Risk Management

Looking at Risk Three Dimensionally

Risk managers who collaborate throughout their organizations improve awareness, agreement and alignment of tactical plans.
By: | December 1, 2015 • 4 min read
Topics: ERM | Risk Managers

There is a direct relationship between strong risk management practices and superior operating performance, according to several reports.

The “2015 Aon Risk Maturity Index Insight Report” released in November analyzes the inverse relationship between a higher “risk maturity rating” and lower stock price volatility, as well as a direct relationship between a higher risk maturity rating and superior operational financial performance.


Additionally, the report’s findings reinforced the relationship between a higher risk maturity rating and the relative resilience of an organization’s stock price in volatile equity, currency and commodity market scenarios.

Organizations with a high risk maturity rating differ from those with lower ratings in several ways, said Kieran Stack, managing director at Aon Global Risk Consulting in Chicago.

“If organizations try to increase the performance across those dimensions, that helps them also improve building awareness, agreement and alignment of tactical plans to execute.” — Kieran Stack, managing director at Aon Global Risk Consulting

Typically, he said, they communicate their risks across the organization, they collaborate across functions and they form consensus in both determining the key strengths and weaknesses of mitigating the risks and formulating tactical plans to continue to improve their risk management programs.

Indeed, 60 percent of organizations with above average risk maturity ratings consistently and formally share the results of risk assessment activities across the organization, while only 19 percent of organizations with below average risk maturity ratings do so, according to the report.

Organizations with below average risk maturity ratings are more likely to communicate these risk assessment results only on an ad-hoc basis (68 percent of below average respondents versus 40 percent of respondents scoring above average).

Collaboration Counts

As for collaboration, 51 percent of organizations that score above average collaborate across risk functions while only 11 percent of firms scoring below average do. The report found that 72 percent of organizations that score below average only collaborate on an ad-hoc basis during data gathering or analysis activities.

“In the business world there is still a disconnect that risk management is an essential part of the strategic planning process allowing companies more certainty with achieving desired outcomes.” — Albert L. Sica, managing principal, The ALS Group

“If organizations try to increase the performance across those dimensions, that helps them also improve building awareness, agreement and alignment of tactical plans to execute,” Stack said.

High risk maturity organizations also tend to integrate quantitative modeling techniques in their risk management activities, he said.

“These organizations are not just looking at qualitative assessments of their key vulnerabilities, but also assessing these risks from a quantitative perspective,” Stack said. “For instance, they are using probabilistic modeling techniques such as stochastic simulations to better assess and quantify their exposures to these risks.”


Another report, using data from the RIMS Risk Maturity Model, has similar conclusions: Organizations exhibiting mature risk management practices realize an increased valuation premium of 25 percent, according to “The Valuation Implications of Enterprise Risk Management Maturity.”

The findings by Mark Farrell of Queen’s University Management School and Dr. Ronan Gallagher of University of Edinburgh Business School are based on RIMS research data.

According to the report, organizations with highly mature ERM practices had formal processes for performance management, ERM process management, adoption of ERM-based approach, root cause discipline, uncovering risks, risk appetite management, and business resilience and sustainability.

Carol Fox, director of strategic and enterprise risk practice, RIMS

Carol Fox, director of strategic and enterprise risk practice, RIMS

Carol Fox, RIMS’ director of strategic and enterprise risk practice, said that the study suggests that firms that have successfully integrated these processes into their strategic planning activities and everyday practices have superior ability to understand the risk dependencies across the enterprise.

“The question we often get asked is, is risk maturity worth the investment?” Fox said. “I think the RIMS report and the Aon report tell a very compelling story for organizations that it is worth it to invest in risk management capabilities – not only for for-profit companies, but also for nonprofit organizations.”

Albert L. Sica, managing principal of The ALS Group, an independent insurance and risk management consulting firm in Edison, N.J., said that the concept of risk maturity is very important.

“Risk management in many cases has been synonymous with buying insurance, rather than a more thoughtful overall understanding of risks so companies can avoid surprises,” Sica said.

“In the business world there is still a disconnect that risk management is an essential part of the strategic planning process allowing companies more certainty with achieving desired outcomes.”

One example of this disconnect is not fully understanding the retained risk companies have through simple exclusions in their insurance policies, he said.

Albert L. Sica, managing principal, The ALS Group

Albert L. Sica, managing principal, The ALS Group

Companies should also determine where the pinch points are in their supply chains and how an occurrence could develop into significant financial issues for their product or project – such as a supplier going out of business or a critical part coming from overseas being delayed.

