This report, published by Aon Analytics, conducted a survey of 435 organizations from 45 countries in 2009 concerning global risk technology and the benefits organizations have derived from its use. The respondents consisted mainly of risk managers or insurance managers spanning a wide range of industries. Fifty-four percent of the respondents were public companies, thirty-seven percent were private and the remainder constituted of government-owned or not-for-profit organizations.
From the survey results Aon outlined the top ten benefits respondents found from utilizing risk technology or risk management information systems. The most important benefits realized were:
- Accuracy and Reliability of Data
- Data Consolidation and Management
- Management Reporting Improvements
- Automation of Processes
- Risk Management Process Improvements
- Communication Improvements
- Claims/Losses Reduced
- Increased Awareness
- Total Cost of Risk Reduction/Management
- Control & Transparency
The Cost of Risk
One of the biggest obstacles risk technology advocates face is proving that this investment will create a solid ROI to upper management, especially today since most capital expenditures are being put on hold in response to the state of the global economy. Important questions to consider include whether or not there will be reduced administrative costs or if the information provided could lead to reduced fees and fewer occurrences of incidents and claims. Nearly 57% of those surveyed responded that the primary driver of using risk technology has been the better management of the total cost of risk (TOCR). TOCR includes four main components:
- Risk transfer costs (insurance)
- Risk retention costs (retained losses)
- External risk management costs (consultants)
- Internal risk management costs (staff)
The survey found that 62.3% of organizations experienced a 1% or more decrease in risk transfer costs and a 57.6% decrease in risk retention costs. While the management of TOCR may be a primary driver for many organizations, Aon’s research found that no formal model exists to determine TOCR resulting in inconsistent measurement and management of total risk. Over half of the survey respondents reported using external solutions to seek out data that helps reveal and manage TOCR.
Technology, Data and Risks
As the scope and complexity of available data have both increased, so too has the need for a fresh perspective on how to analyze data in order to derive more useful information. With no current standards on coding or accounting practices for data management, there is a push in the professional world for more involvement in the field of risk and data analysis. The results from the survey provide a strong indication that risk management information systems will assist both Enterprise Risk Management and Business Continuity Management in the future. Seventy-nine percent of respondents believe that this risk technology will help motivate organizational and business strategy changes as well as positively impact the organization’s budget and compliance requirements.
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