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from the editorFROMtheeditorWelcome tothe first editionof Currencyfor 2012.Steve NevettChairmanPacific RegionWhat’s the shape of your future?In this issue we explore how goodrisk management practices can shapethe future success of your business bydeveloping the ability to adapt andrespond to challenging circumstances.We also look at how risk managementcan help deliver results that putyou ahead of the competition byreducing volatility, protecting yourbalance sheet and promoting stabilitythroughout your organisation.2012 marks the release of the resultsfrom <strong>Aon</strong>’s 10th Risk Survey. We takea look at a decade of data, insightsand trends around how Australasianorganisations measure andmanage risk.We also examine whether moresophisticated risk managementpractices lead to improved financialperformance. Using the findings from<strong>Aon</strong>’s Risk Maturity Index and analysisconducted by The Wharton Schoolat the University of Pennsylvania,we provide tangible insights intothis issue.We sit down with Coca-Cola Amatiland discuss how they deal with issuesaround their risk mitigation and riskmanagement strategies, and heartheir key learnings from the pastyear’s natural catastrophes.Greg Case, President and CEO of<strong>Aon</strong> Corporation is our special guestin the 30 Minutes With section. Weget Greg’s thoughts on the biggestchallenges facing the market, <strong>Aon</strong>’splans for the future and how wemanage our risk exposures andservice our clients.I hope you enjoy reading this latestedition of Currency.
<strong>currency</strong>146OHSinharmonyThe overhaul of occupationalhealth and safety legislation.Risk radar14 Shapingyour businessInsights into how good riskmanagement underpins businesssustainability.cover story10Coca-Cola AmatilCase Study18A decade of data,insights and trends<strong>Aon</strong> sits down with CCA to discusstheir risk exposures.On the pulseWe discuss the results of <strong>Aon</strong>’s2011/12 Australasian Risk Survey.Food for thought
106263261823 Greg CaseGreg Case, Presidentand CEO, <strong>Aon</strong> Corporation.30 minutes with26 Themissing linkWe introduce <strong>Aon</strong>’s RiskMaturity Index.Global story30 Portfolios,premiums and pricingInsights and analysison the insurance market.market review32Going Global –Benefits Management<strong>Aon</strong> responds to the needs ofmultinational clients through ourGlobal Benefits team.<strong>Aon</strong> in focus34<strong>Aon</strong>’s Risk MaturityIndex receives BusinessInsurance magazine’sprestigious InnovationAward, Pass It Onglobal initiative and<strong>Aon</strong> Hewitt’s BestEmployers.latest newsaon.com.au
isk radar ohs in harmony 7OHSin harmonyA new national approach to occupational health and safety legislation.The overhaul of occupational healthand safety (OHS) legislation has beenon the radar for a number of years buton 1 January 2012, new laws came intoeffect to standardise OHS legislationacross <strong>Australia</strong>. The introduction ofthe new legislation into every stateand territory will provide nationwideconsistency for OHS laws and hopefullysimplify what was a very complex systemwhich differed from state to state.Businesses operating in more thanone state will find this nationwideconsistency especially beneficial.a new approachto OHSThese new regulations mean thatorganisations need to radically re-thinktheir approach to OHS in the workplace.Businesses and individuals who do notcomply with the new harmonisation ofwork, health and safety laws will faceharsher penalties including fines of up to$600,000 for directors and $300,000 foremployees. Either party can also face upto five years imprisonment.Businesses and individuals who do not comply withthe new harmonisation of work, health and safety lawswill face harsher penalties including imprisonment.so what has changed?The new Act clearly states the broadrange of people who are now protectedand are owed a duty of care – the newdefinition of ‘worker’ now includesemployees, contractors or subcontractors(and their employees),labour hire staff, outworkers,apprentices or trainees, students gainingwork experience and volunteers.The new laws clarify that the directorsand officers of corporations have anobligation to exercise due diligenceto ensure the company’s duty of care.Due diligence is now defined as takingreasonable steps to support a health andsafety culture and developing processesthat ensure compliance with legalobligations under the Act.These health and safety laws have sofar been enacted in New South Wales,Queensland, the <strong>Australia</strong>n CapitalTerritory, the Commonwealth and theNorthern Territory with other states setto follow later in 2012.George Harding, <strong>Aon</strong>’s OHS LiabilitySpecialist warns “regardless of whatsize or type of organisation, businessor association you are, if you engagepeople to perform a task, you needto understand the new OHSharmonisation legislation. We arefinding that many of our clients areconfused about the new laws and theirobligations and exposures createdas a result of the new legislation.”
