OREANDA-NEWS. December 19, 2007. Business investment in emerging markets continues to boom, but many companies are failing to manage the risks effectively according to a survey released by professional services provider Ernst & Young. For Risk Management in Emerging Markets survey, Ernst & Young interviewed more than 900 senior executives responsible for risk management in either international headquarters or emerging market operations.

The survey shows attitudes to risk priorities vary between the developed market headquarters view and those of management in emerging market businesses. Developed market companies are more likely to worry about political risks (40%), whereas emerging market businesses focus on more immediate risks such as market and competitive risk (41%), and currency (28%). "What becomes clear is risk has to be managed locally and emerging market businesses do seem to be more active in managing across all risks than developed market businesses," says Inge Boets, Global Head of Business Risk Services for Ernst & Young.

Part of the study is focused on building a picture of best practices to see how companies are successfully managing risks in emerging markets. The survey is focused on five particular markets: Brazil, China, India, Russia and Turkey. The study devoted to Russia provides insight into risk management practices. By contrasting responses from Russia with results received from other emerging markets, it was possible to analyze the differences in viewpoints and approaches to risk management.

The survey demonstrates how best practices and Western corporate culture are affecting the Russian market. "Many Russian companies are expanding their use of the international approach to and best global practice in risk management," says Svetlana Ignatieva, Ernst & Young Manager and Head of Enterprise Risk Management Services for Ernst & Young's CIS practice. Such an integrated approach becomes obvious in comparing the practices applied by companies in other emerging markets participating in the survey.

Based on the experience of survey respondents, Ernst & Young has learned that companies headquartered in Russia are more likely to:
Manage more risks. The survey found that companies in Russia are, by and large, actively managing a greater number of risks compared to companies in other emerging markets - "particularly political risk, trade credit, reputation, technology and transactional risks".

Implement leading practices, using room for improvement on a number of individual aspects.
Quality of risk communication.
Sufficient internal audit testing.
Consistent approach towards risk, including improvements in documentation of risk management strategy and standardization of practices in future.

Prioritize trade credit and compliance risks. Trade credit or customer insolvency risk is seen as the top priority in Russia, identified by 45% of businesses, compared to just 25% across other emerging markets. Look towards international expansion. The survey findings show that Russian companies are entering into a new and exciting phase of globalization. "Our own experience and the results of the survey show there is no "one-size-fits-all" approach to managing risk in emerging markets - plenty have tried and have learned hard lessons. However, embedding a risk culture, aligning structure and risk processes and improving communication can provide a strong foundation," said Tonny Dekker, Partner and Head of Risk Advisory Services for Ernst & Young in the CIS.

About Risk Management in Emerging Markets
The survey interviewed 435 large multinational companies with Headquarters in 12 developed countries, with 1342 links with emerging companies, including 88 companies in Russia. There were also interviews with 501 companies in the emerging markets of Brazil, Russia, India, China and Turkey. Of these 220 were subsidiaries of developed market companies, 190 were joint venture, third party agents or intermediaries, and major suppliers to foreign companies, and 91 were leading businesses within the emerging markets.

Ernst & Young expands its services and resources in accordance with clients' needs throughout the CIS. Over 3,300 professionals work at 15 offices throughout the CIS in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Togliatti, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Baku, Kyiv, Donetsk, Tashkent, Tbilisi, and Minsk.