Risk management is linked to better corporate performance, FERMA survey finds

Maturity of risk management processes is correlated with sustainable improvements in corporate performance, the 2012 Risk Management Benchmarking Survey of the Federation of European Risk Management Associations (FERMA) has revealed.

The results of the survey, conducted in cooperation with AXA Corporate Solutions and Ernst & Young, were announced today (Mon) at the FERMA Seminar being held on 22 and 23 October in Versailles, outside Paris. This is the sixth edition of the survey, which has taken place every other year since 2002.

The 2012 survey showed that companies with the most advanced risk management showed the strongest level of growth for the past five years, as measured in terms of earnings before interest, taxes, depreciation and amortisation (EBITDA).

From a record number of 809 responses from risk and insurance managers in European 20 countries, the survey found that:

  • 28% of companies with advanced risk management practices reported an EBITDA growth rate of more than 10%, compared to 22% whose risk management was classed as mature, 15% for moderate and 16% for emerging.
  • Among companies with an EBITDA growth rate of more than 20%, three-quarters (74%) have mature or advanced risk management practices.

The President of FERMA, Jorge Luzzi, said: “We have long believed that good risk management contributes to sustainable corporate growth. Now we have clear evidence that there is a correlation. This is a particularly important finding in light of the pressures on corporate results during the last five years.”

Other key messages from the survey include:

In the current financial and economic climate, top management wants more information on the risks and risk management of the business, according to 46% of respondents. In 53% of the companies with mature or advanced risk management (2010 – 45%), the function now reports to the board, a board committee or a top executive.

However, the survey found that there is considerable work to be done before companies across Europe fully understand the implications of the European 8th Company Law Directive and integrate them into their business.

When it comes to the insurance market in the current financial climate, European businesses say they want sustainable relationships with stable partners. They are not looking generally to increase risk transfer (17%), but they want long term arrangements (40%) and more robust insurance partners (32%). More than half (57%) reported strengthening their loss prevention activities.

The respondents’ message to insurers is improve efficiency but don’t forget innovation. They want more efficiency in the claims settlement process (43%), more tailored policy wording (36%) and innovative coverage (30%). Neither more capacity (14%) nor greater geographical coverage (12%) is a high priority for respondents, which is a measure of the insurance market resilience following the catastrophe losses of 2011.

Jorge Luzzi said: “We believe the FERMA survey is most extensive measure of the current state of risk management in Europe and of commercial insurance buyers’ views of the insurance market. The findings are valuable, and provide actionable information for us and our companies.”

He paid tribute to the survey’s sponsors. “We thank AXA Corporate Solutions and Ernst & Young very much for their continued support for this survey. It is an important piece of research and the detailed findings are evidence of the resources which they have contributed.”

Notes to journalists

The 2012 FERMA Benchmarking Survey took place between 20 April and 17 June 2012. It took the form of an online questionnaire which was open to members of the FERMA member associations and other approved risk and insurance managers. An independent, third party organisation managed the questionnaires and analysed the results.

There was a total of 809 replies, although not all respondents answered every question. The companies represented cover a wide range of industry sectors. Most are large or very large; 55% have an annual turnover above €2bn; 59% have more than 5,000 employees; 45% have operations in more than 20 countries and 54% are listed on at least one stock exchange.

The FERMA Seminar is an event exclusively for risk and insurance managers and sponsors. It takes place every other year, alternating with the larger FERMA Risk Management Forum which is an open to everyone. The next FERMA Forum will take place in Maastricht in the Netherlands from 29 September until 2 October 2012.

For more information, contact

Lee Coppack
FERMA media coordinator
lee@coppack.co.uk or +44 (0)20 8318 0330 or
+44 (0)7843 089904
Or

Florence Bindelle
FERMA executive manager
+32 (2) 761 94 31




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