Abundance of Data and Growth of Alternative Risk Finance Methods Provide Opportunities for Risk Managers: Marsh/RIMS Report
New York, NY | April 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 published today 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.
The Excellence report, Strategic Risk Finance in the Era of Big Data, 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.
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 business of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With annual revenue approaching US$17 billion and 76,000 colleagues worldwide, MMC helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses: Marsh, Guy Carpenter, Mercer, and Oliver Wyman. Follow Marsh on Twitter @MarshGlobal; LinkedIn; Facebook; and YouTube, or subscribe to BRINK.
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.