Chief risk officers need to address the critical issue of liquidity risk, a Deloitte global risk survey has found.

The study found that although 67% of surveyed firms have strengthened their liquidity risk management in the wake of the global credit crunch, the risk remains "inadequately covered in many organisations".

"It has been badly underestimated and has severely bitten the industry in the global financial crisis," Australian Deloitte Risk partner Mark Young said. "It is a critical concern within financial services."

Liquidity risk refers to the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss.

Mr Young says risk management has "become sexier" in the wake of the global financial crisis. About 75% of firms now demand chief risk officer input at board level, up from 37% just three years ago.

Despite improvement in some areas, the survey revealed about half of all firms fail to incorporate risk management into performance and compensation targets.

Mr Young claims that Australia's strong regulatory system and robust lending practices have helped avoid the worst of the global financial crisis.

"[The Australian Prudential Regulation Authority] knows how an organisation works," he told insuranceNEWS.com.au. "Compared to other regimes such as US where regulation seems to be more fragmented, Australia is a one-stop shop."