Advanced risk management yields financial success

Businesses that have advanced risk management practices are reaping financial rewards, Aon Global Risk Consulting has found.

The finding was outlined in Aon’s Risk Maturity Index Insight Report produced jointly with Wharton School at the University of Pennsylvania.

Researchers analysed data from more than 100 global publicly traded companies across more than 25 industries. They found a direct correlation between mature risk management practices and the relative resilience of an organisation’s stock price in response to significant risk events.

Commenting on the findings, the firm’s group managing director Theresa Bourdon told StrategicRISK: “We were struck by the consistency of the correlation between risk maturity and financial performance and organisational resilience. 

“We found this correlation with the first 100 or so participants and it has continued to hold true now that we have vastly expanded the population of organisations represented in the study.”

She added: “Best in class organisations are investing the time and resources to develop a deep understanding of the range of possible financial outcomes from key risks, both insurable and uninsurable.

“In many cases there is limited data on potential egregious events. Working with key subject matter experts within organisations, from the CFO to the chief engineer, we help organisations develop the parameters that define a range of impacts from major threats to financial performance. 

Armed with this knowledge, business decisions can be made that reduce volatility to the balance sheet. Whether it’s reliance on one supplier, location of a major manufacturing site or expansion of a bring your own device policy, all business decisions require a risk/reward trade-off.”