Mature risk management, resilience of an organization’s stock price linked: Aon

There is a direct correlation between more mature risk management practices and stronger financial results and organizational resiliency, suggests the Aon Risk Maturity Index Insight Report, released late last week.

Penned by Aon Global Risk Consulting in collaboration with the Wharton School at the University of Pennsylvania, the report identified a relationship between risk maturity levels and the relative resilience of an organization’s stock price in response to significant risk events.

Characteristics that determine risk maturity include board- and senior-level understanding and commitment to risk management, transparency of risk communication and a risk culture that encourages full engagement and accountability at all levels of the organization, notes a statement from Aon Global Risk Consulting, the risk consulting business of Aon plc.

The new report builds off of initial findings, published in February, on stock price return and stock price volatility by detailing new correlations found between return on equity and risk maturity.

“Our analysis indicates that certain practices and structures can be put into place to help organizations maximize financial results and achieve organizational resiliency in the midst of stock market turbulence,” Theresa Bourdon, group managing director at Aon Global Risk Consulting, says in the statement.

“We continue to see organizations that take a holistic approach to risk and integrate proactive risk management strategies with their broader strategic direction are better positioned for long-term financial and reputation success,” adds Kieran Stack, managing director at Aon Global Risk Consulting and project leader of Aon Risk Maturity Index. “This integration is especially important considering the magnitude of risk businesses are dealing with in the current environment,” Stack suggests.

The index – a web-based survey containing approximately 125 multiple-choice questions focused on observable practices and structures related to corporate governance, management decision-making and risk management – measures 40 components of “risk maturity” that are grouped into 10 overarching characteristics or statements of best practices.