Risky Business

rich-smith-risky-business

There have been a number of articles in the last year that have chronicled and validated the growing influence of risk management in the higher echelons of corporations and non-profits across the globe, a trend that will only continue to grow.

A report at the end of last year in Business Insurance showed that the role of the risk manager exerts greater influence across their organizations. According to the Ace study, 71% of risk managers in Europe believe their influence is greater now than it was three years ago, while 21% of that total believe their influence has risen “significantly.” This makes sense when you look at the results as reported in another Business Insurance report. Citing the annual Aon Risk Maturity Index, BI described a strong statistical correlation between progressive risk management practices and reductions in stock price volatility. The report says that the correlation “further validates the findings that advanced risk management practices are one of the factors that smooth our volatility in an organization’s stock price.” It continued on to say that “organizations with more advanced risk practices are more likely to have various and dedicated risk functions collaborate in executive risk-based processes through a defined, jointly executed risk assessment process.” The report also notes that organizations that demonstrated the best understanding of risk formally shared risk assessment results across the organization.

This implies a great trend for the captive industry: As organizations get more risk savvy and bring risk management closer to the top leadership in an organization, the option to start a captive seems like a clear choice. We already know that the understanding of an organizations risk profile is a key ingredient to a successful captive program. Once an organization “owns” its risks, it will be better able to mitigate them and that has a direct impact on the bottom line – whether you are a Fortune 500 company or regional non-profit hospital. As usual, the captive insurance industry is waiting and ready to serve!

Thank you all very much, and I look forward to hearing from you.

Rich Smith
VCIA President

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