A on Global Risk Management Survey 2009

8/3/2019 A on Global Risk Management Survey 2009

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RISK MANAGEMENTSURVEY

GLOBAL





AONGLOBALRISKMANAGEMENTSURVEY2009

TAble O cONTeNTs

INTRODUcTION 2

eXecUTIVe sUMMARY 4

ResPONDeNT PROIle 6

TOP TeN RIsks 8

Ri prpardn or t top tn ri 18

lo aoiatd wit top tn ri 20

IDeNTIYINg, AssessINg, MeAsURINg AND MANAgINg RIsk 22

Maurin TcOR 22

Idntiyin maor ri 23

Ain maor ri 24

Dtrminin imit o inuran 25

bnit o invtin in ri manamnt 26

extrna drivr or ri manamnt 27

bOARD OVeRsIghT AND INVOlVeMeNT 28

Poii on ri ovrit and manamnt 28

Approa to ri manamnt at t oard v 29

RIsk MAN AgeMeNT DePARTMeNT AND UNcTION 31

buin ativity prioriti 31

ci ri oir 33

Ri manamnt/inuran dpartmnt 34

caim and aty/ri ontro ro 35

Ri manamnt dpartmnt rportin 37

Tird party rvi providr 38

INsURANce MARkeTs 40Dird an in t inuran mart 42

RIsk INANcINg 44

Umra/x iaiity 44

Dirtor and oir iaiity 46

comort v 47

Vry itt an in rtntion v 48

glObAl PROgRAMs 49

Purar o oa proram 49

cAPTIVes 51

Oraniation tat u aptiv 51

ky ri undrwrittn 53

MeThODOlOgY 56

keY cONTAcTs 57

AON AT A glANce 58




INTRODUcTION A t word’ adin ri advior and inuran ror, Aon

i proud to provid int wit t uprior rvi and t

mot initu ri init and data avaia

On o t nt o avin an unmatd oa ntwor

i t aiity to vra our i and op to rat t indu-

try’ mot omprniv data rport, i t 2009 goa

Ri Manamnt survy

Ti rport, ad on urvy data rom Q4 2008, aptur

t prptiv o t word’ adin ri proiona rom

adin oraniation T ainatin rut ar tin o

t nvironmnt in wi ti urvy wa dd Trou

a t ndin, on tm rmain onitnt: T word-wid onomi downturn a ad an normou impat on

ow w approa and mana ri

stayin uy inormd and up-to-dat wit t att indu-

try trnd i t t way to rmain omptitiv and rvant

in vovin oa mart W provid ti urvy rport

to our int or ti raon – to p tm tay arat o

mrin iu and to arn wat pr and omptitor

ar doin to mana ri, ovrom an and aptur

opportuniti It i our op tat you an u ti rport or

t am purpo

I you av any ommnt or qution aout t urvy, or

wi to diu t ndin urtr, pa ontat your Aon

aount manar or viit wwwaonom/oariurvy

bt rard,

Steve McGill

Chairman and CEO

Aon Ri srvi

Ted Devine

President

Aon Ri srvi




In today’ rapidy vovin uin nvironmnt, orania-

tion ar inrainy ryin on anayti to ma inormd

diion and ain a omptitiv advanta It i ritia or

any uin to prudnty xut pan today to aiv

it utur otiv, and wit a to ra tim data, you

an dvop orward-tinin init tat ma it poi

to a t utur wit ondn

Roniin t vita nity o providin int wit

at tat ou on idntiyin, ain, maurin and

manain inura ri, Aon i pad to provid you wit

ti yar’ goa Ri Manamnt survy

Aon i ommittd to providin our int wit t attuin intin I you ar intrtd in arnin mor

aout ow w an u t indutry’ mot omprniv

t o data to rn and vaidat your ri manamnt

trati, pa ontat m or any o my oau itd

in t a o ti rport

W op you nd ti urvy pu and vaua – and a

away, w wom your da

bt rard,

Lambros Lambrou

CEO — Aon Analytics




eXecUTIVe sUMMARYT goa Ri Manamnt survy ondutd in Otor and Novmr

2008 apturd int ntimnt durin a wordwid onomi downturn

T prviou urvy, ondutd in Q4 2006 wit a rport iud in 2007,

wa t rt o it ind In ti yar’ urvy, w wr a to ompar y

and mrin ri iu wit to rvad two yar ao, and introdu

nw ara o onrn or opportunity or uin around t word

T goa Ri Manamnt survy rport ompri our main omponnt:

Top tn ri

Ovra ri prpardn

lo ratd to ri

svn aptr ouin on y uin topi or untion

TOP TeN RIsks

Rpondnt tod u ary tat t rii impatin t

oa onomy wa t numr on mot important ri

to tir oraniation Otr y ri itd inud tayin

aad o ruatory ompian; manain uin intr-

ruption; mtin t an o inrad omptition;ommodity pri ri; prottin rputation; manain

ri aoiatd wit a fow, uppy ain, and tird-

party iaiity; and irin and rtainin top tant evry

on o t ri a inrad in a and ompxity

ivn t tat o t urrnt onomi nvironmnt

RIsk PRePAReDNess

In nra, mot oraniation av inrad tir pr-

pardn or ri compard to t 2007 urvy, ovra ri

prpardn or t top tn ri a inrad rom 60 to

70 prnt howvr, or tr o to tn ri, onomi

downturn, dama to rputation and ruatory/iativan, wr tan 66 prnt o rpondnt indiat ty

