The Big Issues for Risk Managers

AON Risk Solutions released its 2011 "Global Risk Management Survey," which covered 960 respondents worldwide, about equally divided between public and private companies.  The Top 10 Risk Issues for the managers were:

1. Economic slow down
2. Regulatory/legislative changes
3. Increasing competition
4. Damage to corporate reputation/brand
5. Business interruption
6. Failure to innovate and loss of customers
7. Failure to attract and manage talent
8. Commodity price risks
9. Technology/system failures
10. Cash flow and liquidity risk

Historically, 5,8,9, and 10  have formed the bulk of the content for a corporate risk management program, and it was probably indistinguishable from the purchase of insurance coverage and from  financial hedging, probably through the treasury function. 

The AON sample companies are 89% from the Americas and Europe.  In total, 31% of the respondents say that they have a position of Chief Risk Officer (CRO), and these tend to be regulated industries, including banks and insurance companies. 69% of the respondents have a dedicated risk management department. 

Interestingly, in Asia the #2 concern of risk managers is the attraction and retention of talent, which falls to #7 in the total survey sample.

Less than 40% of the companies responding to the survey monitor their Total Cost of Risk.  These include, according to AON's framework:

• Risk transfer costs (premiums paid for insurance coverages)
• Risk retention costs (retained risks and claims adjustments costs)
• External costs (brokers, consultants, regulatory compliance)
• Internal costs (personnel and systems)

The AON susrvey concludes that it is for companies with revenues in excess of $1 billion that a dedicated, fully integrated Enterprise-wide Risk Management system begins to make economic sense.  Smaller operations can take a holistic view through good management in the CFO/financial function. 

Much of the literature written for NACD members is written as if  ERM could apply to smaller companies, and it seems clear that this not cost effective.