan Hung, deputy chairman of the State Securities Commission said that many enterprises had ignored the important role of risk management, which had left them vulnerable to the negative impact of economic uncertainties.

Hung spoke at a ceremony held by Ernst & Young Viet Nam in HCM City to introduce a new manual on risk-management strategies.

The book, produced under a technical-support agreement between the SSC and Ernst & Young Viet Nam, is expected to help companies re-evaluate their risk-management process in the proper way.

Phan Dinh Chuong, deputy general director of Ernst&Young Viet Nam, said that very few local businesses had worked out an overall risk-management framework, although some enterprises had risk-management approaches in certain areas.

From May 2 to June 15, Ernst&Young conducted a survey of 155 companies, including those involved in finance, real estate and construction, consumer goods, and agriculture and industry.

Thiry-five per cent of respondents said they had no official risk-management policy. Only 16 per cent of the surveyed businesses said the members of management boards and high-ranking managers had received professional training in risk management.

According to the respondents, the top contributors to business risks were the Government's regulations and policies; competition and the general market; personnel administration and business efficiency; bank interest rates; foreign exchange rates between the Vietnamese dong and the US dollar; inflation fluctuation; and credit and liquidity.

Chuong told companies that they should employ legal staff to keep a close eye on policy changes.

The survey showed that up to 78 per cent of respondents said they had plans to improve their risk-management approaches in the next two years, as they had now recognised the benefits.

Respondents also said that one of their top concerns in coming years would be risks related to their business strategies, including in merger and acquisitions and opportunities that arise due market changes.

"Companies need to consider risk management as an essential activity in their business strategies," said Chuong. "Business efficiency and shareholder value will improve if risk management is conducted more effectively." — VNS

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