av ormay rviwd tat ri or av a pan in pa to

da wit it T tr ri ar ompx, diut to ontro,

arry a dr o unprditaiity and impat t ntir

ntrpri Tou diut to mana and utantiay not

inura, ty mut ti addrd and rquir innovativ,

orward-ooin oution

lOsses

T oa onomi rii a opnd t door to many

uin o givn t timin o t urvy – Otor

and Novmr 2008 – mu o t o ad not yt n

raid or rportd, piay in onomi upava o

ti natur at indutri and oraniation at dir-nt v and in varyin timram It oud aumd

tat mot oraniation wi xprin imiar o in t

omin 12 to 24 mont

RIsk MANAgeMeNT DePARTMeNTs AND UNcTIONs

“Doin mor wit ” appar to today’ ada or mot

oraniation T 2009 goa Ri Manamnt survy

rvad tat ompani ar uttin a on rour and

rinin ri manamnt dpartmnt wi tryin to

arpn t ou and trntn t inratrutur o t

tam T rowin nd to mana ri on an ntrpri-widai do not m to av promptd mor rm to rat t

i ri or (cRO) ro howvr, manain ri on an n-

trpri-wid ai ontinu to aat in importan givn

t inrain ompxity o ri or oraniation o a i,

t impmntation o a proativ, mor oiti approa to

t pro om vn mor ritia Ti, omind wit

an tan o in-ou ri manamnt dpartmnt and

untion, ontinu to driv rian on tird parti or t

inuran and ri manamnt ativiti



AONGLOBALRISKMANAGEMENTSURVEY2009 AONGLOBALRISKMANAGEMENTSURVEY2009

IDeNTIYINg, AssessINg, MeAsURINg ANDMANAgINg RIsk

wr tan a o urvy rpondnt rport train and

manain tir tota ot o ri (TcOR) Ti trnd motiy rft t rinin o ri manamnt dpart-

mnt and top manamnt’ tim pnt addrin y

ri – tr may impy tim avaia to monitor

ativity at ti v howvr, witout adquat monitorin

and maurin pro in pa, TcOR wi diut –

and prap impoi – to mana tivy evn wit

ri manamnt rour trtd tin in t rion,

oraniation wi nd to ta a or oo at train

and maurin TcOR Rian on nior manamnt’

intuition and xprin i ti t mot ommon way

oraniation idntiy ri T danr to ti mtod ar

ar – ri idntiation ad on xprin and intuitionaon tnd to mi mrin or nw ri and may

inonitnt

cAPTIVe MANAgeMeNT

Mor tan 5,000 aptiv ar pin oraniation man-

a tir ot durin t urrnt onomi downturn,

partiuary or arr oraniation or to in t nania

rvi tor Tirty-vn prnt o a urvy rpon-

dnt rportd avin an ativ aptiv or Prottd c

company (Pcc) In ti tumutuou onomy, orania-

tion tat arady av aptiv an quiy a tm or

immdiat oution In addition to aiitatin t man-

amnt o divr oa proram, aptiv p rdu

tota ot o ri, taii inuran ot, rat a to

inuran and rinuran mart, and rtain a fow

and invtmnt inom Ri mot rqunty undrwrit-

tn y aptiv ar proprty and nra iaiity, ut tr

i rowin intrt in undrwritin a roadr ran o ri

inudin nania produt, mpoy nt, nviron-

mnta/poution and rdit/trad rdit

RIsk INANcINg

At t tim t urvy wa ondutd – t ourt quartr o 2008 – oraniation rportd ty wr omorta wit

t v o umra/x iaiity and dirtor and or

iaiity (D&O) imit purad, a w a t v o tir

urrnt rtntion Ovra, t maority o oraniation

indiatd no an in tir rtntion ompard to tir

prior poiy priod, mainy drivn y t ot mart in 2008

and t at tat rtntion wr at u a v tat urtr

inra woud not iy yid maninu avin

bOARD OVeRsIghT AND INVOlVeMeNT

board o dirtor ar tppin up to proativy provid

adrip or tir oraniation a ri inra aro in-

dutri and around t word Tr out o our ompanirportd taiin poii on ri ovrit and mana-

mnt and amot nin out o 10 ompani av oard-v

invovmnt in tir urrnt approa to ri manamnt

buin ri i not ut ront-pa nw – it i ary a oard-

v iu and wi or many mont to om

INsURANce MARkeTs

In t onoin oa onomi rii, mot orania-

tion ar in inuran arrir wo an dmontrat

nania taiity in t orm o tron nania ratin and

on-trm apaity to pay aim Ti urvy wa on-

dutd in t ourt quartr o 2008, and oraniation

ary rvad ow ty viw inuran mart, inudin

ow variou ator ar prioritid in tir oi o inurr

Unand in t prviou urvy ondutd two yar

ao, nania taiity/ratin wa rand a t mot ritia

ator, onitnty in rt pa in a rion Rand

ond ovra wa vau or mony, oowd oy y

aim rvi and apaity – two traditiona tandard in

wi inurr ar vauatd

glObAl PROgRAMs

Nary two-tird o our rpondnt aid ty av pur-ad a oa inuran proram or ot proprty and