on the pulse case study: coca-cola AMATIL 11case study:coca-colaAMATIL<strong>Aon</strong> sat down with CCA to discuss their risk exposures.what are the key risksfaced by Coca-ColaAmatil (CCA)?CCA has a detailed and stringentapproach to risk management andidentifying key risks is an ongoing corebusiness activity. While we do not wishto identify specific risks, we wouldsay that general risks for our businessinclude consumer confidence levels andadverse economic conditions in thecountries where we do business, as wellas issues such as unexpected legislationand regulatory changes.how do you go aboutunderstanding yourkey risk exposures?CCA uses top down and bottom upapproaches to understanding riskexposure. Top down risk profiles for keyareas of the business are prepared inconjunction with senior management.Bottom up operational measures feedinto an enterprise risk managementdashboard that provides a view of howrisks are managed on a day-to-day basis.Insurable risks are quantified andmodelled to ensure appropriateinsurance coverage or a decision ismade to self-insure.Financial risk such as interest rates,credit, foreign exchange andcommodity prices are forecast andsensitivity tested.Scenario simulations are also carriedout for areas such as malicious producttamper and business interruption, tobetter understand and quantify keyrisk exposures.how does CCAmatch risk profileto risk transfer?Risk profile is determined by theunderlying risks identified across thebusiness and the risk tolerance levelsagreed by Executive Management.Risk likelihoods and risk mitigations arethen taken into account to determinewhether residual risks (risk profile)fall within risk tolerance levels. If not,further risk mitigations are considered,in conjunction with risk transfer(insurance). Where risk transfer isdeemed appropriate, this is matchedto risk profile, to determine the optimallevel of risk transfer. The cost of risktransfer is also considered.how do youdemonstrate yourcommitment to riskmitigation?This is done in a number of ways. CCAhas a designated Group Chief RiskOfficer (CRO), who reports to both theGroup Chief Financial Officer (CFO)and Audit and Risk Committee. TheCRO is responsible, amongst otherthings for CCA’s internal audit program,fraud and security, CCA’s enterprise riskmanagement framework and quarterlyAudit and Risk Committee reporting.CCA’s internal audit program is riskbased and aligns with the Group’soverall risk profile. Audit plans areformally agreed out to three years inorder to maximise audit scope andcoverage, and to better identify areaswhere risk mitigation can be enhanced.Action plans and management followups are also agreed upon.Scenario simulations are run to enhancegreater risk mitigation.Quarterly insurance engineering andrisk analysis meetings are held, withrecommendations being followed upwith production facility managers andbeing incorporated where appropriateinto Audit and Risk Committeereporting.
12cca’sinsuranceclaimsguidelinesEducational and referencedocument to assist in theevent of property andbusiness interruption.are scenariosimulations important?Scenarios simulations are importantfor a number of reasons:scenariosimulationsassist in better identificationand quantification of key risks;provide gap analysis ininsurable risks;what are the keylearnings out of thepast year’s naturalcatastrophes?CCA’s scenario simulations and priorinsurance coverage reviews providedCCA with expected coverage, with nonasty surprises. CCA was also quick toenact its incident management crisisresponse, which led to designatedstaff being assigned key roles in themanagement process, includinginsurance claim processing.It also stipulates a designated accountbe immediately set up for insurancerelated losses and expenses to assist inthe claims processing.what has your claimsexperience been like?By and large it has been favourable. Apre-agreed <strong>Aon</strong> representative for claimsmanagement in excess of AU$1 millionwas highly beneficial to the process.Designating key CCA staff to the claimalso greatly assisted, together with proactivemanagement of the loss adjusters.Evaluate CCA’s insuranceprograms, including what toinsure by way of risk transferor retain by way of selfinsurance,insurance limits,exclusions etc;develop more targetedinternal audit scopes;formulate enhancedcontrols and other riskmitigations; andbecome a source oftraining and development.Scenario simulations are run to enhance greater risk mitigation.Following this, CCA prepared aninsurance claims guideline document,which was provided to all businessManaging Directors, CFOs, andall members of CCA’s incidentmanagement crisis response team. Thedocument also sits on the CCA intranet.This serves as both an educational andreference document that will assistin the event of future property andbusiness interruption incidents andclaims. For example, it identifies areasthat are both insured and uninsuredto ensure optimal documentationand record keeping is maintained.Applying the appropriate level ofresources, expertise and experiencewithin CCA, <strong>Aon</strong> and the loss adjusterswas critical to our positive claimsexperience. This was also assisted byall key personnel regularly makingthemselves available for follow-upmeetings, site inspections, Q&As etc.•
14shapingyour business:how good risk managementunderpins sustainabilityRisk is fundamental to business. Howwell that risk is managed will shape thefuture of the organisation, not only byreducing negative consequences but alsoby providing valuable information andinsight into opportunities.“People tend to forget that riskmanagement is also about identifyingopportunities,” says Tim Mason, Principalof Business Continuity Management at<strong>Aon</strong> Global Risk Consulting. “Sustainableorganisations are continuously searchingout opportunities to expand or improvetheir business and applying riskmanagement principles to assess theirworth.”“People forget, riskmanagement is also aboutidentifying opportunities.”Tim Mason | <strong>Aon</strong> Global Risk Consultinga mature riskframeworkTypically, organisations that are wellstructured to identify, measure andmanage risk are positioned to outperformtheir peers and achieve sustainableperformance improvements.“Boards of directors and executiveleaders are increasingly aware of theneed to establish effective approachesto identifying, assessing, managing andreporting risks,” says Laurie Champion,Managing Director at <strong>Aon</strong> RiskConsultants in Atlanta. “This is true acrossall business sectors – and, in many cases,enterprise risk management is seen as amanagement discipline that enhancescorporate strategy as well as day-to-dayoperations.”A number of factors can driveorganisations to take a more holisticview of risk and adopt a more proactiveapproach.
