ACE Report: Good Risk Management = Competitive Advantage

According to a report from the ACE European Group, released in London, “risk management is now seen as a key contributor to a company’s source of competitive advantage with companies putting risk managers under increasing pressure to show measurable returns on investment in this area.”

ACE noted that a big majority (97 percent) of senior executives and risk professionals that it surveyed for the latest global risk briefing report, conducted by the Economist Intelligence Unit (EIU) and sponsored by ACE, said that “good risk management is an important source of competitive advantage.” They concurred that risk management “is now expected to be more than just a tool to protect a company from losses.”

The report notes that most respondents believed “their risk management operations enhanced shareholder value and, almost half of the 218 executives interviewed agreed that the most important benefits of risk management were protecting and enhancing the business’s reputation.”

The research also showed that companies worldwide are planning to increase their investment in most areas of risk management over the next three years, “including improving the quality and reporting of data, training and strengthening risk assessment processes.”

Commenting on the results of the global risk briefing, Andrew Kendrick, ACE European Group Chairman and CEO stated: “Risk management has come of age. But with this maturity comes responsibilities. More than 60 percent of respondents to the research said that over the last three years the commitment of their company’s board to risk management issues had increased. But, as a result, there is a greater expectation that the operation will make a measurable return on the investment it receives.”

There’s still room for improvement. Companies appear to be most confident in “dealing well with more traditional areas of risk such as financing, market volatility and bad debts,” ACE’s report concludes. But the research revealed a “lack of confidence in effectively assessing and managing emerging risks and those outside the control of the business” – notably in such areas as “IT, climate change and human capital risks.”

“With dangers lurking in areas of non-traditional risk, there is great potential for insurers, risk managers and their brokers to work together to develop effective risk transfer solutions,” Kendrick added. “The impact of cyber and environmental related liabilities on businesses are just two examples of where both groups can, and are, working mutually to build relevant policy covers.”