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‘Risk-mature’ businesses perform better: Aon

Businesses that understand and manage risk well perform better financially and have less volatile stock, according to the new Aon Risk Maturity Index Insight Report.

The report, written with the University of Pennsylvania’s Wharton School, analyses the inverse relationship between risk maturity ratings and stock price volatility.

It says companies with higher risk maturity ratings show superior operational financial performance.

Aon rates businesses after assessing their risk management practices.

The report says organisations that successfully utilise risk quantification techniques enjoy greater transparency around their risk exposure and appetite.

Aon Global Risk Consulting MD Kieran Stack says the report focuses on how businesses can develop a cross-functional understanding of risk to improve risk maturity and ultimately their financial results.

“Our data confirms that organisations that successfully focus on improving this set of distinct risk-related factors, as well as utilising advanced quantitative risk management techniques, are more aware of their risk exposure and have enhanced agreement and alignment on required actions to help successfully realise superior performance,” he said. 

The report recommends companies communicate risk management strategies, objectives and practices, collaborate in executing risk-based practices across risk-based functions, and get consensus on strategy for cross-functional risks.

Aon Group MD Theresa Bourdon says the dynamic economic and geopolitical landscape means risks are becoming more interconnected.

“The ability for organisations to understand and manage this increasing interconnectivity and develop the organisational governance and processes are imperative to their financial and operational wellbeing,” she said.

Aon surveyed more than 1400 risk managers and executives for the report.