cover story shaping your business 15“Some of these factors are external,such as regulations, industry standardsor lender scrutiny,” says Michael Joiner,Associate Director at <strong>Aon</strong> Global RiskConsulting in Atlanta. “Others stem frominternal pressure, such as board requestsor management’s desire to understandwhat drives performance volatility.In both cases, the message is similarand clear: organisations must takesteps to implement an enterprise-wideapproach to risk.”Champion and Joiner both believe thatthe nature of risk will continue to evolveand re-shape the competitive landscape.“Emerging issues will overtake existingissues in importance while the frequencyand severity of the known, ‘traditional’risks will rise and fall,” Joiner continues.“The most successful businesses will bethose who adapt their risk approachto meet the new risk environment andtranslate this advanced and proactiverisk maturity into sustainable competitiveadvantages. Against a backdrop ofcontinued and growing uncertainty,organisations can no longer afford todelay the development of their riskmanagement frameworks.“strengtheningthe supply chainRisk managers are facing an increasinglycomplex set of challenges. Over thepast few years, a more volatile economicenvironment, the threat of bio hazardssuch as pandemics and the proliferationof cybercrime and social networkinghave broadened the spectrum of risk.Meanwhile, globalisation of the worldeconomy, decentralised manufacturingprocesses and a relentless search for lowcostsupplies have extended and stressedsupply chains.
food for thought A decade of data, insights & trends19A decade of data,insights & trendsresults from aon’s 2011/12australasian risk surveyTen years ago we embarked on ajourney with our clients to transformthe then narrow, transactional viewof risk management into a morestrategic, company-wide approach.“For the last decade <strong>Aon</strong>’s AustralasianRisk Survey has provided a valuableannual snapshot of how Australasianorganisations measure and managerisk,” says Paul Venning, ManagingDirector – Corporate, <strong>Aon</strong> RiskSolutions.The report is designed to assist thoseworking in risk management to assesshow their organisation manages riskcompared to others and to measurethe costs incurred in delivering a riskmanagement strategy.This year’s findings are based onrisk management information from413 <strong>Australia</strong>n and New Zealandorganisations, and incorporate insightprovided during a series of workshopsconducted with a range of executivesand risk management professionals.a cause forcontinued concernThis year there has been a slightincrease in the aggregated risk ratingsfor the top 20 risk concerns – signifyingthat 2011 was a year of higher concernfor risk managers than 2010.“Over the past year we have witnessedhow quickly the environments in whichwe operate can change,” says Venning.“Events such as natural disasters andthe changing global economy havehighlighted how important it is for allof us to be prepared and have robustrisk management strategies in place tomitigate future risks.”external factorson the riseWith 2011 being a very volatile year,risks external to an organisation wereidentified as the highest risk categoryaffecting businesses – with concernaround operational risks also increasing.“External risks such as natural disasters/climate change, impact of regulationand market environment are now onaverage rated as the highest type of riskconcern facing businesses today,” saysVenning. “These risks have surpassedcorporate risk which has consistentlybeen ranked as the highest type of riskconcern for the past eight years.”Organisations are also more connectedto the global economy and marketsthrough their suppliers, customers,employees and their own operations.This evolution has introduced newand increased risk exposures includingsupply chain risk, economic and foreign<strong>currency</strong> risk and a variety of people risks.
