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Academic study shows direct relationship between mature enterprise risk management practices and value growth

The Journal of Risk and Insurance has released ‘The Valuation Implications of Enterprise Risk Management Maturity’ study, the first wholly independent research project that confirms the value connection of mature enterprise risk management practices in organizations. The peer-reviewed study finds that organizations exhibiting mature risk management practices realize a value growth potential of up to 25 percent.

Based on their findings, the authors report that “firms that have successfully integrated the ERM process into both their strategic activities and everyday practices display superior ability in uncovering risk dependencies and relationships across the entire enterprise and as a consequence enhanced value when undertaking the ERM maturity journey.”

Using data from the RIMS Risk Maturity Model (RMM) gathered over the period from 2006 to 2011, Mark Farrell, the paper’s author and the Actuarial Science & Risk Management Programme Director at Queens University Management School of Belfast (QUMS) and Dr. Ronan Gallagher of the University of Edinburgh Business School, provided evidence through this research that firms that have reached mature levels of enterprise risk management attributes exhibit a higher firm value. The broad data set encompassed publically traded organizations from a variety of industries. Nearly 50 percent of the data tabulated by the researchers were submitted by RIMS members.

To access the research study, click here.

•Date: 25th April 2014 • World •Type: Article • Topic: ERM

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