Aon Private–Confidential and Limited DistributionSurvey Overview The fourth of its kind since 2007, this biennial survey ...
Aon Private–Confidential and Limited Distribution 3Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionRespondent Profile4Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionSurvey Respondents by Industry5Aon Risk SolutionsProprietary & Confidenti...
Aon Private–Confidential and Limited DistributionSurvey Respondents by Region6Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionSurvey Respondents by Revenue (in USD)7Aon Risk SolutionsProprietary & Co...
Aon Private–Confidential and Limited DistributionSurvey Respondents by Number of Employees8Aon Risk SolutionsProprietary &...
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Aon Private–Confidential and Limited DistributionTop 10 Risks12Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionTop 10 Risks13Aon Risk SolutionsProprietary & Confidential2013 2011 2009 ...
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Aon Private–Confidential and Limited Distribution 23Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionInterdependency of Risk24Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionTop 10 Risks in the Next Three Years25Aon Risk SolutionsProprietary & Con...
Aon Private–Confidential and Limited DistributionReported Readiness for the Top 10 Risks26Aon Risk SolutionsProprietary & ...
Aon Private–Confidential and Limited DistributionRisk Readiness for the Top 10 Risks27Aon Risk SolutionsProprietary & Conf...
Aon Private–Confidential and Limited DistributionLosses Associated with the Top 10 Risks28Aon Risk SolutionsProprietary & ...
Aon Private–Confidential and Limited DistributionLosses Associated with Top 10 Risks29Aon Risk SolutionsProprietary & Conf...
Aon Private–Confidential and Limited Distribution 30Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionIdentifying Major Risks31Aon Risk SolutionsProprietary & ConfidentialCate...
Aon Private–Confidential and Limited DistributionAssessing Major Risks32Aon Risk SolutionsProprietary & ConfidentialCatego...
Aon Private–Confidential and Limited DistributionIdentifying and Assessing Major Risks33Aon Risk SolutionsProprietary & Co...
Aon Private–Confidential and Limited DistributionMeasuring Total Cost of Risk34Aon Risk SolutionsProprietary & Confidentia...
Aon Private–Confidential and Limited DistributionBenefits of Investing in Risk Management35Aon Risk SolutionsProprietary &...
Aon Private–Confidential and Limited DistributionExternal Drivers for Risk Management (past two years)36Aon Risk Solutions...
Aon Private–Confidential and Limited Distribution 37Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionBoard of Directors or a Board Committee Has Established Policieson Risk O...
Aon Private–Confidential and Limited DistributionCurrent Approach to Risk Management at the Board Level by RiskManagement ...
Aon Private–Confidential and Limited DistributionApproach to Risk Management at the Board Level40Aon Risk SolutionsProprie...
Aon Private–Confidential and Limited Distribution 41Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionRole of the Chief Risk Officer42Aon Risk SolutionsProprietary & Confident...
Aon Private–Confidential and Limited DistributionDo you have a Formal Risk Management / Insurance Department?43Aon Risk So...
Aon Private–Confidential and Limited DistributionWho is Handling Risk, if no Risk Management Department exists?44Aon Risk ...
Aon Private–Confidential and Limited DistributionWhere does Risk Management Report?45Aon Risk SolutionsProprietary & Confi...
Aon Private–Confidential and Limited DistributionRisk Management Department Staffing by Revenue (in USD)46Aon Risk Solutio...
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Aon Private–Confidential and Limited DistributionPriorities in Choice of Insurer48Aon Risk SolutionsProprietary & Confiden...
Aon Private–Confidential and Limited DistributionDesired Changes in the Insurance Market49Aon Risk SolutionsProprietary & ...
Aon Private–Confidential and Limited Distribution 50Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionSatisfaction with Limit Levels51Aon Risk SolutionsProprietary & Confident...
Aon Private–Confidential and Limited DistributionChanges in Retention Levels52Aon Risk SolutionsProprietary & Confidential...
Aon Private–Confidential and Limited DistributionChanges in Coverage53Aon Risk SolutionsProprietary & ConfidentialHow have...
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Aon Private–Confidential and Limited DistributionGlobal Insurance Purchasing Habits55Aon Risk SolutionsProprietary & Confi...
Aon Private–Confidential and Limited DistributionGlobal Insurance Buying Patterns56Aon Risk SolutionsProprietary & Confide...
Aon Private–Confidential and Limited DistributionTypes of Global Insurance Coverage Purchased57Aon Risk SolutionsProprieta...
Aon Private–Confidential and Limited DistributionImportance to Global Program Purchase Decision58Aon Risk SolutionsProprie...
Aon Private–Confidential and Limited DistributionCaptives59Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionOrganizations with a Captive or PCC by Current and Future Use60Aon Risk S...
Aon Private–Confidential and Limited DistributionReasons for Captives61Aon Risk SolutionsProprietary & ConfidentialReason ...
Aon Private–Confidential and Limited DistributionCurrent and Future Coverage Underwritten within a Captive62Aon Risk Solut...
Aon Private–Confidential and Limited DistributionCurrent and Future Coverage Underwritten within a Captive (continued)63Ao...
Aon Private–Confidential and Limited Distribution 64Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionAppendix65Aon Risk SolutionsProprietary & Confidential
Aon Private–Confidential and Limited DistributionPerspectivesAon’s survey outlines the challenges for organizations that f...