20top riskconcernsby type of risk6.0Risk rating (out of 7)5.55.04.54.03.52004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12Source: <strong>Aon</strong>’s 2011/12 Australasian Risk Survey. corporateBrand and imageCorporate governanceLack of innovation externalImpact of regulationMarket environmentNatural disasters/climate change knowledgeComputer crimeInformationmanagementLoss of intellectualpropertySystems financialCapital availability/structureCreditLiquidityMarket risk/treasury operationalBusiness interruptionEnvironmental impactHuman resourceInternal fraudLegalLiabilityM&A transactions/restructuringPhysical assetsProductionSalesTerrorism/sabotageThe Queensland floods were one of the mostdevastating events in recent memory to occur in<strong>Australia</strong> with three quarters of the state declareda disaster zone.“There was also a resurgence of concernaround global pandemics such as BirdFlu in 2003, Equine Influenza in 2007and the Swine Flu outbreak in 2009,all of which forced businesses to reassesstheir preparedness and abilityto effectively manage people risks,”Venning continued.a changingenvironmentNatural disasters dominated regionalevents in 2011, reflected in the risein rankings for risks such as businessinterruptions, physical assets and naturaldisasters/climate change.The Queensland floods were one ofthe most devastating events in recentmemory to occur in <strong>Australia</strong> with threequarters of the state declared a disasterzone and estimated damages of over$30 billion. These events were closelyfollowed by tropical cyclone Yasi whichhit North Queensland in early February2011 – causing an estimated $3.6 billiondollars in damage and making it thecostliest tropical cyclone to hit <strong>Australia</strong>on record.New Zealand also experiencedcontinuing challenges due tothe earthquakes and aftershocksexperienced throughout 2011. Totalrebuilding costs to insurers are expectedto reach NZ$20–30 billion, making itNew Zealand’s costliest natural disasterand the third-costliest earthquake(nominally) worldwide.global reach,local impact“Looking back at some of the eventsthat have occurred over the past tenyears, it is crucial to acknowledge theimpact of the numerous terrorist attacksthat occurred around the globe in thetumultuous period between 2001 and2005,” says Venning.While the dust may have started tosettle from the Global Financial Crisis(GFC) we are certainly not out of thestorm just yet. In this year’s surveymarket environment has risen six placesin the rankings and is now ranked asthe second highest risk concern forbusinesses.“2011 was a volatile year for worldmarkets,” says Venning. ”Theperformance of global economiesin 2012 is uncertain in light of theincreasingly difficult financial position inEurope, increasing bad debt concernsof China’s banking sector, China’s abilityto sustain double digit growth and<strong>Australia</strong>’s ability to maintain exportmarket performance levels,” Venningcontinued.
22regulationrising in the ranksRising from sixth position last year,impact of regulation is now ranked asthe third top risk concern for 2011/12.premiumsMeanwhile, respondents reportedthat premiums had increased, withthe largest increases in property andmotor vehicle insurance.risk managementbenefitsMore organisations are recognising thebenefits of investing in risk managementwith the largest rises occurring forimproved shareholder value andimproved returns on investment.Rising from sixth position last year, impact of regulationis now ranked as the third top risk concern for 2011/12.“What we have seen over the last decadeis that risk management in <strong>Australia</strong> hasevolved into a broader, more maturefunction focused on delivering value tothe business,” says Venning. •The change in Labor governmentleadership in June 2010 followed bytheir return to power in the August2010 Federal election has seen anumber of new regulations beingproposed or introduced. This includesthe introduction of the Resource SuperProfits Tax and Carbon Tax and arenewed focus on workforce related riskwith the introduction in January 2012of new OHS legislation.There was also an expectation fromrespondents of the survey that premiumswill continue to rise in 2012 acrossthe board – particularly in the area ofproperty insurance.When it comes to selecting an insurer,respondents have told us that coveragequality and breadth remains the keyfactor with price competitiveness aclose second.contactPaul Venning, Managing Director– Corporate, <strong>Aon</strong> Risk Solutionson +61 2 9253 7578or email paul.venning@aon.comTotalCost ofInsurableRiskunderstandingriskexposuresRisk transfercosts(insurancepremiums)Retained losscostsThe key to risk management is inunderstanding a company’s riskrequirements and using insuranceas a financial tool. This leads to theconcept of Total Cost of InsurableRisk (TCOIR) – that is, the costsincurred by a business to deliver aneffective risk management strategy.Externalriskmanagementcosts(e.g. broker fees)Internalriskmanagementcosts(e.g. salaries)what are the benefits?TCOIR provides a sound basis onwhich to manage, control, measureand compare insurable risk costsand performance.CFOs and Risk Managers shouldbe working together to target thelowest sustainable TCOIR – throughan understanding of current riskexposures and analysing which risksshould be transferred or retained.Many companies are using theircurrent TCOIR result to track theirown performance year on year,reporting results to the Board andacross the organisation.
