European business fails to mitigate six out of 10 top risks

Risk managers are not satisfied with the level of mitigation for risks that are of serious concern for chief executives, according to FERMA.

Meanwhile, risk management is developing into a strategic function within European organisations and, at the same time, can contribute much more as its strategic role grows.

These are the key findings from the 2014 Risk Management Benchmarking Survey conducted earlier this year by the association. In its seventh edition, the FERMA Benchmarking Survey this year received a record number of 850 responses from 21 European countries.

The survey asked respondents to name the top 10 risks that “keep the chief executive awake at night” and how well they were mitigated.

For six of the 10 top risks, a low level of satisfaction with the mitigation was reported. These risks are: political, government intervention; legal and regulatory changes; compliance with regulation and legislation; competition; economic conditions; market strategy and human resources.

Furthermore, results show most insurance risk and enterprise risk managers are close to the decision-making heart of their organisations. The majority (84%) of insurance risk and enterprise risk managers report to the board or top management and almost half (45%) do this several times a year.

Heads of insurance or risk management most commonly report to: the chief financial officer (33% for insurance and 24% for risk), the chief executive (12% and 17%) and to the board (12% and 18%).

Many respondents have regular, close collaboration with other functions. Risk managers are involved in discussions on ethics, compliance and legal issues (57%); internal audit and control (55%); mergers and acquisitions (52%) and strategic business planning (35%).

Using the results of the survey, FERMA today publishes its first European Risk and Insurance Report, at its 40^th anniversary seminar in Brussels.

FERMA president Julia Graham said: “FERMA has said that risk managers are becoming risk leaders - the European Risk and Insurance Report provides evidence to support that view.

“It, therefore, also endorses FERMA’s objective to shape and support risk management as a profession.”

FERMA vice-president Michel Dennery, a member of the survey committee, said: “As we can see from the report, political actions such as government intervention and regulation have grown in importance, while confidence in the level of mitigation is low. 

“In a flat economic environment, the risk management profession and those that it calls on for support, including FERMA and our industry partners, must help to raise the level of innovation in the solutions available for managing risk, insurance and other means of risk financing.” 

For the first time, the survey reveals the gender of respondents. It shows a split of 73% male and 27% female.

Graham, who has made increasing diversity in the profession one of her key initiatives, said: “Industry could do better and there is certainly room for improvement. The results endorse FERMA’s focus on improving gender diversity in our profession.”

European issues

One of the objectives of the survey is to help FERMA target the European issues that are of most importance for its members. In 2014 these are:

·         Data Protection Regulation (45%);

·         annual reporting and transparency (38%);

·         solvency II and captive treatment (38%); and

·         the possibility of mandatory EU-wide financial security (38%).

The European Risk and Insurance Report 2014 is available online in two parts with two objectives: an executive summary intended to help risk managers communicate risk management priorities to senior management and a full analysis of the survey results, including country-by-country comparisons.