auaty T pura o t proram i dirty ratd

to t xitn o a ri manamnt dpartmnt and t

oraniation’ opratin trutur – to ompani wit

ntraid opratin mod and t aiity to impmnt,

monitor and mana oa ri nan trati wi

mor iy to arran oa proram au ty oo

at ri, ot o ri, and approa to ri nan rom a

roadr prptiv

cONclUsION

Wit t oa onomy in iniant ditr, it a nvr

n mor urnt to undrtand and proativy addr

uin ri at vry v o t oraniation Opportunity i

inrnt in a orm o rii, o to oraniation prpard

to aptur opportunity wi ad t way out o ti downturn

wit rout and w-ttd ri manamnt trati in

pa, and wit ar otiv t or u in t utur




ResPONDeNT PROIle Aon’ goa Ri Manamnt survy wa ondutd in Otor and

Novmr 2008, and i ad on rpon rom 551 oraniation in

40 ountri

T 551 rpondnt inudd in ti rport rprnt a

road ran o indutry tor around t o T

maority o rpondnt – 56 prnt – ar puiy-ownd

oraniation, and 37 prnt ar privaty ownd T rt

o t rpondnt ar primariy ovrnmnt-ownd or not-

or-prot oraniation

Ti i t ond oa urvy Aon a ondutd;

t rt wa puid in 2007 Ti urvy wi ta

pa vry two yar

53 North America

25Europe

13

Asia Pacific

6

Latin America

3

Middle East & Africa

%

iur 1

survy rpondnt’ domii y rion

55 The Americas

24Europe

15 Asia

Australasia

2

Africa

%

4

iur 2

survy rpondnt’ rvnu y ara




35

$1B – $4.9B

16

$5B – $9.9B

9

$25B+

7

$15B – $24.9B

$10B – $14.9B

%

< $1B

26 7

iur 3

survy rpondnt’ rvnu

Ta 1

survy rpondnt’ indutry

Industry Percent

Ariuin 4%

Aviation 1%

banin 2%

cmia 5%

conumr ood manuaturin 7%

contrution 6%

eduation and nonprot 2%

ood proin and ditriution 5%

hat ar 3%hopitaity 1%

Inuran, invtmnt and nan 5%

lumr, urnitur, papr, and paain 3%

Mainry and quipmnt manuaturin 6%

Mta miin and manuaturin 5%

Natura rour (oi, a and minin) 5%

Non-aviation tranportation manuaturin 2%

Non-aviation tranportation rvi 5%

Parmautia and iotnooy 2%

Printin and puiin 1%

Proiona and prona rvi 3%

Ra tat 2%

Rtai trad 6%

Rur, pati, ton and mnt 2%

Tnooy 6%

Tommuniation and roadatin 4%

Utiiti 3%

Woa trad 2%

* Rtaurant and ot inudd in hopitaity; bvrainudd in ood proin and ditriution; Txti

inudd in conumr ood manuaturin

Role Percentage

Ri manar 54%

Otr 14%

ci ri or 10%Traurr 6%

ci nan or 5%

ci xutiv 2%

Pridnt 1%

ci adminitration or 1%

ci oun/ad o a 1%

had o uman rour 1%

Ri onutant 1%

company rtary 1%

ci opration or 1%

Ta 2

survy rpondnt’ ro




TOP TeN RIsks

In at 2008, rdit – t iood o t onomy –

ontratd; ar nania intitution tumd ovrnit;

ondn in t ovny o nania intitution pum-

mtd; and an virtuay ad ndin T rapidy

vovin ator d to a ompt upava in t ounda-

tion o our onomy

T Us onomy’ poor prorman a n mirrord

a ovr t word Virtuay no ompany, indutry, or oun-try i immun to ti unprdntd priod o onomi

unrt Tror, it om a no urpri tat onomi

owdown wa t numr on ri in our urvy (Ta 3)

In a dtrioratin onomy t a o avaia rdit –

wi aow uin to oprat and row and individu-

a to ma pura – or oraniation to radiay

an avior y rduin apita pndin Ti rdution

rtrit rowt y uttin opratin ot and iminatin

o Today’ Us unmpoymnt rat i at it it v

in 16 yar, and many onomit xpt o o to

ontinu or mont to om

A o o aat, onumr pndin dra

Ti not ony rdu rvnu ut ad to x apaity,

wi in turn ad to id aiiti and aoiatd

ar – u a t ot o trminatin xitin ontratua

rationip; rduin t woror; and maintainin

tanant invntory Utimaty, uta in pndin r-

du arnin, potntiay rutin in vn mor ayo

In ti viiou ir, a rdit r and an onomi

ontration d into a otr Wn ti appn, ony

to wit t it rdit ratin an otain rdit, and

vn tn it i oty Witout rdit, ma uin

annot xpand and ar onomrat ar ord to ay

o mor worr, omtim y t touand

Du to ti widprad onomi owdown, ri dpart-

mnt, i any otr untion in t oraniation, omundr mountin prur to divr rut wit wr

rour Ti prur an impat ri manamnt in a

numr o way, rom proram din to tam trutur

Prap t mot diut ri manamnt iu w a

amidt ti turmoi i nurin tat oraniation rmain

ommittd to taid, tiv ri manamnt

trati sin ort-trm ain may rtrit or rdu

t on-trm u o ri manamnt proram Ri

ontro ort, or xamp, oud not inord or t

a o immdiat xpn uttin a ty ar ntia to

on-trm ot mitiation

A omprniv and uu rpon to ti oa

onomi downturn rquir t onitnt appiation o

xn in a at o ri manamnt

1. Economic Slowdown




Ranking Risk description Change in ranking vs 2007

1 eonomi owdown +7

2 Ruatory/iativ an +4

3 buin intrruption -1

4 Inrain omptition Nw ntry

5 commodity pri ri Nw ntry

6 Dama to rputation -5

7 ca fow/iquidity ri Nw ntry

8 Ditriution or uppy ain aiur -4

9 Tird party iaiity -6

10 aiur to attrat or rtain top tant -3

Ta 4

Top tn ri y rion

Asia Pacifc Europe Latin America Middle East & Arica North America

eonomi owdown eonomi owdown eonomi owdown buin intrruption eonomi owdown

Inrain omptition Dama to rputation Tird party iaiity eonomi owdown Ruatory/iativan

