Global investors prefer companies having better risk management

Global investors prefer companies that have better risk management capabilities, as they rate this aspect on top of the list while making investment decisions, says a survey by Ernst & Young (E&Y).

According to the 'Global institutional risk survey,' released at a function organised by the Bombay Stock Exchange on Friday evening, majority of the global respondents (69 per cent) identified transparency as the top priority when considering an initial investment in a company. 

'Investors feel that they might be making investment decisions based on incomplete information about how companies are managing risks and stress the importance of a detailed investor communications program to make them aware about these risks,' the survey said.

Of the respondents, 61 per cent avoided investing in companies which lack a risk programme, while 48 per cent actually de-invested from firms where risk management was insufficient.

At the same time, 82 per cent investors were willing to pay a premium for companies with good risk management. The E&Y report is the compilation of studies conducted on 163 institutional investors across 16 countries. Of those studied, more than 30 per cent manage funds of over $1 billion.

The BSE has also launched a six-part series in association with E&Y on mastering risk.

The series will span over four months and will focus on themes such as operationalising enterprise risk management, role of internal audit in corporate governance, managing treasury risk and clause 49 & risk management -- maximising benefits of compliance initiatives.

The series was inaugurated by G Anantharaman, a whole time member of the Securities and Exchange Board of India, in the presence of Rajnikant Patel, MD and CEO, BSE, and Sunil Chandiramani, national director, risk and business solutions at E&Y. Get more information