Mitigating risks that “keep the CEO awake at night” top concern for risk managers

Risk professionals are increasingly focused on strategic issues, according to the key findings of FERMA’s benchmarking study, while a breakdown of the results reveals the strong relationships that Airmic members have in the insurance market. Cristina Martinez of FERMA explains.

The first European Risk and Insurance Report published by FERMA, the Federation of European Risk Management Associations, reveals that most European risk managers are concerned about the level of mitigation of the “risks that keep the CEO awake at night.” 

The report, which is based on the results of the FERMA Risk Management Benchmarking Survey 2014 of risk managers across Europe, goes beyond a traditional top ten risk ranking. It also reveals what risks they believe really concern top management – and how satisfied they are with the level of mitigation.  

These CEO-insomnia risks are mainly external forces, such as political changes, regulation, compliance and competition. In terms of mitigation, for 60% of these risks the risk managers’ level of satisfaction is “low”.  They are more confident only in the mitigation of more internal, operational risks like quality issues and liability of products and services.

The report shows that with increasing maturity in the management of operational risks, the risk manager is becoming more concerned with strategic issues and how to serve as a business partner for the company and a "trusted advisor" to the board.

FERMA’s aim in publishing the European Risk and Insurance Report 2014 executive summary is to support risk managers in this developing role by communicating with the board and senior management.  

UK comparatives

The analysis illustrates the comparatively large size and risk management maturity of the UK market and the strong relationships that Airmic members have in the insurance market.  For example:

• Airmic members seem to make more strategic use of analytics than their European counterparts (58% use risk registers compared to 46% European average, and 41% analyse risk appetite and tolerance vs 27%).
• Airmic members have higher expectations in terms of reporting for internal platforms (51% vs 44% European average).
• UK risk managers depend more on external advice in connecting their risk management and insurance purchasing strategy than other countries (69% vs 57% European average).
• They buy more insurance: 50% of UK companies buy more than €100m in D&O cover vs 29% on average, and 64% buy more than €100m product liability cover vs 43% across Europe. They are more likely to buy standalone cyber risk insurance (35% vs 28%) although less likely to insure environmental impairment (54% with no cover vs 37%).

One result shows the work done by Airmic over the years on contract certainty has paid dividends. Only 6% of master policies in the UK take more than three months after inception for issuance compared to a pan-European benchmark of 14%.

European regulatory priorities

Another innovation in the report is the ranking among selected European regulatory topics that are of the most concern for the respondents. This ranking is meant to direct more efficiently the lobbying action of FERMA on an EU level.  Respondents identified their three top priorities as:

• The Data Protection Regulation;
• Corporate transparency and the mandatory reporting of non-financial information;
• Solvency II and the treatment of captives.

The data protection issue was put first mainly because of the large number of British and French respondents who see it as a priority for FERMA action in Brussels. UK respondents also seem more worried than other countries about the possible mandatory financial security imposed by the EU to cover environmental damages.

These results are just a selection from the FERMA European Risk and Insurance Report. Full details, including a country-by-country breakdown of responses, are available at http://www.ferma.eu/about/publications/benchmarking-surveys/benchmarking-survey-2014/

Cristina Martinez is a FERMA board member and head of the FERMA Benchmarking Survey Committee. She is director, corporate risk management for Campofrío Food Group Holding, Spain

Cristina Martinez