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Better use of data, analytics seen as No. 1 priority

Posted On: Apr. 28, 2019 7:32 PM CST

Data and analytics

Improving the use of data and analytics was the top risk management priority in the Excellence in Risk Management XVI survey released by Marsh LLC on Monday.

Nearly half of respondents, 47%, made it their top pick in the survey, which is based on more than 600 responses and a series of focus groups with leading risk executives in January and February 2019.

The Strategic Risk Finance in the Era of Big Data report also focuses on how data and analytics can be used to make alternative risk transfer decisions, according to Brian Elowe, Boston-based North American chief client officer for Marsh LLC.

There is a rising level of capital available for risk financing, with capital providers such as pension funds and sovereign wealth funds earmarking about $1 trillion to get involved in risk finance, he said.

At the same time, “there’s definitely explosive growth in data and analytics,” and the study this year “is really about the connection between the two,” Mr. Elowe said.

Growth in the use of alternative risk transfer helped spur the decision, he said.

“Of the organizations we studied, a third of them are saying that they’re using alternative risk transfer methodologies already, and another 8% expect to do so over the next two years,” Mr. Elowe said. “That combination of things evidenced to us that this was an area worth diving into a little bit more deeply.”

“For those organizations that are marshaling the data, it helps them understand and model out their own changing risk profiles,” he added.

Similarly, “some of those alternative capital sources don’t have longstanding underwriting and claims divisions, so for them it’s all about the modeling in order to attract their capital,” much like catastrophe bond investors seek robust hurricane modeling, Mr. Elowe said.

“Formalize/expand risk management training/education across the organization” was the second-highest risk management priority in the survey, selected by 33% of respondents.

“We see a real opportunity for risk executives to help their organizations by educating them,” Mr. Elowe said. “There wasn’t enough knowledge about the products and how they can best be used inside an organization. That creates a big opportunity for the risk executive and risk managers to become educators.”