Companies with strong risk management practices for their physical plant and other properties are less likely to see their earnings affected by market volatility compared with companies with weak risk management practices, FM Global said in a study released Wednesday.

The study, “The Risk/Earnings Ratio: New Perspectives for Achieving Bottom Line Stability,” found that companies with strong physical-plant risk management practices produced earnings that fluctuated an average of 18% while those with weak practices had earnings that fluctuated an average of 31.4%.

Johnston, R.I.-based Factory Mutual Insurance Co., which does business as FM Global, partnered with Oxford Metrica, a global strategic adviser to Fortune 500 companies, and found that a company that reduces its property loss exposures to perils such as fire and natural hazards also can reduce its earnings volatility.

The study, which compared the physical-plant risk management practices of 520 companies with annual revenue of more than $1 billion, studied the correlation between earnings and risk management of physical plants and other properties.

“The results of this study arrive at a time when many organizations continue to reduce budgeted capital and other resources across diverse functional areas and operations, including physical risk management,” the report said. “While reductions in expenses are a critical necessity for many enterprises, the research suggests there are negative consequences to cutting back on physical loss prevention resources.”

According to the study, the average risk of property loss is 20 times greater for companies with weak risk management practices than for those with strong practices.

Further, it found that companies with weak physical-plant risk management practices suffered an average loss severity of more than $3 million compared with $620,000 for a company that manages its risks well.

With regard to property exposures related to hurricanes, earthquakes and other natural disasters, the study found that, overall, the average risk for companies with weak risk management practices was 29 times greater than those with strong practices.

The study also found that the average natural disaster loss per location for companies with “inferior” risk management practices exceeded $3.4 million per incident compared with $478,000 for companies with “advanced” processes.