Aon 2013 Global Risk Management Survey
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Aon 2013 Global Risk Management Survey

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The fourth of its kind since 2007, this biennial survey helps companies stay abreast of emerging issues and learn what their peers are doing to manage risks and capture opportunities
This survey covers the following topics:
Top risk concerns facing companies today and in the future
How companies identify and assess risk
Approach to risk management and board involvement
Risk management functions
Insurance markets
Risk financing
Global programs
Captives

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  • For three consecutive surveys, respondents rank economic slowdown / slow recovery, regulatory / legislative changes and increasing competition as the top risks facing their organizations today – identical to the 2011 survey Political risk / uncertainties have entered the top 10 list for the first time Failure to attract or retain top talent has increased in priority from #7 in 2011 to #5 in 2013 Despite the diverse respondent profile, there are amazing similarities in their risk outlook – it reinforces that events, which would have been considered local or regional a decade before, are carrying global consequences, affecting companies across geographical regions The 2013 Aon Global Risk Management Survey also uncovered several significant risks to watch, as these are perceived to be underrated risks. Aon encourages companies to increase attention on the following: Computer crimes / hacking / viruses / malicious codes (18) Counter party credit risk (20) Loss of intellectual property / data (29) Social media (40) Pension scheme funding (47)
  • Similar to the prior survey, study findings highlight the interdependency among many of the top risks as well as risks outside of the top 10 rankings
  • Economic slowdown / slow recovery is projected to be the top risk in 2016, following its third consecutive ranking as the #1 risk in 2013 Political risk / uncertainties, failure to innovate / meet customer needs and weather / natural disasters are all projected to move up the list Business interruption and damage to reputation / brand are projected to drop in priority
  • Risk readiness means a company has a comprehensive plan in place to address risks or has undertaken a formal review of those risks On average, survey respondents reported readiness for the top 10 risks dropped 7% from the 2011 survey – from 66 to 59% (see next slide) Of the top 10 risks, all but business interruption has decreased in overall readiness Of the 28 industry sectors defined in this report, only three sectors (pharmaceutical and biotechnology, non-aviation transportation manufacturing, and agribusiness) have reported the same or improved levels of readiness in the 2013 survey The highest percentage of readiness reported by respondents is related to business interruption at 69% The three risks that respondents identified as the most difficult risks to manage and are the least ready for are political risk at 39%, and economic slowdown / slow recovery and regulatory / legislative changes, both at 54%
  • On average, 42% of survey respondents reported loss of income from the top 10 risks – in 2011 28% reported loss of income (see next slide) Of the top 10 risks, all but c ommodity price risk and economic slowdown / slow recovery has increased reported loss of income compared to 2011 Economic slowdown and regulatory / legislative changes top the list of losses arising from the top 10 risks 67% of respondents say they have experienced loss of income from economic slowdown, similar to the 2011 survey Losses from damage to reputation / brand and regulatory / legislative changes have registered the greatest increase, at 32% respectively
  • At 60%, “board and / or management discussion of risk during annual planning, risk assessment or other processes” was cited as the most common method used by respondents to identify major risks facing their organizations According to risk experts, the most comprehensive method for organizations to identify their risks should be a structured enterprise-wide risk identification and assessment process – 33% of survey respondents utilize this method to identify risks Organizations with revenues greater than USD 1 billion are twice as likely to utilize a structured enterprise-wide approach in the identification of risks than companies under USD 1 billion
  • When it comes to risk assessment, the most frequently used method is senior management judgment and experience at 62% According to risk experts, the most comprehensive method for organizations to identify and assess their risks should be a structured enterprise-wide risk identification and assessment process – 26% use this process to assess their risk Organizations with revenues greater than USD 1 billion are twice as likely to utilize a structured enterprise-wide approach assessment of risks than companies under USD 1 billion
  • In 2013, no more than 33% of respondents report they have tracked and managed all components of their TCOR, down from 39% in 2011 Among the reasons cited for failure to measure all TCOR components, 55% attribute it to shrinking resources / expertise and 38% claim they lack data / information 32% of respondents do not find the process valuable and this trend should be a cause for concern — it is difficult to manage what is not measured In the long run, failure to track and manage all aspects of TCOR could be detrimental to an organization
  • Since 2009, the top three benefits for investing in risk management have remained the same, except for the differences in ranking from year to year 65% of respondents cite more informed decisions on risk taking / risk retention as the top benefit for investing in risk management, followed by improved internal controls at 55% and lower total cost of insurable risk at 52% Similar to the 2011 survey, organizations without a formal risk management department place less value on all the listed benefits
  • Economic volatility and increased focus from regulators remain the most important external drivers strengthening risk management The only two factors that have seen an increase (4%) from previous surveys are natural weather events and political uncertainty This is because we have experienced devastating natural catastrophes, including the Japan earthquake and tsunami, the Thailand floods, the Christchurch earthquake, the Australian floods and Superstorm Sandy The political turmoil and volatility throughout the Middle East and North Africa, Asia and Latin America are also contributing factors to this increase New to the list are risk events / black swan events, cited by 18% of respondents
  • Consistent with the prior two surveys, risk management remains a strong focus of boards of directors regardless of company size or type Board level commitment is critical to establishing, maintaining and funding a framework for risk oversight and risk management, and embedding this framework within the culture of the organization Eight out of 10 companies say their board or a board committee has established or partially established policies on risk oversight and management The more advanced a company progresses on Aon’s Risk Maturity Index, the higher the involvement of its board in establishing policies for oversight and management
