Businesses are prioritising risk management like never before, according to the 11th Aon Australasian Risk Management Benchmarking Survey.

In what should prove good news for brokers, 70% of the 133 Australian and New Zealand companies questioned had a formal risk management or insurance department last year, up 10% on 2011.

The ability to make informed decisions is the main reason cited for investment in risk management (76% of respondents), which is typically linked to compliance and better internal controls.

Companies also increasingly recognise the value to their bottom lines, with 58% citing greater shareholder value as a key benefit of risk management, up from 47% in 2011 and an increase of 19% over the past five years.

Local businesses put a higher priority on risk management than their international counterparts; the average global proportion of companies with formal risk management or insurance departments is just 58%.

But of the Australian and New Zealand companies with formalised risk management or insurance functions, 44% consist of just one or two staff.

For those businesses without risk management strategies, the two most prominent barriers are logistical or geographical distance issues and lack of human capital.

Board involvement in risk management is increasing, according to the Aon survey of businesses in a wide range of sectors and sizes.

Boards or risk committees have formally established risk policies in 68% of those surveyed, while 23% of respondents’ boards have partial or informal involvement in the risk management process.

Most businesses (68%) say identification of major risks typically occurs through board and management discussions during the annual planning process.

Using insurance brokers or independent consultants is the most popular method (75%) of identifying insurance limits.

The survey also tracks total cost of insurable risk across the businesses – measured by adding the cost of insurance premiums to retained loss costs, brokers’ fees and internal risk management salaries.

Last year the median total cost of insurable risk grew 7% from $5.32 to $5.70 per $1000 of revenue – the second consecutive increase.

Spending on insurance premiums returned to a “regular level” – 71% of total risk spend – during the survey period, Aon says. This follows a drop to 51% in the previous survey, when higher insurance pricing led to increased risk retention following natural catastrophes in Australia and New Zealand.

When choosing an insurer, value for money is the main consideration, followed by financial stability and claims service, the survey reveals.

Most cedants (67%) want to see their risk management efforts recognised through lower premiums, while 61% would like broader coverage from the insurance market and 55% want greater flexibility on underwriting, pricing and cover.

For years insurers and brokers have worked to educate clients about the benefits of risk management. Now that insureds are adopting formal processes and incorporating risk management into their decision-making, they are looking for their insurers to acknowledge their efforts. The Aon research is sending the industry a clear signal about clients’ expectations.