An expert view from Eddie McLaughlin, chief commercial officer, Aon Global Risk Consulting
Increasing risk maturity adds measurable value to an organisation. When this increased maturity is coupled with a supporting risk culture, the organisation is able to maximise its return on risk management investment.
Risk maturity and organisational value
There is a clear relationship between a risk mature organisation and the relative resilience of its stock price in volatile equity, currency, and commodity market scenarios, which is why this should be a key consideration for the Board, Risk Managers, and all core functions across the business. Aon, in partnership with Wharton Business School, have developed the Risk Maturity Index (RMI) which has been applied in the assessment of over 1500 organisations globally.
This has demonstrated how managing risk better adds value across a number of metrics, such as increased share price and reduced volatility.
The importance of culture
Risk culture is the system of organisational values, goals, attitudes and behaviours that govern risk decisions. In other words the ecosystem that makes an organisation function, including how staff work with each other and manage risk. Failure to consider this ‘human element’ within any risk management system will result in a poorer ROI for risk management. Culture covers alignment of risk / rewards, risk communication, risk ownership (embedded in performance management) and risk training. These are all vital elements in improved risk maturity.
Adopting a ‘risk maturity’ approach and understanding an organisation’s culture are both vital elements in ensuring the management of risk adds value to an organisation, beyond compliance and traditional qualitative justifications for risk management investment, e.g. protecting reputation and better decision making. Fundamentally, a key aspect of Enterprise Risk Management is understanding the ‘human element’ and developing an appropriate risk culture.
To learn more and complete a complimentary risk maturity assessment visit www.aon.com/riskmaturityindex