  • Of the approaches most cited by respondents, “board considers specific business risks or receives a regular update on key risks and risk management activities” is the most common (42%), followed by “board reviews and approves annually,” (29%) The primary use of these two approaches remains consistent by industry, revenue and region with just a few exceptions (see next slide)
  • 28% of respondents to this year’s survey report having a CRO as compared with 31% and 25% in the prior two surveys Among those who have a CRO, 18% say the CRO function includes risk management, a decrease from the 2011 survey, when 19% reported such an alignment 63% of the surveyed organizations say they do not have a CRO, nor do they plan to create one, up from 60% in 2011 However, 7% of respondents do not have a CRO but are considering creating such a position, slightly up from 6% in 2011 In Aon’s view, this seems to suggest that the trend toward creating a CRO position within organizations has peaked. It is unclear to what extent recent economic conditions may be contributing to firms reporting they have or plan to have a CRO
  • 58% of respondents indicated that they have a formal risk management department The larger a company’s revenue and employee count, the more likely it has a formal risk management department Corporate structure is also a factor in whether or not an organization has a formal risk management department Public companies are far more likely to have a formalized department (76%) than a private company (47%) Private companies tend to be smaller and less risk averse because of their compact corporate structure and less stringent financial reporting requirements In contrast, public companies are subject to more rigorous standards, driven by significant financial regulatory oversight and investor scrutiny
  • In the case where no formal risk management department exists, 35% said their CFO handles risk management, while 25% indicated that the function is handled by the CEO / President
  • Among those, 51% said the risk management department reports to the CFO / Finance / Treasury, which remains consistent with results in prior surveys For most organizations, complex risk financing programs, loss cost/cash flow considerations, significant risk retentions and utilization of captive insurance facilities make insurance risk management a natural fit within the finance / treasury function Organizations facing significant risk retentions, complex contractual claims and / or litigation issues often choose to put the risk function within the legal department In organizations under USD 100 million in revenue with fewer than 500 employees, the function reports most often directly to the chief executive or the president
  • Risk management department staffing levels appear, on an aggregate level, to have remained fairly consistent since 2009 The majority of organizations (65% to 71%) maintain staffing levels at five or less employees The staffing level within the department also seems to be somewhat correlated to revenue – 29% of respondents with a risk management department have more than five employees The percentage gradually increases, for the most part, with size – for companies greater than USD 25 billion, 59% have six or more employees in the risk department
  • For the first time, claims service and settlement is cited as the top criterion in an organization’s choice of insurers, replacing financial stability, which topped the list in the past three surveys Claims service and settlement has also seen the greatest increase in priority among all surveyed factors This pivotal change in priority is not totally unexpected, because 2011 was one of the largest loss years on record The insured losses in 2012 (which included Superstorm Sandy) also exceeded the global 10-year average For companies with offices in more than 16 countries, an insurer’s ability to deliver a global program ranks number one in their choice of an insurer, versus number eight for overall respondents, even before an insurer’s pricing
  • Changes that the majority of respondents would most like to see in the insurance market include: Broader coverage / better terms and conditions – has increased from 63% in 2011 to 66% in 2013, a 3% jump More flexibility – has increased 14%, from 52% in 2011 to 66% Recognition of investments in internal risk management efforts through lower premiums – has decreased 3%, from 58% in 2011 to 55%
  • 79% of respondents are comfortable with the level of umbrella / excess limits purchased, similar to the results of the 2011 survey Companies falling into the largest revenue groups (with USD 25 billion or greater) and smallest (between USD 0 – USD 99 million) are the least satisfied with umbrella / excess limits purchased 77% of respondents are comfortable with the level of D&O limits purchased, compared with 79% in 2011 In general, companies’ purchasing decisions related to limits are linked to one or more of the following factors: Increasing D&O claims frequency Increasing D&O claims severity Decreasing pricing environment Concern about the financial health of D&O insurance carriers
  • The majority of organizations have not changed their retentions from the prior policy period, but increasing retention levels is a growing trend across all the lines of coverage surveyed Similar to results in the three prior surveys, property has experienced the most changes in retention levels – 22% of respondents indicate an increase, while 6% note a decrease Some larger examples of increases take place in the natural resources — oil, gas and mining (41%), and chemicals (38%), and hotels and hospitality (36%) industries
  • In comparison with the prior year’s programs, the majority of respondents indicate that the terms and conditions for all surveyed lines of coverage remain unchanged Like the 2011 survey, the coverage lines that have experienced the most improvement in coverage terms are property at 22% and D&O at 29% Property also experienced the greatest restriction in coverages at 20%
  • 49% of companies operating in more than one country say their corporate headquarters controls procurement of all of their global and local insurance programs 43% control some lines and leave local offices to purchase other lines The group with largest representation for “corporate headquarters control procurement of ALL insurance programs (global/local)” is multinationals with operations in two to five countries Conversely, the group with the largest representation for “corporate headquarters control some lines and leave local offices to purchase other lines” is multinationals with operations in 26 to 50 countries This demonstrates that the ability to control all placements runs in opposite correlation to the number of countries in which multinational firms operate
  • The most common methods reported by respondents who’s corporate headquarters controls procurement of insurance for operations in multiple countries are: 54% buy “programs” which may include global policies issued to parent and local policies issued to local operations 31% using a combination of method shown above The answers by respondents clearly suggest that for multinational firms, reliance on local insurance procurement at the foreign subsidiary level or complete reliance on policies with global territories procured at the corporate headquarters level is not the norm. In fact, it is safe to derive from the responses that the purchase patterns clearly point to a combination programs, purely local and global policies purchased at the corporate headquarters.