30 minutes with greg case 2330 minutes withGREGCASEPresident and CEO, <strong>Aon</strong> PLCA conversationwith Greg Case,President and CEO,<strong>Aon</strong> plc.What is the biggest global issue facing theinsurance and risk market at present?It’s hard to point to a single issue that is ofequal concern worldwide, but our clientsand carrier partners have expressed somecommon themes in the issues that keepthem up at night. Economic slowdowncontinues to be a major worry; thereare a lot of headwinds in businesses’efforts to grow. Increasing competitionis another concern. Yet another isincreasing regulation. These are somecommon and often cited concerns for riskmanagers and insurance carriers alike.What is <strong>Aon</strong> doing to empowerresults for clients?We empower results for our clients byhelping them with two of the mostimportant issues in the global economytoday; managing risk and realising thefull potential of their people. Everyday we touch about 30 per cent ofthe global economy through our riskand people businesses; whether it ishelping our clients’ employees chooseand manage their health and retirementbenefits, advising companies on thepotential risk of natural catastrophes,or ensuring business continuity andemployee safety after a disaster occurs.I know many of our <strong>Australia</strong>n andNew Zealand clients are deeply familiarwith our role in the aftermath of thedevastating Brisbane floods and theearthquakes in Christchurch. Our strongrelationships with insurers enabledus to obtain necessary and importantadvance claim payments on behalf ofaffected clients almost immediatelyafter the catastrophic events.Similarly, <strong>Aon</strong> Hewitt’s support andexperience played a significant role ininvoking clients’ business continuityprograms in the affected regions. Thisensured that employees were safe andthat businesses could recover quickly. Thisis what we do, and I am proud to say thatthanks to our colleagues, we do it well!What has <strong>Aon</strong> done to improve efficiencyand effectiveness for the benefit of clients?Everything we do at <strong>Aon</strong> is intendedto deliver distinctive value for clients,develop unmatched teams and achieveoperational excellence. Being moreefficient and effective in all our businessesunderpins all three of those elements.As a global organisation, we simplycan’t deliver the best solutions and helpclients achieve the best results if weare battling inefficiencies internally.We have been and we will continue tomake wise investments in innovation,technology and people such as <strong>Aon</strong>GRIP and <strong>Aon</strong> GRIP Solutions, in ourmodeling capabilities with <strong>Aon</strong> Benfield,and in <strong>Aon</strong> Hewitt’s approach onhealth care exchanges. Our journey tooperational excellence is ongoing, butif we continue to invest wisely in ourpeople and our platform, we will do aneven better job of serving our clientsmore efficiently and more effectively.In the future, what does <strong>Aon</strong> intendto focus on and what are theopportunities that lie ahead?Our strategic imperatives remain thesame. All of us must focus on deliveringdistinctive value to our clients. We mustcontinue to focus on making <strong>Aon</strong> thedestination for the best talent. And, wemust continue to focus on achievingoperational excellence. If we canachieve success on these three goals,we will be able to empower results forour clients in a very powerful way thatwill allow them to achieve sustainablegrowth, continuity and profitability.What is the rationale for moving<strong>Aon</strong>’s global headquartersfrom Chicago to London?We made this decision in order to provideour firm with greater access to emergingmarkets and to take better advantageof the strategic proximity to Lloyd’s andthe London market, as it is one of thekey international hubs for insurance andrisk brokerage. The move will also createseveral near- and long-term financialbenefits for <strong>Aon</strong>, including increasedfinancial flexibility and a greater abilityfor us to allocate capital for investmentand growth. For our colleagues in<strong>Australia</strong> and elsewhere around theworld, it will allow us to make furtherinvestments in training as well as increaseour ability to align as an organisationaround the <strong>Aon</strong> Leadership Model.
24IndiaSouth AfricaAONPASS IT ONPass It Onis a programaimed at buildingconnectionsamong clients,communitiesand colleagues.aonpassiton.comSouth KoreaSouth AfricaBrazil<strong>Australia</strong>AustriaNamibia
30 minutes with greg case 25“We want to hire the best, build the best and be the best.”greg case | <strong>Aon</strong>How does <strong>Aon</strong> managetheir risk exposures?<strong>Aon</strong> is the world’s leading firm advisingclients on their most complex risk andpeople challenges, and yet we alsoface risks in our own organisation. Weare far from perfect, but we have greatunderstanding of risk and the ability todevelop solutions that help us, like theclients we serve, to focus on growth,profitability, continuity and innovation.<strong>Aon</strong> carefully considers the risks we faceas a global professional services firmand we make decisions accordingly,always with an eye to support ourstrategic objectives and create long-termvalue for our clients, colleagues andthe communities we proudly serve.Specifically, <strong>Aon</strong> uses the Enterprise RiskManagement practice within our GlobalRisk Consulting group to report on theseverity and likelihood of different riskexposures identified by our businessleaders. Colleagues can see the mostsignificant risks to our business by lookingat the Risk Factors disclosure that <strong>Aon</strong>publishes in its annual 10-K report. Oncewe identify a risk, we engage internalexperts from across the organisation tohelp reduce or mitigate the risk exposure.For example, <strong>Aon</strong> Hewitt helps manageinvestment risk from <strong>Aon</strong>’s definedbenefit plans, while <strong>Aon</strong> Risk Solutionsadvises <strong>Aon</strong> on how to reduce thelikelihood of professional service errorsand also arranges insurance coverage toprotect against claims that could arise.How is <strong>Aon</strong> building asustainable organisation?I am proud that our colleaguesare committed to establishing andmaintaining environmentally sustainablebusiness practices for both our clientsand within our own operations.Every corporation has a responsibilityto its community to achieve sustainablegrowth and value, and we promote theseprinciples in the services and products weoffer our clients. Across the organisation,we place a great deal of importance onenvironmental stewardship, communityand stakeholder involvement. Many ofour offices have established a network of’green champions’ that play an importantrole in helping <strong>Aon</strong> shape the way wedeal with the many issues that are onour green agenda. They are generatingnew ideas and identifying localsolutions that help make a difference.When our new corporate headquartersbuilding is completed in London in2014, it will have achieved the BREEAMExcellent rating – the highest ratingin the industry. BREEAM is the leadingglobal method of assessing a building’ssustainability and environmentalperformance, and the fact that ournew headquarters building will haveachieved this rating is testament to<strong>Aon</strong>’s support of environmental bestpractices. Our industry-leading spacewill be the model for others to follow.What approach is <strong>Aon</strong> taking tocreate and develop best practiceinitiatives around gender diversity?We want to hire the best, build the bestand be the best. That captures both ourpromise and our potential. <strong>Aon</strong>’s successas a growing firm is directly correlated toour continued ability to attract, engageand retain highly talented professionalsaround the world – both women and men.Our Unmatched Talent Agenda focuseson developing our colleagues andensuring they have the support andresources necessary to develop theircareer within our firm. Our Diversityand Inclusion Group partners with oursenior leadership team to make surethat diversity and inclusiveness area priority across the organisation.We have local talent and inclusion groupsaround the world that work closelywith our Diversity and Inclusion Groupto make sure that we have companywidecompliance with our workplacediversity initiatives and that we enhancesmaller local office inclusiveness throughawareness activities and communityfocusedevents. Women’s leadershipis of critical importance to <strong>Aon</strong> andour clients alike. Diverse leadershipis increasing among the clients weserve, and <strong>Aon</strong> must reflect the variedperspectives it represents in order tobring the best solutions to our clients.Is there anything else youwould like to add?Yes. Thank you for giving me theopportunity to talk about some ofthese issues and to have a chance tocommunicate with our colleagues in<strong>Australia</strong>. I am very proud to be a partof such a great team. We are a globalcompany of people helping people.Wherever there is a need; whether it ishelping our clients manage catastrophicrisk in <strong>Australia</strong> or Japan, or helpingpeople get access to health care orprepare for retirement, I have seen <strong>Aon</strong>colleagues unite to give our clients thesolutions they need. And what I hearwhen I meet with clients is that we alwaysstrive to do more than what is expectedof us. To me that shows that our 61,000colleagues have a strong commitment toour values of service, teamwork, integrityand results. If we all continue on thatpath, I believe that we can deliver onour promise of empowering economicand human possibility for our clients, ourcommunities, and for our colleagues.•
global story The missing link 27ThemissinglinkRisk managementand your bottom lineintroducing <strong>Aon</strong>’sRisk Maturity IndexDeveloped in partnership with TheWharton School of the University ofPennsylvania, the <strong>Aon</strong> Risk MaturityIndex helps risk and finance managersto develop a deeper understanding oftheir organisation’s approach to risk.The easy-to-follow questionnaire takes30 to 35 minutes to complete, yet itgets right to the heart of a company’srisk management framework, corporategovernance and decision-makingprocesses. Two to three weeks after theinitial response, participants receive adetailed Rating Report which highlightstheir rating across all 40 components ofthe Index.Organisations worldwide can nowreceive an instant, customised RiskMaturity Rating by simply completingan online questionnaire.The entire process is completelyconfidential and free of charge – andfeedback has been extremely positive.“Participants appreciate that the Indexprovides tangible results and valuableinsights that can be leveraged to guidetheir risk management investmentdecisions,” says Michael Joiner,Associate Director at <strong>Aon</strong> Global RiskConsulting in Atlanta. “These resultsthen drive management and board-leveldiscussions regarding the appropriaterisk maturity targets and the actions thatneed to be implemented.”Many participants go on to discussthe results in greater detail with <strong>Aon</strong>.“They want to know how they comparewith peers in their industry, nationallyand globally,” says Theresa Bourdon,Group Managing Director of <strong>Aon</strong> GlobalRisk Consulting in America. “They’reinterested in what the best companiesare doing, what constitutes best practiceand how they can use that to take theircompany to a higher level of maturity.”a way to enhancefinancial performanceResearchers have already found asignificant relationship between thematurity of an organisation’s riskmanagement practices and its financialperformance. This is based on apreliminary set of Index data collectedfrom publicly traded companies rangingfrom mid-sized firms to the largestFortune 100 organisations.Researchers have already found a significantrelationship between the maturity of anorganisation’s risk management practicesand its financial performance.
