Companies that invest in sophisticated risk management practices will report a stronger financial performance and enjoy a higher share price, according to research for Aon.

The Aon Risk Maturity Index shows that companies with the best risk management reap the most benefits when markets are volatile and falling.

The Wharton School at the University of Pennsylvania developed the index using data from 500 organisations across 25 industries and five continents.

Aon Global Risk Consulting CEO Andrew Tunnicliffe says the researchers found that when markets performed well almost all organisations except those with the most basic risk maturity ratings saw positive returns.

But from May 2011 to May 2012, when markets were weaker and more volatile, only companies with the two highest risk maturity ratings posted positive returns.

“When markets are marginally down and more volatile, companies with more sophisticated risk management practices perform significantly better than others,” Mr Tunnicliffe says.

“Companies need to understand not only the complexity of risk but also that it demonstrably contributes to better financial performance, especially during tough times.”

He says companies with the highest risk maturity rating experience much less volatility in their share price.