exan rat futuation commodity pri ri Pyia dama commodity pri ri buin intrruption

buin intrruptionDitriution or uppyain aiur

ca fow/iquidity riaiur to attrat or rtaintop tant

su-prim oap/rditrun

commodity pri riRuatory/iativan

Inrain omptition Inrain omptition Inrain omptit ion

Ruatory/iativan

buin intrruption Dama to rputation exan rat futuation commodity pri r i

Tird party iaiity Inrain omptition commodity pri riInadquat uionpannin

ca fow/iquidity ri

Dama to rputation Tird party iai ityDitriution or uppyain aiur

Ruatory/iativan

Dama to rputation

Pyia dama exan rat futuation Watr/natura diatr Poi tia ri/unrtainti aiur to attrat or rtaintop tant

Watr/natura diatraiur to attrat or rtaintop tant

Ruatory/iativan

ca fow/iquidity riDitriution or uppyain aiur

Ta 3

Top tn ri




Industry Key Risk 1 Key Risk 2 Key Risk 3

Ariuin commodity pri ri ca fow/iquidity ri Watr/natura diatr

banin empoy dionty computr viru/maiiou odraud, u-prim oap/rditrun

cmia eonomi owdown commodity pri riDitriution or uppy ain

aiur

conumr ood manuaturin eonomi owdown commodity pri riDitriution or uppy ain

aiur

contrution eonomi owdown su-prim oap/rdit run Inury to worr

eduation and non-prot eonomi owdown Inrain omptition ca fow/iquidity ri

ood proin and ditriution Produt ra commodity pri ri buin intrruption

hat ar Ruatory/iativ an Inrain omptition ca fow/iquidity ri

hopitaity eonomi owdown Inrain omptitionbuin intrruption, Damato rputation

Inuran, invtmnt and nan Ruatory/iativ an eonomi owdownInrain omptition, Damato rputation

lumr, urnitur, papr,and paain

eonomi owdown commodity pri risu-prim oap/rditrun, ca fow/iquidity ri

Mainry and quipmntmanuaturin

eonomi owdown exan rat futuationcommodity pri ri, buinintrruption

Mta miin and manuaturin buin intrruption eonomi owdown commodity pri ri

Natura rour(Oi, a and minin)

commodity pri r i aiur to attrat or rtain top tant Ruatory/ iativ an

Non-aviation tranportationmanuaturin

eonomi owdown Ditriution or uppy ain aiurcommodity pri ri, buinintrruption, exan rat

futuation

Non-aviation tranportation rvi eonomi owdown Ruatory/iativ an Inrain omptition

Parmautia and iotnooy Ruatory/iativ an Dama to rputationDitriution or uppy ain aiurexan rat futuationaiur to attrat/rtain top tant

Proiona and prona rvi eonomi owdown aiur to attrat or rtain top tantDama to rputation,Ruatory/iativ an

Ra tat eonomi owdown su-prim oap/rdit run Tird party iaiity

Rtai trad eonomi owdown Dama to rputationDitriution or uppy ain

aiur

Rur, pati, ton and mnt eonomi owdown Ditriution or uppy ain aiur commodity pri ri

Tnooy eonomi owdown buin intrruptionInrain omptition, aiurto attrat or rtain top tant

Tommuniation androadatin

eonomi owdown Ruatory/iativ an buin intrruption

Utiiti Ruatory/iativ an Watr/natura diatr cimat an

Woa trad eonomi owdown Dama to rputationcommodity pri riDitriution or uppy ain aiurempoy dionty

Ta 5

Top tr ri y indutry




2. Regulatory and Legislative Changes

3. Business Interruption

Oriinay dind to manim or mitiatin ri,

ruation and iation ar now privd a t ond

ratt ri ator ain uin – a iniant an

rom two yar ao wn it wa rand ixt in ti urvy

Ri ratd to ruatory and iativ an invov

t inaiity o an oraniation to ompy wit urrnt,

anin or nw ruation T ri indr t orani-

ation’ omptitiv advanta and it aiity to t ivy

ondut uin and aiv it otiv

In t wa o t oa onomi rii, an inra in

ruation witin t nania tor i widy antiipatd;

owvr, it i ti unar wtr mor trinnt rua-

tion wi xpand to otr indutry tor or mutina-

tiona oraniation, t ot, quantity and ompxity o

ruation prnt riou an in trm o mana-

in ompian wit ruatory ri T uin ar

pndin onidra tim and rour in puruit o

ompian o variou typ o ruation, inudin

saran-Oxy, ba II, sovny II and t Intrnationa

inania Rportin standard Wit mot ompani

apt t nd or ru to ovrn uin and ar au-

tomd to worin witin ruatory ontraint, t voum

and ompxity o t ru an dauntin, not to

mntion t rquny wit wi ty an

T Unitd stat i ommony viwd a on o t mot

aviy ruatd ountri in t word, atou cina’