  • The most common types of global policies purchased are general liability, including public / product liability, as well as property damage / business interruption
  • The most important factors to global program purchase decisions are certainty of coverage followed by cost Interestingly, in looking at all respondents, the ability to allocate costs and ensure fiscal compliance and payment of related premium taxes and fees are the least dominant drivers, with the purchase of programs being more economical coming in second and statutory compliance third
  • Organizations in all industry groups and geographies continue to use captive insurance companies as a cost-effective and strategic risk management tool 15% of respondents report having an active captive or Protected Cell Company Larger and more sophisticated buyers are more likely to explore the captive option as part of their risk management and financing strategy We expect to see continued steady growth in captive formations, and expansion of those already established In emerging markets, such as Latin America and certain parts of Asia Pacific, we are seeing more interest in captives
  • Organizations establish captives for many different reasons While the two most cited are strategic risk management tool and cost efficiencies, there does not appear to be one overwhelming result, illustrating the uniqueness of every organization’s decision / reasoning for establishing a captive
  • Within a captive, property and general liability are the most often underwritten lines of coverage both at 41% Other popular lines include: auto liability at 33%, employers liability / workers compensation at 32%, products liability at 23% and professional indemnity / errors and omissions at 19% Respondents indicate increased interest in underwriting the following risks over the next five years: Cyber liability / network liability: 7% Employee benefits (excluding health / medical and life): 6% Directors and officers liability: 6% Credit / trade credit: 5% Employment practices liability: 5%
  • Aon 2013 Global Risk Management Survey

    1. 1. Aon Private–Confidential and Limited DistributionSurvey Overview The fourth of its kind since 2007, this biennial survey helps companies stay abreast of emergingissues and learn what their peers are doing to manage risks and capture opportunities This survey covers the following topics:– Top risk concerns facing companies today and in the future– How companies identify and assess risk– Approach to risk management and board involvement– Risk management functions– Insurance markets– Risk financing– Global programs– Captives2Aon Risk SolutionsProprietary & Confidential
    2. 2. Aon Private–Confidential and Limited Distribution 3Aon Risk SolutionsProprietary & Confidential
    3. 3. Aon Private–Confidential and Limited DistributionRespondent Profile4Aon Risk SolutionsProprietary & Confidential
    4. 4. Aon Private–Confidential and Limited DistributionSurvey Respondents by Industry5Aon Risk SolutionsProprietary & ConfidentialIndustry# ofRespondentsIndustry# ofRespondentsAgribusiness 33 Metal Milling and Manufacturing 43Aviation 19 Natural Resources (Oil, Gas and Mining) 74Banks 44 Non-Aviation Transportation Manufacturing 21Chemicals 43 Non-Aviation Transportation Services 57Conglomerate 13 Pharmaceuticals and Biotechnology 22Consumer Goods Manufacturing 52 Printing and Publishing 11Construction 119 Professional and Personal Services 85Educational and Nonprofits 49 Real Estate 40Food Processing and Distribution 58 Retail Trade 56Government 42 Rubber, Plastics, Stone and Cement 23Health Care 63 Technology 69Hotels and Hospitality 33 Telecommunications and Broadcasting 33Insurance, Investment and Finance 98 Utilities 67Lumber, Furniture, Paper and Packaging 30 Wholesale Trade 50Machinery and Equipment Manufacturers 68Restaurants included in Hotels and Hospitality; Beverages included in Food Processing and Distribution; Textiles included in Consumer Goods Manufacturing
    5. 5. Aon Private–Confidential and Limited DistributionSurvey Respondents by Region6Aon Risk SolutionsProprietary & Confidential
    6. 6. Aon Private–Confidential and Limited DistributionSurvey Respondents by Revenue (in USD)7Aon Risk SolutionsProprietary & Confidential
    7. 7. Aon Private–Confidential and Limited DistributionSurvey Respondents by Number of Employees8Aon Risk SolutionsProprietary & Confidential
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    11. 11. Aon Private–Confidential and Limited DistributionTop 10 Risks12Aon Risk SolutionsProprietary & Confidential
