Cost-benefit analysis is a significant component of the global risk management process. This study examines the challenges that risk managers face in developing cost of risk allocation systems through a formal survey of the US-based companies, most of which have international operations. Survey results show that 85% of risk managers are involved in allocating financial risks, and opposing goals such as stability vs. responsiveness and simplicity vs. equity that are influential in corporate cost allocation decision-making.

Global risk management has always included cost- benefit analysis as a significant component of the process. The security of a nation's homeland offers a timely illustration. For example, at what point do the extra time, cost and aggravation associated with airport precautions exceed the potential security benefits? Allocating costs in a meticulous manner is also imperative. For many organizations, accounting and tax considerations require that all costs be assigned with reasonable accuracy. Precision is also necessary to correctly evaluate the performance of different profit centers.

It has been suggested that an organization's risk management division annually calculate the firm's cost of risk, and also benchmark their cost internally among the firm's operating divisions as well as externally against peer companies. (Lawrence, 2008)

The purpose of this study is to expand the conversation involving some of the persistent challenges facing risk managers in developing cost allocation systems today. This is accomplished through a formal survey of the US-based companies, most of which have international operations, which are intensely involved in cost of risk issues.

Another reason for gathering, analyzing, and sharing this information is to assist various stakeholders as they strive to develop or improve chargeback systems. In today's economically challenging and globally competitive environment, it is vitally important to explore every avenue available for cost savings and improve risk management efforts.

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