Abundance of Data and Growth of Alternative Risk Finance Methods Provide Opportunities for Risk Managers: Marsh/RIMS Report

2019 Excellence in Risk Management Report from Marsh and RIMS

New York, NY (Apr. 29, 2019) – Risk managers are operating in an environment rich in data that, when combined with growing alternative risk solutions, can result in more robust risk finance strategies and more resilient organizations, according to a new report by Marsh, the world’s leading insurance broker and risk advisor, and RIMS, the risk management society®.

However, a general lack of understanding of available alternative risk solutions and effective use of data and analytics are hindering many risk professionals from harnessing the opportunities, the 16th annual Excellence in Risk Management report found.

According to the report, most risk professionals (47%) rank improving the use of data and analytics as their top priority for improving risk management capabilities. Such improvement has ranked as the top priority since the Excellence survey began asking the question in 2013, prompting one to wonder: “Why isn’t the needle moving?”

At the same time, despite growing interest in a number of alternative risk solutions such as structured risk programs and parametrics, many respondents remain unfamiliar with the concept and what they offer. For example, 33% of risk professional respondents and 53% of the C-suite respondents said they need to learn more about alternative solutions before making a decision whether to use one. Data-driven modeling is thus critical as companies need to compare traditional insurance against alternative solutions to clearly understand the value each provides, the report notes.

“By effectively marshalling data and risk modeling tools, organizations can better understand changes in their risk profiles and risk bearing capacity allowing them to access the opportunities presented by the growing levels of capital available for risk finance,” said Brian Elowe, North American Chief Client Officer, Marsh.

Carol Fox, Vice President of Strategic Initiatives, RIMS, added: “Expectations for risk management professionals to deliver strategic solutions has never been greater. Now is the opportune time to integrate new technologies for accessing ‘real time’ data to inform business and risk-taking decisions, as well as lead in the development of innovative finance solutions to transfer risk.”

Other highlights from the report include:

  • Financing hard-to-insure exposures was the top benefit of alternative risk solutions cited by survey respondents (38%).
  • Cost and explaining the benefits to others in the organization were cited as the two main obstacles to using alternative solutions by 31% and 30% of respondents, respectively.
  • Risk professionals and C-suite respondents differ on how they think their organization would best benefit from improved use of data and analytics. Risk professionals cited informing decisions on specific risks, while C-suite respondents cited informing the overall business strategy.

Excellence in Risk Management XVI: Strategic Risk Finance in the Era of Big Data

The 2019 Excellence in Risk Management Report from Marsh and RIMS looks at how capital and data are changing how risk managers understand and finance risk.

Risk management executives today operate in a time of abundance in two key areas: capital and data. By effectively marshalling data and risk modeling tools, organizations can better understand changes in their risk profiles and their risk bearing capacity, allowing them to access the opportunities presented by the growing levels of capital available to finance risk. The reward for those that get it right is to build a robust risk finance strategy and more resilient organization.

But making effective use of risk data remains a stumbling block for many companies. In fact, the 2019 Excellence in Risk Management survey found that organizations’ top priority for improving risk management capabilities is to improve their use of risk data and analytics. Again.

This has been the top priority each time we’ve asked the question since we first started doing so in 2013.

At the same time, many respondents were unfamiliar with alternative risk transfer (ART) solutions and what they offer. As the 16th annual Excellence report points out, there is a compelling relationship between understanding what alternative risk finance solutions can do and effective data and analytics. By leveraging data and grasping new risk finance opportunities, risk executives have an opening to become ART educators, adding value to the strategic decisions that affect their company’s balance sheet.

Access the full report.

About the Report

The Excellence report is based on more than 600 responses to an online survey and a series of focus groups with leading risk executives in January and February 2019.

Findings from the report were released today at the RIMS 2019 Annual Conference & Exhibition.

About Marsh

Marsh is the world’s leading insurance broker and risk adviser. With over 35,000 colleagues operating in more than 130 countries, Marsh serves commercial and individual clients with data driven risk solutions and advisory services. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With annual revenue over US$15 billion and 75,000 colleagues worldwide, MMC helps clients navigate an increasingly dynamic and complex environment through four market-leading firms: Marsh, Guy Carpenter, Mercer, and Oliver Wyman.

About RIMS

As the preeminent organization dedicated to educating, engaging and advocating for the global risk community, RIMS, the risk management society®, is a not-for-profit organization representing more than 3,500 corporate, industrial, service, nonprofit, charitable and government entities throughout the world. RIMS has a membership of approximately 10,000 risk practitioners who are located in more than 60 countries. For more information about the Society’s world-leading risk management content, networking, professional development and certification opportunities, visit www.RIMS.org.

Source: Marsh

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