Professional Documents
Culture Documents
The shortcomings of risk management and risk forecasting provide important lessons—
namely, that a firm’s leadership needs to make risk a priority and a key part of strategic decision
from the people within your organization and checking its reliability to ensure that the group
management can use it to take the right decisions. The operations and management control teams
are caught between their daily work, the obligation to provide their forecasts on time, the risk of
error and ongoing exchanges with subsidiaries they exhaust themselves trying to take “current”
The issue of risk is often raised and eventually minimized due to lack of time,
information or simply because your tools don’t allow you to assess it correctly, measure it and
between the quality of information used for managerial decision-making and external financial
disclosures, suggesting that the quality of information that firms use to forecast earnings and
develop financial plans should be associated with the accuracy of their externally-disclosed
earnings forecasts. We test this prediction by examining the relation between the sophistication
with which a firm incorporates risk considerations into its forecasting and planning processes
to improve understanding of current and emerging risks by providing best and worst case
performance scenarios and identifying risks that fall outside of established tolerances. Enhanced
quality and consistency of key finance and risk assumptions and forecasting inputs, greater
alignment of risk-return profiles across the firm, improved quantitative understanding and
analysis of the risk drivers that contribute most to earnings exposure, and enhanced analytical
capabilities can improve a firm’s ability to assess and incorporate uncertainty in forecasts and
plans.