Satisfaction with global insurance companies’ enterprise risk management (ERM) efforts is growing, and 74% of executives and board members for those companies view ERM as an important strategic partner.
That’s according to a survey by Towers Watson, which polled 398 executives from North America, Europe, and the Asia-Pacific region.
Sixty-three per cent of insurers were satisfied or very satisfied with their ERM performance, compared with 53% who expressed satisfaction in the previous survey two years ago. And 70% expect ERM to increase shareholder value through better risk decision-making.
Research from PwC indicates that all types of companies that have a strong ERM foundation can be more profitable, in part because an integrated risk framework can help companies be more agile.
Insurance companies that have ERM integrated into their annual plan report far higher satisfaction with the overall ERM efforts, the Towers Watson survey said.
“Companies that strive for strategic value in their risk-management function – as opposed to simply using ERM for regulatory compliance – typically differentiate themselves, in part, by integrating risk management into their strategic decision-making process from the beginning,” Martha Winslow, a Towers Watson senior consultant, Americas P&C practice, said in a news release. “Too often, senior management incorporates risk management later in the process or even after it’s complete, when there’s not much chance of it influencing critical decisions.”
Respondents in the Towers Watson survey said that boards and senior management view strong ERM practices as having an effect on five areas:
- Integration with business management and operations.
- Clear, well-supported risk identification.
- Comprehensive risk reporting and assessment.
- Well-established governance procedures.
- Clear, well-integrated risk appetite.
Regulatory requirements were listed as the key driver of change in how insurers approach ERM; 61% said it was a key driver of change, with respondents from Asia Pacific (72%) and Europe (63%) citing this more often than those in North America (47%).
The top obstacles insurers expected to face for ERM implementation in the next year were regulatory issues (46%), followed by people challenges (45%).
Related CGMA Magazine content:
“Regulation Remains Top Risk for 2015”: Risks posed by regulation remain the top concern for company executives and directors in 2015, according to a new survey report ranking the top ten business risks.
“Five Barriers Restricting Risk-Management Progress”: Only about 15% of companies see a strong link between their enterprise risk management (ERM) processes and their business strategy, according to a 2014 survey.
—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.