ruatory nvironmnt i xpandin snior manamnt

tam around t word ar ny awar tat non-om-

pian wit ruation oud rut in o o mart,

rputation and utomr – vr onqun tat

oud trt ar yond any dirt pnaty impod y

normnt ani

Ratd numr tr, uin intrruption ri i ind to

uppy ain and t intrdpndny o oa uinpartnr, a w a trnd toward outourin and oor-

in T ator tat ontriut to uin intrruption

an rapidy, main it a anin ri to undrtand

and mana

Wi not a o t ri ratd to uin intrruption

ar inura, inuran proram ar radiy avaia or

dama-ratd o or xamp, produt ra inur-

an xit or to indutri nitiv to produt qua-

ity aiur auin intrruption Inrainy inurr ar

in to innovat in t proviion o non-dama ratd

uin intrruption ovra

irt tp or prparin or uin intrruption ri inud

idntiyin uin intrruption trat, ain and vau-

atin to trat, and prioritiin tm to nur tat t

ri tat arry t mot impat and iiood ar proativy

addrd A iniant omponnt o ti i undrtandin

intrdpndni – ow vry ompany invovd in your

uppy ain t totr and t ri xpour ti rat

Wit omprniv uin intrruption inuran

ovra and ontinny pannin, t ri an tivy mitiatd Ri an ao tran rrd y

outourin Ti, owvr, rin nw xpour in

it rom t poitia and onomi nvironmnt otn

td or outourin opration

Too otn, uin ai au tir adr do not r-

oni t natur o tir oraniationa xpour

la o nowd i t ratt an to ovrom

ratd to uin intrruption ri

Today’ onomi downturn a atd oraniation

a aon t uppy ain An oraniation may itr notriv xptd raw matria rom a uppir, indrin

prodution and oin rvnu, or it may av a urpu

o produt ut no uyr In ti onomy, uin ar

runnin vn anr opration to r up a, and o

wn omtin o wron ty av tim and wr

rour wit wi to rpond Now mor tan vr it

i ruia to prpard or uin intrruption ri




4. Increased Competition Risk Rand ourt on ti yar’ urvy, inrad omptition

i a ar rftion o an ariv oa uin nviron-

mnt Today it i tour to win and rtain uin, and t

aiur to adquaty prpar or mart an – u a a

wordwid onomi owdown – oud rut in a rapid and

prap irrvri o o mart ar

Inrad omptition a a dirt and atin impat on

arnin In an a o mart oaiation, uin

vrywr mut awar o oa and oa ompti-

tor urtr, au a wand oa onomy man

tat onumr av dipoa inom, ompani

ar omptin or a mar a o int wit drad

pndin powr

comptitiv traty an no onr impy ad on t

urrnt mart nvironmnt ut mut oud on wr

t indutry i adin so-ad “trid and tru” uin

mod oud not oowd indy Mor tan vr, in-

novation, pd, and fxiiity wi ntia to ompt-

in in t oa onomy

Manain omptition ri dmand a i-v, ntr-

pri-wid approa tat inud:

Idntiyin and undrtandin nw omptitor ntr-

in t martpa

Diovrin t att onumr trnd and dvopin t

rquiit fxiiity to adapt and rpond to to trnd

stayin arat o tnooia advanmnt to n-

ur tat your uin i intratin t mot tiv

tniqu and tnooi avaia

Tain not o ruatory an witin your indutry

tor and in t tor o your uin partnr

bin awar o onomi trnd, partiuar y t urrnt

onomi owdown, and inorporatin t downward

it in dipoa onumr inom into your ort-

and on-trm trati

Undrtandin oaiation, inudin t ntry o

owr-ot onomi into t oa martpa

Prparin or ariv ation on t part o ompti-

tor, u a pri war

A taodr’ ou on nania pr orman ontinu

to arpn, tiv manamnt o t ri o inrad

omptition wi ontinu to a y ou or t oard o dirtor and nior manamnt




5. Commodity Price Risk commodity pri wr rand t du to dramati voatiity

in rtain ommodity mart u a oi, oa, mta and

ariutur or many indutri pri voatiity i a trmn-

dou onrn and a ia ri or ot r and uyr

Wn pri annot urd, ot trutur, udt,

invntory and prodution ar a a td buin pur-

ain ommoditi may in a avora poition to uy,

yt ty av rvnu an au t onomi

downturn a advry atd mart dmand Wn

dmand i ow and ommodity pri ar i, many or-

aniation wi try to avrt ri y ntrin into on-trm

ontrat, o tat ty an avoid t futuation o t

daiy mart wi ontroin ot trutur

howvr, on-trm ontrat ao av inrnt ri, a

taid pri may inianty dir rom t mart

pri, and i t pri drop it an a iniant dtri -

mnt to an oraniation Tror, it i ntia to tri

t rit aan twn on-trm ontrat and pot

pura Admittdy, ti aan wi dirnt or

a oraniation, ut it mut diinty manad

T urrnt imat o ommodity pri voatiity omind

wit a drain dmand ma it piay importantto mana oraniation’ nd and purain diion

Adoptin a on-trm traty wi p ontro ot and

mana ommodity ri som tip or t ommodity

ri nvironmnt inud:

Avoid speculation and plan wisely. Dvot tim and

rour to a diion mad and avoid ituation

tat or you to pura ar quantiti at unnown

mart pri A mia manuaturr i ut to t

futuation in natura a pri a a dto xpn

or nid produt I u a ompany wr to av

paid pot pri or natura a rom t innin o

2008 to mid-2008, marin oud av n potntiay

rodd or a ix-mont priod wi pri inrad

Understand the impact o the commodity on other

cost drivers in the business. In t uptram oi and

a indutry, day rat or mi-umri foatin ri

aatd aov $500,000 in 2008 ut av droppd to

$300,000 or in t rt quar tr o 2009 A ompany

wo oi and a martin traty did not ain wit

t rvi and quipmnt traty oud t -

in produt at a ow pri wi payin a i pri or

rvi and quipmnt

Understand your supply chain and business interrup-

tion risks. or om mart, u a nry, uin

intrruption i trony ind to ommodity ri by

dtrminin xpour and purain uin intr-ruption inuran ad on tat nowd, t

ompani an mor proativy mana tir ri and

imit xpour to pot-mart priin in a tim o rii

or nd

Balance locking in contracts with avoiding peak

market prices. In t t prodution indutr y, mt-

auria oa pri futuation in 2008 oud av

aud iniant arta i pura ad not n

andd tratiay ood in Autraia drov t pri

o mtauria oa to a-tim i at t innin

o 2008, ut a oa onomi rion aud t

dmand undamnta to wan and pri or mta-

uria oa to arpy drop at t nd o 2008 A t

produr wo purad ontrat or mtauria oa

durin t ummr o 2008 potntiay ad a an o

ttin tu wit mtauria ontrat at i pri

and t a at owr tan antiipatd pri




6. Reputation Risk

7. Cash Flow/Liquidity Risk

In t 2007 goa Ri Manamnt survy, ri to rputa-

tion wa ratd a t #1 ri Ti yar, it a droppd to

ixt pa Ti dra in ratin i du in ar part to t

oa onomi owdown, wi a ary tan prior-

ity in t urrnt urvy, a w a to otr ator ratd

to t downturn u a ruatory and iativ an,

uin intrruption, uppy ain an, and o o

ondn in mart howvr, t drop in ranin do

not dimini t importan o rputation ri In at, du

to onumr and ovrnmnta rutiny o mart futua-

tion and orporat avior, ompani today mut mor

awar tan vr o vnt and pattrn tat dirty impat

tir rand ima

Rputation ri impat t pui’ prption o t qua-

ity, intrity and intntion o an oraniation T ri a-

t a uppir’ diion to partnr wit t oraniation, a

utomr’ diion to pura it produt or rvi, and

a ovrnmnt’ or ruator’ diion to aow t orania-

tion’ ation

Rnty, tr av n vra xamp o rputa-

tion ri tat av arnrd wordwid attntion, u a

quaity iu in our ood and mdia uppi and otr

ood Taintd panut uttr and inant ormua and adpaint in toy ar ut a w xamp In today’ uin

and onumr imat, a vii ri an inianty

dama rdiiity; in ti n, a ri impat rputation

In at, a t 25 prnt indutry-wid dra in panut

uttr a indiat, vn i an oraniation i innont,

it uin an a td y an vnt tat vn rmoty

ti it to wrondoin T ti an tm rom t ation

o otr in t indutry or vn orapia trritory

soution to rputation ri tart wit oatin xitin ri

or t uin and tn undrtandin t impat on rp-

utation i t ri ourrd An ary warnin ytm tat

idnti and poiy prvnt potntia prom a w a

a ommuniation and ontinny pan ar t mot

tiv way o addrin rputation ri

Additionay, quaity ontro mut aivd at vry

point aon t uppy ain a a omponnt o a ri

manamnt pan

A apita i urtr ontraind, ompani ar main

ardr oi and ooin at a diion wit a rat da

o rutiny and ptiim Wi t raity o t onom-

i downturn i normou, a uin an ta om ma

and tiv tp to prott t oraniation: a t

ood wor tat a n aompid, ma inrmnta

improvmnt, and dvop a proativ and ompany-widrputation prottion proram

In ti anin onomi nvironmnt, a fow and

iquidity ri a mad an apparan in t top tn it o

ti urvy ca fow i otn a ttr indiation o iquid-

ity tan maur o inom au a i ud to pay

t oraniation’ i liquidity ri i t ri tat an atannot tradd quiy, or t ri tat a iaiity annot

paid wn du Rnt turmoi in t oa rdit and

anin mart point to t importan o maurin

and manain a fow and iquidity – two y ompo-

nnt in a ompany’ ovra uin r i pro

Many uin invt in ond to improv t prdit-

aiity o tir inom tram howvr, unti rnty

rdit o rom i-quaity ond wr rar and

unxptd in t udtin pro Additionay, rnt

voatiity in t oa to mart a urtr trda fow and itnd nitivity to iquidity onrn

A ompany’ aiity to turn ort-trm at into a to

ovr dt i ntia wn rditor ar in paymnt

banrupty anayt and morta oriinator rqunty u

iquidity ratio to a a ompany’ at and virany




8. Supply Chain Managementsuppy ain manamnt ri, ind to uin intr-

ruption and ommodity ri, ran it in an unrtain

oa onomy wr t ri o uppy ain diruption

and day i inrainy ommon and an rat dramati

prom or oraniation aro indutri

Oraniation wit ompx uppy ain otn nd it di-

ut to a t natur o tir ri xpour, piay

in a at-movin nvironmnt T rowin ompxity o

oa uppy ain intration and rapid dvopmnt

in tnooy ar widnin t ran o uppy ain ri

iu Intrna and xtrna uppy ain ri tratn

uin ontinuity and ompiat t manamnt o

uppy ain vunraiity

Wi many onidr uppy ain ri manamnt to ap-

py oy to manuaturin oraniation, it i impor tant to

roni tat rvi oraniation ar not immun to ti

ri T oraniation ar at ri trou potntia ra

down in poii, produr, tnooy and ommuni-

ation ytm, a w a t ri aoiatd wit uman

apita A numr o maor trnd ontinu to iit t

importan o uppy ain manamnt:

Oshoring and outsourcing: To mt invtor rowt

and prorman xptation, tr a n trmn-dou prur in t orporat word to rdu xpn

and rmov undrprormin at and opration

rom uin portoio

Lean sourcing: ou on uppy ain or t pat 10

yar ntrd mainy on uin pro optimiation

trou six sima or otr vauation pro

Reductions and consolidation o supplier base: In an

ort to driv down t ot o raw matria, orania-

tion av onoidatd tir uppir a In addition,

mrr and aquiition o uppir av ao drad

t numr o vndor on wi oraniation ry

Reliance on technology: Mor tan vr or, manu-

aturin and rvi oraniation ar dpndnt on

tnooy, inudin intrnt and intrant a, and

variou mod o ommuniation

Tartd ri amnt ar an intra apt o mana-

in uppy ain in t urrnt onomi nvironmnt

Mappin t uppy ain to undrtand intrrationip,

manuaturin pro and rvi produr wi p

idntiy and prior iti potntia uppy ain ri T

ri an ari rom a numr o dirnt ara, inudin

in and o our uppir; t aiity to attrat and

rtain t rit uman rour; proprty and auaty

ri; quipmnt, pro or produr aiur; and ountr-

it and tamprin ri

Many oraniation ar uin t inormation and

rom ri mappin and amnt to dvop ri quan-

tiation mod around tir uppy ain ri T

mod not ony provid init into t manitud o

potntia vnt ut ao aow or t onitnt and quan-

titativ ot–vru–nt vauation o variou mitiation

trati tat may inud divriation o oation and

uppir, uin ontinuity pannin, din, and

nanmnt to tnooy

compani today ar runnin anr opration Tit

rdit, ut-in-tim invntori and mar ta a

ontriut to potntia uppy ain diruption or day Pro-

ativy dinin uppy ain to riint i a y trat-y or manain ri in a rapidy anin nvironmnt




9. Third Party LiabilityIn 2007, tird party iaiity (TPl) wa itd a t tird

mot iniant ri and ti yar it i rand a nint

Ti dra a to do wit an ovra rdution in

TPl and mor wit t at tat a t onomy a it-

d, uin otiv av oowd uit and otr ri

av tan ir priority Ti ranin i ao a rftion

tat t inuran mart or TPl a nray n ta

and rponiv to ri xpour

T a dnition o TPl i odiy inury, o or dama

aud to a tird party a a rut o ation or ination, or

nin Rutin awuit may rout y tird

parti, u a mpoy, t pui or arodr,

and an ratd to a wid ran o ativiti tat t

uin ondut

TPl awuit ar inrainy oa and ontriut to an

ovra riir iaiity nvironmnt or uin, tir

manar and oard o dirtor Tr maor TPl itia-

tion trnd av n idntid:

Tird party itiation undin (waty individua and

ompani pin to und awuit tat painti mit

not otrwi rin)

ca-ation uit (a awuit rout y on or mor

painti on a o a ar roup o otr wo av

a ommon intrt)

orum oppin (t tion o ourt tat aimant or

dndant iv wi mot rindy to tir a)

T nra trnd toward inrad rquny and vr-

ity o awuit indiat tat in today’ wordwid rion

many arodr, invtor and onumr mit

ompnation or ad wrondoin ratr tan apt

mart o Indd, a ompani to d ot y

rduin tir woror, ormr mpoy may u or

ad dirimination or unair prati Our “ompna-

tion utur” i dmontratd in t tartin o potntia

aimant on ot an individua and roup ai

Tr av n partiuar ara o onrn rardin t

iaiiti o dirtor and or, wit a rowin numr

o ation in Autraia, canada, cina, India, Itay,

Maayia, Ruia and t Uk, wn ompard to t rt

o t word howvr, t Unitd stat ontinu to ad

onrn rardin TPl and it i a dominant iu or om-

pani wit ot Us opration and to xportin into

t mart It i xptd tat t arit in o rdit

run itiation wi tart in t Unitd stat

Rpon to t inrad xpour a varid rom t

pramati, u a improvd at and aty tandard

or aitd rturn-to-wor proram, to t mor xtrm,

u a xitin rom rtain produt or rvi du to t

privd danr o awuit




Oraniation nd t rit pop in t rit poition

to uid t uin in t propr dirtion At a tim o

maiv ayo, rtruturin and dayrin, attratin and

rtainin top tant rquir adrip i tat aan in-

rad intnity and trati and tatia ou wit tiv

an manamnt and ommuniation Main diion

aout wo tay and wo o rquir a onitnt and

diint vauation pro

Many onomit iv tat orporat prot wi din

in arat y a mu a 50 prnt in 2009, and xprt

xpt t onomi downturn to at 24 to 36 mont

compani ar xptd to ut ot ovr ti priod y an

avra o 10 prnt and many oraniation ar ooin

at outourin and oorin to rdu xpn

T mot important omponnt in tant manamnt

today i t din o a pan tat i pi to t ora-

niation and tat driv y uin otiv To

uin tat do not mana tir ta nt diion ap-

propriaty ar xprinin nativ onqun and in-

rad ot examp o t rut inud an inra

in int dtion, a rdution in mpoy mora and

wor or produtivity, an inra in itiation ri and

worr’ ompnation ot, and a o o y tant

cot uttin and tan an ar a raity in today’

