Aon Global Risk Consulting, the risk management consulting arm of Aon, launched a report finding a statistically significant link between a higher risk maturity rating and lower volatility in stock price.
Researchers at Aon and the Wharton School at the University of Pennsylvania conducted analysis of data collected by the Aon Risk Maturity Index Report. Working with annual financial results for more than 100 global publicly-traded companies across more than 25 industries, researchers confirmed that during a two-year period from 2010 to 2012 stock price volatility was 50 per cent lower for organizations with high risk maturity ratings than those with lower ratings. Between 2011 and 2012, when markets were marginally down and particularly volatile, organizations with more advanced risk management practices performed significantly stronger. Only organizations with the two highest ratings closed the year with a positive return while lower-rated organizations ended the year with a 17 to 30 per cent loss.
“We are pleased that in less than two years after the launch of the index the data confirms what we intuitively have always believed regarding the link between risk maturity ratings and stock price as well as financial performance and risk management,” said Theresa Bourdon, group managing director of Aon Risk Solutions. “This is an incredibly valuable tool that facilitates transparency and provides a benchmark on risk management. It enables organizations to shape their risk management processes to improve financial performance.”
The Aon Risk Maturity Index Report was developed by Aon Global Risk Consulting, in conjunction with the Wharton School at the University of Pennsylvania and Aon’s Centre for Innovation and Analytics. An award-winning tool for its innovation, the Aon Risk Maturity Index Report is increasingly being recognized globally for its success in understanding and assessing the link between risk management and financial performance.
Additional Aon Risk Maturity Index Findings
The Aon Risk Maturity Index respondent group includes 500 organizations on five continents, representing 25 countries and more than 28 industries. Following are additional findings, identifying global risk maturity trends:
– Industry averages overall mirror the global average Risk Maturity Rating, which reveals that most organizations are in the middle-of-the-road on the complexity of risk, agreement on strategy and action and alignment to execute risk management programs
– Size of an organization measured by annual revenue does not appear to play a major role in influencing risk maturity
– Chief Financial Officers scored slightly lower risk maturity ratings, on average, than other respondent groups; this may reflect the increased insight of a senior leader into risk and governance processes, or focus on the financial impact of risk
– Chief Risk Officers scored slightly higher risk maturity ratings on average than other respondent groups; this may reflect the level of risk management maturity at an organization that has established a titular CRO role
– There appears to be little difference in the level of consistency of North American and EMEA region operations with their organizations’ global risk management strategy, regardless of whether the organization is headquartered in either of those regions
The Aon Risk Maturity Index Report is open for participation to senior risk and finance executives as well as senior legal and additional business leaders regardless if they are an Aon client. Upon completion of a questionnaire, participants receive an immediate risk maturity rating along with commentary for potential improvements. Results are then further analyzed by the Aon Centre for Innovation and Analytics as well as consultants from Aon Global Risk Consulting’s Enterprise Risk Management Practice. A comprehensive and complimentary rating report is delivered to the participant.
The index will continue to capture data that can be used to drive insights, benchmark to industry and global standards as well as assist businesses in the development of their risk management frameworks.