28“The Index provides tangibleresults and valuable insightsthat can be leveraged toguide their risk managementinvestment decisions.”Michael Joiner | <strong>Aon</strong> Global Risk Consulting,Atlanta USA“Many organisations question theneed for investing in better systemsto identify risk, capture risk data andquantify each of the risks they face asan organisation,” says Bourdon. “Theywant to know whether there’s a tangiblebenefit in fostering a culture whichembraces good communication, goodcorporate governance and effective riskmanagement. Now there’s a very clearanswer – these are all things that candrive better performance.”Companies in the financialservices sector which scoredabove the mean weredelivering an improved2010 stock performance.Using a preliminary set of Index data,Wharton found that companies in thefinancial services sector which scoredabove the mean Risk Maturity Ratingwere delivering an improved 2010 stockperformance. “I’d think that would bepowerful motivation for any financialinstitution to aim to improve their RiskMaturity Rating,” says Bourdon.At the moment, most respondentsare scoring between 2.5 and 3.5with a slight skew towards the lowerscores. “In the majority of cases thereis plenty of room for improvement,”says Bourdon.the elementsof successSo what sets the high scorers apart?Further analysis of the available Indexdata has identified common traitsamong organisations that received anabove-average risk maturity rating.Those scoring between 3.5 and 5differentiate themselves in three areas:> they have an awareness of thecomplexity of risk;> they have a formal agreement inplace covering risk managementstrategy and expectations;> their organisational architectureis very closely aligned to their riskmanagement objectives.“Organisations seeking to enhancetheir approach to risk can use thosethree areas – awareness, agreementand alignment – as an initial roadmap,”Joiner suggests.
global story The missing link 29What’s your organisation’srisk maturity rating?1 1.53.52 344.52.5 5access tothe indexrisk.maturity.index@aon.comWhile some risks are common to everybusiness, others vary by industry.“Clearly, risks for a financial institutionare different from risks for a retailorganisation,” says Bourdon. “Whenresearchers broke down the data byindustry, they were able to identify thefactors with the greatest correlation tofinancial performance. For example,for manufacturers they were operationalissues such as engaging your partnersin your supply chain and understandingsupply chain risk, both upstream anddownstream. In the financial areagovernance related matters appearto be more relevant. As the data basegrows, so will our ability to provideindustry-specific analysis.”the Netherlands, Singapore, Hong Kongand India,” says Joiner. “The Indexis also being translated into severalkey languages so that we can expandits reach to non-English speakingparticipants around the globe. Clientengagement is currently in progressin South Africa, the Middle East and inother parts of Europe and Asia.“Our long-term vision is to develop the Index into anindustry standard platform for real-time insights.”Michael Joiner | <strong>Aon</strong> Global Risk Consulting, Atlanta USA“Our long-term vision is to develop theIndex into an industry standard platformfor providing real-time insights intoan organisation’s ratings and activitiesrelative to peers and best practice.” •traitsabove-averagerisk maturityratings:awareness of thecomplexity of riskformal agreementcovering riskmanagement strategyand expectationsorganisationalarchitecture is veryclosely alignedto company’s riskmanagement objectivesSince its launch in the United Statesin April last year, the Index has beenintroduced to organisations aroundthe world; over 300 have alreadyresponded. “The Index has beenlaunched in countries including<strong>Australia</strong>, Canada, the United Kingdom,contactMarcus Vaughan, Business DevelopmentManager, <strong>Aon</strong> Global Risk Consultingon +61 7 3223 7533 or emailmarcus.vaughan@aon.comaon.com/riskmaturityindex
market review portfolios, premiums and pricing 31natural disasters andcatastrophies 2011economic losses:US$350 billioninsured losses:US$108 billionGiven the spike in naturaldisasters in 2011 andthe load carried byglobal reinsurers, it’s nosurprise that <strong>Australia</strong>ninsurers are facing strongupward pressures in theirreinsurance costs.<strong>Australia</strong>n policyholders in areas such asFar North Queensland where there arehigh natural catastrophe exposures facetougher market conditions, with insurersreleasing capacity sparingly and seekingrate increases in excess of 30 per cent forsome insureds. For others, insurers arereviewing pricing along more traditionallines. Insureds who have a history of highclaims through fires or other traditionallosses can expect insurers to seekpremium increases at renewal. Those witha medium to low exposure to naturalcatastrophes, a good spread of risks anda good loss history can expect to renewwith slight increases to existing premiumsof between five and ten per cent.While most other categories of insuranceremain competitive and enjoy stablepremium rates, these are likely to beaffected by property market conditionsover time as insurers put more thoughtinto how to best utilise their now morecostly capital. As a result small premiumrate increases could follow across otherlines of risk.Policyholders in New Zealand, however,should prepare for a bleaker insurancemarket outlook. The New Zealandmarket is worth about NZ$3 billion andearthquake premiums account for aboutNZ$300 million of this. Given that lossesfrom Christchurch’s earthquake may wellexceed US$25 billion, policyholders inNew Zealand can consider a premiumrate increase of around 30 per cent avery good outcome. They should alsoprepare for and expect large increasesin retentions and deductibles.In the past, <strong>Australia</strong>n policyholderswho had been able to successfullydifferentiate their risks when sellingthese to their insurers could expect abetter premium outcome on renewal.However, the focus