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Risk management maturity is linked to better corporate performance

Maturity of risk management processes is correlated with sustainable improvements in corporate performance, shows the 2012 Risk Management Benchmarking Survey of the Federation of European Risk Management Associations (FERMA).

This is the sixth edition of the survey, which has taken place every other year since 2002.

The 2012 survey showed that companies with the most advanced risk management showed the strongest level of growth for the past five years, as measured in terms of earnings before interest, taxes, depreciation and amortisation (EBITDA).

From a record number of 809 responses from risk and insurance managers in European 20 countries, the survey found that:

  • 28 percent of companies with advanced risk management practices reported an EBITDA growth rate of more than 10 percent, compared to 22 percent whose risk management was classed as mature, 15 percent for moderate and 16 percent for emerging.
  • Among companies with an EBITDA growth rate of more than 20 percent, three-quarters (74 percent) have mature or advanced risk management practices.

The President of FERMA, Jorge Luzzi, said: “We have long believed that good risk management contributes to sustainable corporate growth. Now we have clear evidence that there is a correlation. This is a particularly important finding in light of the pressures on corporate results during the last five years.”

Other key messages from the survey include:

  • In the current financial and economic climate, top management wants more information on the risks and risk management of the business, according to 46 percent of respondents. In 53 percent of the companies with mature or advanced risk management (2010 – 45 percent), the function now reports to the board, a board committee or a top executive. However, the survey found that there is considerable work to be done before companies across Europe fully understand the implications of the European 8th Company Law Directive and integrate them into their business.
  • When it comes to the insurance market in the current financial climate, European businesses say they want sustainable relationships with stable partners. They are not looking generally to increase risk transfer (17 percent), but they want long term arrangements (40 percent) and more robust insurance partners (32 percent). More than half (57 percent) reported strengthening their loss prevention activities.

•Date: 24th Oct 2012 • Europe •Type: Article • Topic: Enterprise risk management

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