“The whole idea is to think about risk management a little bit more three dimensionally,” Sica said.

“Risk management should be working closely with senior leadership to help the company achieve a better understanding of unexpected events and related financial impact allowing them to eliminate surprises.”

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Pinnacle Entertainment’s VP of enterprise risk management says he’s inspired by Disney’s approach to risk management.
By: | November 1, 2017 • 4 min read

R&I: What was your first job?

Bus boy at a fine dining restaurant.

R&I: How did you come to work in this industry?

I sent a résumé to Harrah’s Entertainment on a whim. It took over 30 hours of interviewing to get that job, but it was well worth it.

R&I: If the world has a modern hero, who is it and why?


The Chinese citizen (never positively identified) who stood in front of a column of tanks in Tiananmen Square on June 5, 1989. That kind of courage is undeniable, and that image is unforgettable. I hope we can all be that passionate about something at least once in our lives.

R&I: What emerging commercial risk most concerns you?

Cyber risk, but more narrowly, cyber-extortion. I think state sponsored bad actors are getting more and more sophisticated, and the risk is that they find a way to control entire systems.

R&I: What is the riskiest activity you ever engaged in?

Training and breaking horses. When I was in high school, I worked on a lot of farms. I did everything from building fences to putting up hay. It was during this time that I found I had a knack for horses. They would tolerate me getting real close, so it was natural I started working more and more with them.

Eventually, I was putting a saddle on a few and before I knew it I was in that saddle riding a horse that had never been ridden before.

I admit I had some nervous moments, but I was never thrown off. It taught me that developing genuine trust early is very important and is needed by all involved. Nothing of any real value happens without it.

R&I: What about this work do you find the most fulfilling or rewarding?


Setting very aggressive goals and then meeting and exceeding those goals with a team. Sharing team victories is the ultimate reward.

R&I: What is the most unusual/interesting place you have ever visited?

Disney World. The sheer size of the place is awe inspiring. And everything works like a finely tuned clock.

There is a reason that hospitality companies send their people there to be trained on guest service. Disney World does it better than anyone else.

As a hospitality executive, I always learn something new whenever I am there.

James Cunningham, vice president, enterprise risk management, Pinnacle Entertainment, Inc.

The risks that Disney World faces are very similar to mine — on a much larger scale. They are complex and across the board. From liability for the millions of people they host as their guests each year, to the physical location of the park, to their vendor partnerships; their approach to risk management has been and continues to be innovative and a model that I learn from and I think there are lessons there for everybody.

R&I: What is the risk management community doing right?

We are doing a much better job of getting involved in a meaningful way in our daily operations and demonstrating genuine value to our organizations.

R&I: What could the risk management community be doing a better job of?

Educating and promoting the career with young people.

R&I: What have you accomplished that you are proudest of?

Being able to tell the Pinnacle story. It’s a great one and it wasn’t being told. I believe that the insurance markets now understand who we are and what we stand for.

R&I: Who is your mentor and why?


John Matthews, who is now retired, formerly with Aon and Caesar’s Palace. John is an exceptional leader who demonstrated the value of putting a top-shelf team together and then letting them do their best work. I model my management style after him.

R&I: What is your favorite book or movie?

I read mostly biographies and autobiographies. I like to read how successful people became successful by overcoming their own obstacles. Jay Leno, Jack Welch, Bill Harrah, etc. I also enjoyed the book and movie “Money Ball.”

R&I: What is your favorite drink?

Ice water when it’s hot, coffee when it’s cold, and an adult beverage when it’s called for.

R&I: What does your family think you do?

In my family, I’m the “Safety Geek.”

R&I:  What’s your favorite restaurant?

Vegas is a world-class restaurant town. No matter what you are hungry for, you can find it here. I have a few favorites that are my “go-to’s,” depending on the mood and who I am with.

If you’re in town, you should try to have at least one meal off the strip. For that, I would suggest you get reservations (you’ll need them) at Herbs and Rye. It’s a great little restaurant that is always lively. The food is tremendous, and the service is always on point. They make hand-crafted cocktails that are amazing.

My favorite Mexican restaurant is Lindo Michoacan. There are three in town, and I prefer the one in Henderson as it has the best view of the valley. For seafood, you can never go wrong with Joe’s in Caesar’s Palace.

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]