A major gap respondents from our 2019 excellence in risk management survey cited in organizations’ risk management function is the integration with both operations and strategic planning. This should concern those who believe risk departments should be strategic partners to the overall business — strategic thinking about risks cannot take place in a vacuum.
In turn, data and analytics are increasingly a critical component of adding strategic value. While integration with strategic planning and operations are recognized as common concerns for both executives and risk management professionals, C-suite respondents from our 2019 excellence in risk management survey also called out the lack of data analysis.
They saw it as a bigger issue than a lack of collaboration across the organization, educating others on risk management practices, and five other performance gaps that risk professionals ranked higher.
This divergence between C-suite executives and risk professionals’ view of risk data analysis is noteworthy.
Is the C-suite’s view unfounded, or are those in the risk management function failing to see an existing problem? Whatever the reason, it points to a gap in priorities and shows the need for risk management professionals to deliver higher quality data and analysis, while also highlighting the need for better communication.
As emphasized by some focus group members, the sheer volume of available data can be overwhelming, whether for assessing alternative risk transfer solutions or any other facet of risk management. “Data is truly an area of focus, but we’re trying to keep it simple because you can drown in it,” said a risk executive at a multinational real estate trust.
Risk management professionals today are challenged with evolving their role in data management from what some saw as an “administrative” one — moving data/ information from one place to another — to a more “strategic/analytical” role that embraces data for risk management decision-making. But to be an advisor, one needs to understand how to leverage the data more effectively.
When asked how companies use their risk management data, respondents leaned toward uses that appeared more tactical than strategic. True integration with their organization’s strategic planning will be more likely to occur for those who deliver databased advice to top management; for example, showing how artificial intelligence (AI) and machine learning can provide new opportunities to manage risk.
The most common use of data cited by respondents was to present it to outside providers, followed by other tactical uses such as for insurance renewals, ad hoc uses, and providing it to field operations. The first “strategic” use of data — for long-term adjustments to risk management strategy — was fifth on the list.
Less than 30% said they specifically use risk data for strategic planning, which highlights another opportunity for risk executives.
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For further information, please contact Brian Elowe, Chief Client Officer at Marsh on 617 416 9835.