of insurers haschanged following the fallout of lastyear’s natural catastrophes. SomeJapanese car manufacturers, for example,had contingency plans to produce inThailand if production was halted ontheir home soil, but were then hit bya double whammy when the floodsin Thailand unravelled these plans.Policyholders can now expect theirinsurers to be asking many morequestions about supplier and customerrisks and business interruption risksin general. They will also need todemonstrate in more detail where theirrisks are, the mitigation strategies theyhave in place and that these have beentried and tested.Looking ahead, if 2012 turns out to be aprofitable year for insurers, policyholderscan expect premium pricing to settleand increases to slow, given that thereis still ample capacity and strongcompetition in the market. However,if 2012 ends up being another year oflarge losses for insurers, policyholders ingeneral may well start feeling the pinchof even steeper premium rate hikes. •
aon in focus Going Global – Benefits Management 33<strong>Aon</strong> manages hundreds of multinationalpools around the world on behalf ofour clients. Insurance partnershipsand utilising captives for employeebenefits are becoming increasinglycommon options.Maintaining the benefits data can be asdifficult as bringing it together in thefirst place. There are now a number ofemployee benefit databases available.<strong>Aon</strong>’s platform is ‘Greater Insight’ (GI)which is fully customisable and designedto accept the full range of benefits datafrom pension plans and insured benefitsto incentives and holiday arrangements.GI allows our clients to not only storethe data but also examine it in analmost infinite number of ways aswell as perform analytics and testlocal compliance.Finally, there is the delivery of the benefitprogram to the employee. McNamarasays, “probably the hottest topic inthe world of employee benefits todayis the employee portal. How do wecommunicate our benefit program toemployees and how in turn do theyinteract with it?”In the past, multinationals have relied onfairly rudimentary systems or hard copycommunications. Today there are globaloptions; web based employee portals thatcan be built on a global scale with thesame look and feel worldwide. Employeesin Israel have the same experience asemployees in <strong>Australia</strong>. <strong>Aon</strong>’s employeebenefits delivery platform, ‘Total BenefitsSolution’ is gradually being rolled outglobally with functionality to performtasks that once took a small army ofindividuals to complete.Multinationals are finding thepositive outcomes of globalising theiremployee benefits too significant toignore. Expenditure savings, improvedgovernance, greater compliance,consistency from country to countryand streamlined benefit administrationmeans that this trend will increasinglybecome the norm in the managementof global benefits. •contactRichard McNamara, Principal –<strong>Aon</strong>’s Global Benefits team, <strong>Australia</strong>on +61 3 9211 3642 or emailrichard.mcnamara@aonhewitt.com
34latestnewsPass It OnFrom October 2011 to June 2012, <strong>Aon</strong>’s three regions – AsiaPacific, Europe/Middle East/Africa and the Americas – arecompeting to move Manchester United footballs along threetrans-continental routes.Pass It On is a program aimed at building connections among colleaguesacross <strong>Aon</strong> globally and deepening connections with clients and communities.The program celebrates our sponsorship of the Manchester United footballteam and encapsulates our <strong>Aon</strong> United theme of empowering human andeconomic possibility.Support the Asia Pacific region by visitingaonpassiton.com
<strong>Aon</strong> Hewitt’sBest EmployersParticipation is now open for the 2013 <strong>Aon</strong> HewittBest Employers accreditation program. Now in itseighth cycle, the study is <strong>Australia</strong>’s most credibleand recognised employer accreditation program.<strong>Aon</strong> Hewitt’s research of 2,500 organisations from around the world,including 600 from <strong>Australia</strong> and New Zealand, provides compellingevidence of the link between high engagement and stronger businessperformance. Our robust methodology is focused on both measuringand improving engagement in participating organisations.To find out how your organisation could become an accredited BestEmployer in 2013 email bestemployersanz@aonhewitt.com or visitaonhewitt.com/bestemployersanz.Benefits include:> access to market leadingbenchmarking data> insights into current levels ofemployee engagement> guidance on best practice basedon our extensive research> consulting support to help turninsights into actionsRisk Maturity IndexLeadingthe way<strong>Aon</strong>’s Risk Maturity Index is making headlinesacross the globe after recently receivingBusiness Insurance magazine’s prestigiousInnovation Award for 2012. The awardrecognises leadership, inventiveness andingenuity in products and services designedfor professional risk managers.The award recognisesleadership, inventivenessand ingenuity in productsand services designed forprofessional risk managers.After its <strong>Australia</strong>n launch in November 2011,<strong>Aon</strong>’s Risk Maturity Index has received clientpraise as a market leading differentiator andis another example of <strong>Aon</strong>’s continual pursuitto provide cutting edge risk advisory services.Developed by <strong>Aon</strong> (along with The WhartonSchool of the University of Pennsylvania), the<strong>Aon</strong> Risk Maturity Index provides risk andfinance leaders with a tool to objectively selfassessan organisation’s risk framework acrossten primary risk characteristics. The importanceof the Index and its relevance to <strong>Aon</strong> Unitedcannot be stressed enough. This innovative toolprovides connectivity across <strong>Aon</strong> Risk Services,<strong>Aon</strong> Hewitt, and <strong>Aon</strong> Benfield.email bestemployersanz@aonhewitt.comor visit aonhewitt.com/bestemployersanz2
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