Risk management standards on the up as boards pay attention says Aon’s Tunnicliffe

As risk management rises up the corporate agenda, companies are increasingly making use of risk management tools like analytics and scenario testing to support decision-making, he said. Speaking at the close of the Aon Risk Symposium, he said that a number of factors are driving awareness of risk management at board level and resulting in increased standards. Corporate governance rules, economic and political uncertainty and the experience of high profile losses like those in Thailand and Japan in 2011 are all contributing to the favourable trend, he said.hide"There is a growing recognition of the importance of risk management at board level. It is helping raise the capability and professionalism of risk management functions, improving standards and leading to a more informed decision-making process," said Mr Tunnicliffe. While improvements in corporate governance are helping to raise standards within corporates, companies are also often motivated to use risk management to improve performance, he said. "Governance can force companies to improve risk management, but they value it all the more when they want to do it, rather than have to do it," he said. The Aon Risk Maturity Index, launched in 2011, is making the case for risk management, said Mr Tunnicliffe. "There is now solid evidence that risk management can improve equity returns and reduce stock price volatility," he said. This year's Risk Symposium, which saw risk managers from over 100 international companies gather in Warsaw, focused on 'empowering results' in risk and in people. Speakers and delegates explored some of the tools and approaches available to corporates, as well as how risk management can gain a heightened profile in an organisation by showing results, said Mr Tunnicliffe. There has been unprecedented demand for analytics and the use of risk management in decision-making, said Mr Tunnicliffe. "Best practices are for excellence in analytics, transparency and being able to make predictions," he said. Organisations that demonstrate proactive enterprise risk management will get more out of their insurers, said Mr Tunnicliffe. "There are benefits for companies that demonstrate proactive risk management-insurers' attitudes will be different and there will be benefits in pricing, coverage and structuring," he said. Risk management also has an important role to play in dealing with risks that cannot currently be transferred to insurers, as well as in persuading insurers to create more innovative products in areas such as supply chain and cyber, said Tunnicliffe. He highlighted the comments of Victor Peignet, Chief Executive of SCOR Global P&C, who said that insurers can only do so much. It is inevitable that some risks will not be insurable, but that is when enterprise risk management kicks in, said Mr Peignet, in his presentation at the symposium. Mr Peignet suggested the need for a more granular debate around risk as there are many situations where insurers will not be able to transfer risk and organisations will have to take certain risks head on. For example, there is a point where insurers can't get quality information on supply chains-putting the emphasis on ERM as part of the solution. Companies have been using captives to incubate uninsurable or difficult risks, said Mr Tunnicliffe. This enables companies to develop risk management and establish a track record before transferring some of the risk to insurers, he said. In particular, companies in emerging markets have been using captives to insure difficult to place risk, he said. The role of risk management will become all the more important as business confidence returns and the economic outlook improves, said Mr Tunnicliffe. "The prevailing climate is of stalled investment and many companies have been holding on to their cash. But when the situation changes and that cash is released, the challenge will be to deal with the increased asset values and changes in risk profile," he said.

Risk management standards on the up as boards pay attention says Aon’s Tunnicliffe

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