    12. 12. Aon Private–Confidential and Limited DistributionTop 10 Risks13Aon Risk SolutionsProprietary & Confidential2013 2011 2009 20071Economic slowdown/slow   recoveryEconomic slowdown Economic slowdown Damage to reputation2 Regulatory/legislative changes    Regulatory/legislative changes    Regulatory/legislative changes    Business interruption3 Increasing competition Increasing competition Business interruption Third-party liability4 Damage to reputation/brand    Damage to reputation/brand    Increasing competition Distribution or supply chain failure5Failure to attract or retain toptalentBusiness interruption Commodity price risk Market environment6Failure to innovate/   meet customer needsFailure to innovate/   meet customer needsDamage to reputation Regulatory/legislative changes   7 Business interruptionFailure to attract or retain toptalentCash flow/liquidity risk    Failure to attract or retain staff8 Commodity price risk Commodity price risk Distribution or supply chain failure Market risk (financial)9 Cash flow/liquidity risk   Technology failure/   system failureThird-party liability Physical damage10 Political risk/uncertainties    Cash flow/liquidity risk   Failure to attract or retain toptalentMerger/acquisition/restructuring       Failure of disaster recovery plan
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    23. 23. Aon Private–Confidential and Limited DistributionInterdependency of Risk24Aon Risk SolutionsProprietary & Confidential
    24. 24. Aon Private–Confidential and Limited DistributionTop 10 Risks in the Next Three Years25Aon Risk SolutionsProprietary & Confidential
    25. 25. Aon Private–Confidential and Limited DistributionReported Readiness for the Top 10 Risks26Aon Risk SolutionsProprietary & ConfidentialFor each of the 10 keyrisks identified foryour organization,please indicatewhether a plan is inplace or a formalreview has beenundertaken.Q:
    26. 26. Aon Private–Confidential and Limited DistributionRisk Readiness for the Top 10 Risks27Aon Risk SolutionsProprietary & Confidential
    27. 27. Aon Private–Confidential and Limited DistributionLosses Associated with the Top 10 Risks28Aon Risk SolutionsProprietary & ConfidentialRisk rank Risk description2013: Loss of incomein last 12 months2011: Loss of incomein last 12 months1 Economic slowdown/slow recovery    67% 67%2 Regulatory/legislative changes    54% 22%3 Increasing competition 50% 42%4 Damage to reputation / brand 40% 8%5 Failure to attract or retain top talent 37% 14%6Failure to innovate / meet customerneeds37% 20%7 Business interruption 36% 20%8 Commodity price risk 35% 45%9 Cash flow / liquidity risk 34% 18%10 Political risk/uncertainties    30% 21%For each of the 10 keyrisks identified foryour organization,please indicate thosethat have resulted ina loss of income inthe past 12 months.Q:
    28. 28. Aon Private–Confidential and Limited DistributionLosses Associated with Top 10 Risks29Aon Risk SolutionsProprietary & Confidential
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    30. 30. Aon Private–Confidential and Limited DistributionIdentifying Major Risks31Aon Risk SolutionsProprietary & ConfidentialCategory AllAsiaPacificEuropeLatinAmericaMiddle East& AfricaNorthAmericaBoard and / or management discussionof risk during annual planning, riskassessment or other processes60% 66% 58% 52% 69% 61%Senior management judgment andexperience58% 65% 48% 50% 55% 70%Risk information from other function-ledprocesses(e.g. internal audit, disclosure,compliance, etc.)45% 54% 31% 52% 55% 53Industry analysis, external reports 30% 32% 21% 31% 38% 38%Structured enterprise wide riskidentification process33% 43% 29% 31% 31% 34%Other 2% 1% 2% 3% 10% 2%What is the primarymethod(s) you useto IDENTIFY themajor risks facingyour organization?(You may choosemore than one)Q:
    31. 31. Aon Private–Confidential and Limited DistributionAssessing Major Risks32Aon Risk SolutionsProprietary & ConfidentialCategory AllAsiaPacificEuropeLatinAmericaMiddleEast &AfricaNorthAmericaBoard and / or managementdiscussion of risk during annualplanning, risk assessment or otherprocesses46% 51% 42% 49% 52% 46%Senior management judgment andexperience62% 64% 53% 54% 55% 73%Risk Modeling / risk quantificationanalysis34% 33% 33% 32% 45% 36%Consult with external serviceprovider/advisor29% 31% 19% 44% 34% 35%Structured enterprise-wide riskidentification assessment processsupported by a standard toolkit andmethodology26% 42% 20% 28% 28% 25%Other 2% 0% 2% 2% 3% 2%What is the primarymethod(s) you useto ASSESS thelikelihood andpotential impactof major risks?(You may choosemore than one)Q:
    32. 32. Aon Private–Confidential and Limited DistributionIdentifying and Assessing Major Risks33Aon Risk SolutionsProprietary & Confidential
    33. 33. Aon Private–Confidential and Limited DistributionMeasuring Total Cost of Risk34Aon Risk SolutionsProprietary & ConfidentialWhich of thefollowing elementsof Total Cost ofInsurable Riskdo you measure?(Select all thatapply)Q:
    34. 34. Aon Private–Confidential and Limited DistributionBenefits of Investing in Risk Management35Aon Risk SolutionsProprietary & ConfidentialCategoryAll:2013All:2011With Risk Mgmt.Dept.: 2013Without RiskMgmt. Dept.: 2011Differencein PerceivedBenefits: 2013More informed decisionson risk taking / risk retention65% 71% 74% 52% 22%Improved internal controls 55% 55% 59% 49% 10%Lower total cost of insurable risk 52% 61% 61% 41% 20%Increased shareholder value 47% 46% 49% 45% 4%Improved standards of governance 46% 41% 51% 40% 11%Improved business continuityplanning40% 40% 47% 31% 16%Increased return on investment 25% 29% 30% 17% 13%Improved business strategy 22% 23% 24% 19% 5%Reduced compliance costs 18% 18% 19% 17% 2%Other 2% 2% 2% 2% 0%What does yourorganizationperceive as theprimary benefit(s)of investing in riskmanagement?(You may choosemore than one)Q:
    35. 35. Aon Private–Confidential and Limited DistributionExternal Drivers for Risk Management (past two years)36Aon Risk SolutionsProprietary & ConfidentialIn the past twoyears, what havebeen the mostimportant externaldrivers tostrengthen riskmanagement inyour organization?(You may choosemore than one)Q:
    36. 36. Aon Private–Confidential and Limited Distribution 37Aon Risk SolutionsProprietary & Confidential
    37. 37. Aon Private–Confidential and Limited DistributionBoard of Directors or a Board Committee Has Established Policieson Risk Oversight and Management by Risk Management Department38Aon Risk SolutionsProprietary & ConfidentialHas your Boardof Directors or aBoard Committeeestablishedpolicies on riskoversight andmanagement?Q:
    38. 38. Aon Private–Confidential and Limited DistributionCurrent Approach to Risk Management at the Board Level by RiskManagement Department39Aon Risk SolutionsProprietary & ConfidentialWhich of thefollowing bestdescribes yourorganization’scurrent approachto risk managementat the Board level?(Select one)Q:
    39. 39. Aon Private–Confidential and Limited DistributionApproach to Risk Management at the Board Level40Aon Risk SolutionsProprietary & Confidential
    40. 40. Aon Private–Confidential and Limited Distribution 41Aon Risk SolutionsProprietary & Confidential
    41. 41. Aon Private–Confidential and Limited DistributionRole of the Chief Risk Officer42Aon Risk SolutionsProprietary & ConfidentialRole 2013 2011 2009 2007Yes, but this role does not includerisk management10% 12% 11% 8%Yes, this role includes risk management 18% 19% 14% 17%No, but we are considering creatingthis position7% 6% 10% 10%No, and we do not plan to create sucha position63% 60% 62% 60%Don’t know 2% 2% 3% 4%Does yourorganization havea Chief RiskOfficer (CRO)?Q:
    42. 42. Aon Private–Confidential and Limited DistributionDo you have a Formal Risk Management / Insurance Department?43Aon Risk SolutionsProprietary & ConfidentialFormal risk management department by revenue (in USD)Formal RiskManagementDepartmentAll: 2013 All: 2011 < 1B 1B–4.9B 5B–9.9B 10B–14.9B 15B–24.9B 25B +Yes 58% 70% 43% 87% 88% 93% 92% 98%No 42% 30% 57% 13% 12% 7% 8% 2%Does yourorganizationhave a formalrisk management /insurancedepartment /function?Q:
    43. 43. Aon Private–Confidential and Limited DistributionWho is Handling Risk, if no Risk Management Department exists?44Aon Risk SolutionsProprietary & ConfidentialResponsibility for risk in absence of a risk management department*Other category includes function being handled byCOO, CAO, CCO, Company Secretary, Controller,Board of Directors and Procurement.If no, who handlesrisk managementresponsibilities?Q:
    44. 44. Aon Private–Confidential and Limited DistributionWhere does Risk Management Report?45Aon Risk SolutionsProprietary & ConfidentialOrganizational reporting for risk managementDepartment 2013 2011 2009CFO / Finance / Treasury 51% 54% 62%Chief Executive, President 12% 10% 6%Chief Risk Officer (CRO) 11% 8% 6%General Counsel / Legal 9% 10% 8%Other 8% 8% 9%Internal Audit 3% 1% 1%Company Secretary 2% 1% 3%Human Resources 2% 3% 2%Chief Administrative Officer 1% 2% 2%Safety / Security 1% 0% 1%Controller 1% 1% 1%If yes, where doesrisk managementreport in yourorganization?Q:
    45. 45. Aon Private–Confidential and Limited DistributionRisk Management Department Staffing by Revenue (in USD)46Aon Risk SolutionsProprietary & ConfidentialStaffing level All: 2013 All: 2011 <1B 1B-4.9B 5B-9.9B10B-14.9B15B-24.9B25B+1-2 40% 36% 49% 33% 41% 8% 26% 17%3-5 31% 31% 30% 34% 37% 32% 26% 24%6-8 10% 12% 8% 11% 11% 16% 13% 15%9-11 6% 5% 5% 7% 0% 24% 9% 12%12-15 5% 4% 5% 8% 4% 0% 4% 5%16-20 2% 3% 2% 3% 0% 4% 4% 10%21-25 1% 2% 1% 1% 4% 0% 0% 0%26-30 1% 1% 1% 0% 0% 4% 4% 2%31-35 0% 1% 0% 0% 0% 0% 0% 0%36-40 1% 0% 0% 0% 0% 4% 4% 0%Over 40 3% 3% 1% 2% 2% 8% 9% 15%What is the totalnumber of peoplein your riskmanagement /insurancedepartment /function?Q:
    46. 46. Aon Private–Confidential and Limited Distribution 47Aon Risk SolutionsProprietary & Confidential
    47. 47. Aon Private–Confidential and Limited DistributionPriorities in Choice of Insurer48Aon Risk SolutionsProprietary & ConfidentialFactors 2013 Rank 2011 Rank 2009 Rank 2007 RankClaims service & settlement*** 1 3 3 4Financial stability/rating    2 1 1 1Value for money/price    3 2 2 2Industry experience 4 4 5 6Capacity 5 7 4 Not RankedLong-term relationship 6 6 6 Not RankedFlexibility/innovation/creativity        7 8 7 3*Ability to deliver a global program 8 9 8 8**Speed and quality of documentation 9 10 10 5Risk control and engineering 10 Not Ranked Not Ranked Not Ranked*This was the ranking for Flexibility only in the 2007 survey** This was the ranking for Global Representation***Settlement was added to Claims Services in 2013 survey and Prompt Settlement of Large Claims was removedHow importantare the followingto you in your choiceof insurers?(Rank the following10 options with1 being thehighest priority)Q:
    48. 48. Aon Private–Confidential and Limited DistributionDesired Changes in the Insurance Market49Aon Risk SolutionsProprietary & ConfidentialDesired market changes 2013 2011Broader coverage better terms and conditions 66% 63%More flexibility (i.e. underwriting, coverages, pricing) 66% 52%Recognition of investments in internal risk management effortsthrough lower premiums55% 58%Improved documentation accuracy and timeliness(policy issuances and endorsement processing)39% 42%*More sophisticated claims information technology (IT) systems 27% 28%Increased capacity 26% 18%Streamline/innovate underwriting process    25% N/AMore product innovation 22% 32%Other 5% 7%*42% in 2009 represents the Better Quality of ServiceWhat changes wouldyou like to see in theinsurance market?(Select all that apply)Q:
    49. 49. Aon Private–Confidential and Limited Distribution 50Aon Risk SolutionsProprietary & Confidential
    50. 50. Aon Private–Confidential and Limited DistributionSatisfaction with Limit Levels51Aon Risk SolutionsProprietary & ConfidentialComfort level with limits for umbrella / excess liability Comfort level with limits for directors & officers liabilityPlease indicate whether you feel the level of limits youpurchase should be higher, lower or should remain thesame.Q:
    51. 51. Aon Private–Confidential and Limited DistributionChanges in Retention Levels52Aon Risk SolutionsProprietary & ConfidentialPlease indicate how theretentions for yourcurrent programs havechanged compared tothe prior year. (Consideronly the retention for anyone loss. If multipleretentions apply, chosethe one most reflectiveof your overall program.)Q:
    52. 52. Aon Private–Confidential and Limited DistributionChanges in Coverage53Aon Risk SolutionsProprietary & ConfidentialHow have your currentpolicy coverage termsand conditions changedfrom the previous year?Q:
    53. 53. Aon Private–Confidential and Limited Distribution 54Aon Risk SolutionsProprietary & Confidential
    54. 54. Aon Private–Confidential and Limited DistributionGlobal Insurance Purchasing Habits55Aon Risk SolutionsProprietary & ConfidentialGlobal insurance purchasing habitsCategory All* 2–5 6–10 11–15 16–25 26–50 51+No, each operation buys its owninsurance with no coordinationfrom corporate headquarters8% 13% 10% 10% 1% 4% 4%Corporate headquarters controlsome lines and leave local officesto purchase other lines43% 27% 47% 44% 51% 57% 51%Corporate headquarters controlprocurement of ALL insuranceprograms (global/local)49% 60% 42% 46% 48% 39% 44%*All represents respondents operating in more than one country.Do you purchase /control insurance formost of your operationswhere you operate?Q:
    55. 55. Aon Private–Confidential and Limited DistributionGlobal Insurance Buying Patterns56Aon Risk SolutionsProprietary & ConfidentialGlobal insurance buying patternsCategory All* 2–5 6–10 11–15 16–25 26–50 51+Buy global policies issued tothe parent with no local policies9% 11% 6% 8% 9% 4% 10%Buy “programs” which mayinclude global policies issued toparent and local policies issuedto local operations54% 47% 43% 64% 67% 56% 58%Buy local policies only 6% 12% 3% 0% 3% 4% 3%Combination of two or more ofthe above31% 29% 48% 28% 21% 36% 28%*All represents respondents operating in more than one country.If corporateheadquarters controlsprocurement ofinsurance for operationsin multiple countries,which best describesyour buying pattern?Q:
    56. 56. Aon Private–Confidential and Limited DistributionTypes of Global Insurance Coverage Purchased57Aon Risk SolutionsProprietary & ConfidentialCategory All* 2–5 6–10 11–15 16–25 26–50 51+General Liability/   Public Liability86% 82% 85% 89% 89% 90% 87%Property(Property Damage andBusiness Interruption)78% 71% 75% 83% 85% 82% 81%Directors & Officers Liability 63% 48% 60% 69% 77% 78% 71%Marine/Ocean Cargo    43% 28% 45% 54% 50% 49% 53%Auto/Motor Vehicle Liability    40% 44% 39% 40% 45% 30% 35%Workers Compensation/   Employers Liability39% 42% 34% 40% 48% 39% 31%Crime 32% 23% 28% 31% 38% 33% 47%Other 9% 7% 13% 11% 15% 3% 6%*All represents respondents operating in more than one country.If corporateheadquarters purchasesprograms with globalpolicies only orpurchases programswith global and localpolicies, which line(s)of coverage do youpurchase in this style?(Select all that apply)Q:
    57. 57. Aon Private–Confidential and Limited DistributionImportance to Global Program Purchase Decision58Aon Risk SolutionsProprietary & ConfidentialCategoryAll:AverageScore*2-5:AverageScore6–10:AverageScore11–15:AverageScore16–25:AverageScore26–50:AverageScore51+:Average ScoreCertainty of Coverage —   knowledge of what coverageis included in the program2.4 2.5 2.3 2.1 2.3 2.3 2.3Cost —  this approach is more economical2.9 3.1 2.8 2.8 2.9 2.9 2.8Statutory Compliance —   access to local admittedcoverage where nonadmittedis prohibited3.2 3.5 3.1 2.9 3.1 2.5 3.3Program Performance —   access to local claims and/   or other services from localinsurer/policy provider   4.1 4.1 4.1 4.6 4.2 3.9 3.9Fiscal Compliance —  ability to pay insurance premiumand related taxes4.3 4.6 4.3 3.9 4.4 3.8 3.9Accounting —  ability to allocate risk transfer coststo local operations vs. payfrom corporate5.5 5.4 5.4 5.8 5.7 5.4 5.9*All represents respondents operating in more than one country.**Based on 1-10 scale. (1 representing the highest priority)If corporateheadquarterspurchases“programs” withglobal policies issuedto parent and localpolicies issued tolocal operations,please rate thefollowing from 1 - 10in terms ofimportance topurchasing decision.(With 1 representingthe highest priority)Q:
    58. 58. Aon Private–Confidential and Limited DistributionCaptives59Aon Risk SolutionsProprietary & Confidential
    59. 59. Aon Private–Confidential and Limited DistributionOrganizations with a Captive or PCC by Current and Future Use60Aon Risk SolutionsProprietary & ConfidentialCategory 2013 2011 2009Plan to create a new or additionalcaptive or PCC in the next 3 years*9% 12% 12%Currently have an active captive or PCC 15% 26% 37%Have a captive that is dormant/run-off 5% 6% N/ADo you plan to close a captive in thenext 3 years4% 8% N/A*In 2009 we used next year not next 3 years.Does your organizationhave or are youconsidering creatinga captive insurancecompany or protectedcell company (PCC)?(Select all that apply)Q:
    60. 60. Aon Private–Confidential and Limited DistributionReasons for Captives61Aon Risk SolutionsProprietary & ConfidentialReason PercentageStrategic risk management tool 18%Cost efficiencies 18%Reduction of insurance premiums 12%Risk finance expense optimization 12%Control on insurance programs 11%Access to reinsurance market 7%Cash flow optimization 7%Other 6%Tax optimization 4%Ability to establish reserves 4%What is the primaryreason for the captive?(Select one)Q:
    61. 61. Aon Private–Confidential and Limited DistributionCurrent and Future Coverage Underwritten within a Captive62Aon Risk SolutionsProprietary & ConfidentialCategory2013:Currentlyunderwritten2013: Continue/plan tounderwrite same/newrisk in next five years2013PercentagechangeGeneral/Third-Party Liability    41% 37% -4%Property (Property Damage and Business Interruption) 41% 42% 1%Auto Liability 33% 31% -2%Employers Liability/Workers Compensation 32% 32% 0%Product Liability and Completed Operations 23% 21% -2%Professional Indemnity/Errors and Omissions Liability    19% 21% 2%Directors & Officers Liability 18% 24% 6%Health/Medical    17% 20% 3%Catastrophe 16% 17% 1%Life 16% 17% 1%Marine 15% 15% 0%Crime/Fidelity    14% 17% 3%Employee Benefits (Excluding Health/Medical and Life)    13% 19% 6%What risks is yourcaptive currentlyunderwriting?(Check all that apply)Looking forward overthe next five years,please identify whatrisks you plan tocontinue to underwritein your captive alongwith any new risks youplan to underwrite.(Check all that apply)Q:
    62. 62. Aon Private–Confidential and Limited DistributionCurrent and Future Coverage Underwritten within a Captive (continued)63Aon Risk SolutionsProprietary & ConfidentialCategory2013: Currentlyunderwritten2013: Continue/plan tounderwrite same/newrisk in next five years2013:PercentagechangeTerrorism 12% 15% 3%Third-Party Business 11% 8% -3%Employment Practices Liability 10% 15% 5%Environmental/Pollution    10% 13% 3%Warranty 10% 12% 2%Credit/Trade Credit    9% 14% 5%Aviation 6% 6% 0%Owner Controlled Insurance Program/   Contractor Controlled Insurance Program6% 8% 2%Financial Products 5% 7% 2%Cyber Liability/Network Liability    4% 11% 7%Other 4% 3% -1%Sub-contractor default insurance 3% 6% 3%What risks is yourcaptive currentlyunderwriting?(Check all that apply)Looking forward overthe next five years,please identify whatrisks you plan tocontinue to underwritein your captive alongwith any new risks youplan to underwrite.(Check all that apply)Q:
    63. 63. Aon Private–Confidential and Limited Distribution 64Aon Risk SolutionsProprietary & Confidential
    64. 64. Aon Private–Confidential and Limited DistributionAppendix65Aon Risk SolutionsProprietary & Confidential
    65. 65. Aon Private–Confidential and Limited DistributionPerspectivesAon’s survey outlines the challenges for organizations that fail to innovate inorder to meet customers needs. From the Red Cross’ perspective, we have hadto adapt our disaster preparation strategy to address a range of issues outsideof natural disasters such as pandemic flu or a Gulf oil spill. We also haveembraced new technologies to better communicate with clients, donors andpartners.Gail McGovern, President and CEO, American Red Cross66Aon Risk SolutionsProprietary & ConfidentialAs part of the board responsibility to endorseand monitor strategy, directors should gain intimateunderstanding of the major strategic risks, possiblescenarios, and how the strategy allows the explorationof uncertainties and mitigation of strategic risks.Given the results of Aon’s 2013 Global Risk ManagementSurvey, developing capabilities for strategic riskmanagement by top management teams and boards shouldbe an important priority in these uncertain times.Javier Gimeno, Aon Dick Verbeek Chaired Professorin International Risk and Strategic Management,a Professor of Strategy at INSEADThe survey results highlight the significant opportunitiesthat are available to improve risk management and increaseorganizational performance through the adoption of morestrategic risk management practices that are driven by the boardof directors and that incorporate more sophisticated riskmeasurement and management tools and techniques.Christopher Ittner, Ernst & Young Professor of Accounting,The Wharton School, University of Pennsylvania

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