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Nine Hallmarks of Top-Performing Enterprise Risk Management

09 April 2010 Aon Corporation (NYSE: AON)
Steyn McDowall, Aon Global Risk Consulting Executive

Steyn McDowall, Aon Global Risk Consulting Executive

Programs Defined by Aon Survey

Opportunity for 93 percent of organizations worldwide to increase value driven by ERM

The results of Aon's 2010 Global Enterprise Risk Management Survey, designed to illustrate the extent to which ERM has been successfully implemented by organizations around the world, have revealed nine features of an advanced ERM program.

These qualities are key to a program’s effectiveness in creating value for its organization, regardless of company size, industry, sector or region.

Survey results, garnered from the responses of more than 200 principal risk professionals from leading organizations around the world, uncovered how organizations view themselves against Aon’s five-stage ERM maturity model. This model defines a firm’s ERM program implementation level on a scale ranging from ‘initial/lacking’ and ‘basic’ at the low end to ‘defined’ for average maturity and ‘operational’ and ‘advanced’ for those at more sophisticated stages. Only seven percent of those professionals surveyed rated themselves at the advanced level, while fifty-eight percent reported ERM implementation at the defined or operational levels. Thirty-five percent of organizations categorized the maturity of their ERM programs as initial/lacking and basic. Consequently, the survey found that 93 percent of organizations now have the opportunity to increase the impact of their ERM programs.

The resulting data uncovered the nine hallmarks of top-performing enterprise risk management programs:

1.  Board-level commitment to ERM as a critical framework for successful decision making and driving value
2.  Dedicated risk executive in a senior-level position, driving and facilitating the ERM process
3.  ERM culture that encourages full engagement and accountability at all levels of the organization
4.  Engagement of stakeholders in risk management strategy development and policy setting
5.  Transparency of risk communication
6.  Integration of financial and operational risk information into decision making
7.  Use of sophisticated quantification methods to understand risk and demonstrate added value through risk management
8.  Identification of new and emerging risks using internal data as well as information from external providers
9.  A move from focusing on risk avoidance and mitigation to leveraging risk and risk management options that extract value

"The ERM journey is organic in nature and unique for each organization; it cannot be completed with a cookie-cutter approach," says Steyn McDowall, Aon Global Risk Consulting Executive. "The objective is to have ERM rooted in an organization’s culture, management processes and strategy to enhance risk-based decision making and add to their continuity and profitability.

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