November 13, 2015 by Canadian Underwriter
Reinforcing the direct relationship between strong risk management practices and superior operating performance for organizations, a report released Thursday by Aon Global Risk Consulting further identifies three key factors to help organizations boost risk maturity.
“Our data confirms that organizations that successfully focus on improving this set of distinct risk-related factors, as well as utilize advanced quantitative risk management techniques are more aware of their risk exposure and have enhanced agreement and alignment on required actions to help successfully realize superior performance,” Kieran Stack, managing director at Aon Global Risk Consulting, says of findings in the fourth edition of the Aon Risk Maturity Index Insight Report.
The index tool – the 2015 version of which involved input from 1,400-plus risk managers and C-suite executives who were surveyed – measures 40 components of ‘risk maturity’ that are grouped into 10 overarching characteristics or statements of best practices, notes an Aon statement.
Developed by Aon Global Risk Consulting, the risk consulting business of Aon plc, in collaboration with the Wharton School of the University of Pennsylvania, report findings also reinforced the relationship between a higher “risk maturity rating” and the relative resilience of an organization’s stock price in volatile equity, currency and commodity market scenarios, notes an statement from Aon.
“This year, we focused on identifying specific best practices around how organizations can develop a cross-functional understanding of risk to improve their risk maturity and ultimately help boost their financial results,” Stack explains.
To effectively understand and manage risk, specific strategies that organizations should implement revolve around the following:
In addition, the company statement notes, the report found organizations that successfully utilize risk quantification techniques experience greater transparency into the organization’s specific risk exposure and risk appetite – ultimately boosting the company’s operational performance.
“In today’s dynamic economic and geopolitical landscape, risks are becoming more interconnected,” Theresa Bourdon, group managing director at Aon Global Risk Consulting, says in the statement. “The ability for organizations to understand and manage this increasing interconnectivity and develop the organizational governance and processes are imperative to their financial and operational well-being,” Bourdon advised.
In the 2014 report, Aon reported the following six main findings: