Posted on 18 Apr 2013 by Neilson
The magnitude of risk is on the rise and ever more interconnected, Aon Chief Executive Officer Greg Case told BestWeek at the Philly I-Day Conference in Philadelphia. Case also said tying enterprise risk management to action creates an effective tool. Also, Aon regional managing director Bruce Vassallo spoke about recruiting talent into the industry.
Q: Greg, you were talking about how the levels of risk are changing here. Can you talk to us a little bit about that?
CASE: Think about [not only] all the traditional risks that are out there property/casualty but all the new types of risks around cyber and terrorism, sustainability, pandemic. All these risks come together to mean the magnitude of risk in the world today is, in fact, going up. Not only that, we see on behalf of our clients its more connected than ever before. So the Thai floods were a tragedy in and of themselves but also a global supply chain issue. So the world of risk is more interconnected than ever before and also, beyond that, people care about it more than ever before. Whos people? Boards of directors, CEOs, CFOs. So when we look at it, the world of risk, theres more magnitude, more complexity, more scrutiny than ever before and it's really the risk managers who are here at Philly I Day [who] have got more to think about than theyve ever had before.
Q: Greg, you were just on a panel and you were talking about best practices for enterprise risk management. Tell us a little bit about what you think those should be?
CASE: On the panel the question came up around the evolution of enterprise risk management and how it has fit in and I think the panel universally said its obviously critically important. Its something that more companies than ever before are actually using to actually help measure risk, understand risk, mitigate risk . . . and the observations that we made and I certainly agree with are around the absolute importance of understanding what are you trying to accomplish with ERM. Specifically, is it an operating tool? Is it a management leadership tool, it is a board tool? What specifically are you trying to accomplish? And our observation we have the privilege of serving more companies maybe than anyone in the world on this topic is that when clients really understand what theyre trying to accomplish, they really tie it to action, whether its improving their operating performance of strengthening their balance sheet or reducing volatility. Theyve tied analytics, enterprise risk management, to action operating balance sheet strength or reducing volatility and thats when it purely becomes an effective tool. And then it can be calibrated for boards of directors and CEOs and CFOs, etc. So for us thats been a truly important element as we watch clients apply this around the world.
Q: One of the other big topics on the panel today was interest rate and the interest rate environment. How are the low interest rates driving rate pressure?
CASE: Well, you can imagine, if youre an insurer, and obviously we access insurers to serve clients, to we look at as many insurers as anyone in the world, those insurers are trying to manage a return. Its not our focus. Our focus is our clients and were absolutely focused on getting for them the best terms, the best conditions, the best price. But those insureds, those carriers have a situation where theyve historically had an investment return which contributed to their bottom line and thats essentially gone away. So, in essence, the underwriting return is what is driving their profitability and that has quite naturally put upward pressure on price, which the industry really has to work through on behalf of clients.
WEBER: I want to bring Bruce into the conversation here and one of the things discussed was the lack of young talent in the insurance industry. What needs to be done, Bruce, to bring talent in?
VASSALLO: Well, at Aon we have three different types of programs for young talent. It begins with your early career development program. And then once we get into the firm, we have the catalyst program and the pinnacle program, which help develop a broader range of the way our colleagues look at risk and look at our clients and how to solve problems that they may have.
Q: And young talent really wants something different than when you guys got into the industry, dont they?
VASSALLO: Absolutely. They look at quality of life. They look at impact. They look at opportunity. I know in Philadelphia we have probably seven or eight different early career development individuals and Im talking to them daily. They want training. They just want to feel like theyre providing value to the organization and also developing their own career skills.