wordwid rion, ut ty mut ain wit ort- and

on-trm uin trati Additionay, rtruturin

and ot rdution mut ay dni, at-ad

and air I an i not dr ivn in t rit way, t -

nania ri ar utantia Wn uttin ot ratd to

tant or i tat no onr ain wit trati dirtion,

it i important to prrv t tant, produt and rvi

tat dn t ompany in ordr to uid t pro

and inratrutur tat wi driv utur u

To prrv y tant and na mpoy, ompani

mut impmnt tiv an manamnt and om-

muniation tat:

Dvop a ompin uin a or an

Dtrmin wo i ttin and ivin ma and

quippin manar to upport an

Divr t nw ary, onty and ary rom

rdi adr

T pop wat wi and won’t an, and a or

ation and ommitmnt

ena mpoy in ontant, two-way da to

dip rumor and rinor t uin a

10. Talent Management




RIsk PRePAReDNess OR The TOP TeN RIsks

In nra, mot oraniation av inrad tir pr-

pardn or ri compard to t 2007 urvy, ovra

ri prpardn or t top tn ri a inrad rom60 to 70 prnt

Prpardn or ri i vidnd y a pan in pa tat

addr t ri or a orma rviw o tat ri or om

ri, urvy rpondnt indiatd a ow tat o prpard-

n, u a dama to rputation at 58 prnt (rand

numr ix on t top tn it); onomi downturn at 60

prnt (rand numr on on t top tn it); and ru-

atory/iativ an at 65 prnt (rand numr

two on t top tn it) (iur 4) T ri ar typi-

ay mor ompx, diut to ontro, arry a dr o

unprditaiity and ar ntrpri-wid Wi diut tomana and utantiay not inura, ty mut ti

addrd and rquir innovativ, orward-ooin oution

Tr i, o our, a tron orration twn t avai-

aiity o ri tranr produt tat addr a pi ri

and t xitn o an taid r i-ratd pan

howvr, i t ri annot inurd, t oraniation

mut ti ta tp to mana it a tivy a poi

Wit w xption, mot indutri ar mor prpard

in omparion wit wat ty indiatd in 2007 (Ta 6)

Ti inra in prpardn may a rut o orania-

tion’ ontinud ou on ri idntiation, quantiation

and anayi – and mor importanty inrad priority on

manain ri on an ntrpri-wid ai Ti prmi

i urtr upportd y ti urvy’ rpon to ui-

n ativity prioriti – wr oraniation indiatd

ri idntiation, quantiation and anayi a a numr

on priority (ao numr on in 2007) and manain r i

on an ntrpri-wid ai a numr two (numr our in

2007) (Ta 12, p31)

Tr may a ontinud trnd toward inrad ri pr-

pardn in t utur; owvr, ti oud indrd

in t ort trm y t rdud avaiaiity o rour

rutin rom t onomi r ii I o, it wi intrt-

in to t on-trm impat o t nania rii on

t ri pro o t oraniation

Economic slowdown

Regulatory/legislative changes

Business interruption

Increasing competition

Commodity price risk

Damage to reputation

Cash flow/liquidity risk

Distribution or supply chain failure

Third party liability

Failure to attract or retain top talent

60%

65%

79%

71%

77%

58%

75%

70%

81%

68%

iur 4

Top tn ri wit rportd radin




Industry 2009 2007 Change

Ra tat 87% N/A N/A

Natura rour (oi, a and minin) 83% 64% 19%

Tommuniation and roadatin 80% 58% 25%

Utiiti 83% 64% 16%

lumr, urnitur, papr, and paain 82% 66% 16%

Mta miin and manuaturin 79% 77% 2%

Rur, pati, ton and mnt 79% N/A N/A

Non-aviation tranportation rvi 78% 63% 15%

Woa trad 78% 58% 20%

ood proin and ditriution 76% 63% 13%

Tnooy 74% 65% 9%

Inuran, invtmnt and nan 73% 74% -1%

ban 72% 76% -4%

conumr ood manuaturin 72% N/A N/A

hat ar 68% N/A N/A

Mainry and quipmnt manuaturr 68% 49% 19%

Ariuin 66% 63% 3%

Parmautia and iotnooy 65% 47% 18%

Rtai trad 64% 64% 0%

hopitaity 70% N/A N/ANon-aviation tranportation manuaturin 58% 60% -2%

contrution 57% 61% -4%

Proiona and prona rvi 57% 61% -4%

eduation and non-prot 56% N/A N/A

cmia 54% 52% 2%

Ovra avra 71% 62% 9%

Ta 6

Avra rportd radin or top tn ri y indutry

Region Reported readiness

Aia Pai 74%

Nort Amria 69%

Midd eat & Aria 69%

europ 67%

latin Amria 66%

Ta 7

Avra rportd radin or top tn ri y rion

Nota an ompard to 2007



AONGLOBALRISKMANAGEMENTSURVEY200920 AONGLOBALRISKMANAGEMENTSURVEY200920

lOsses AssOcIATeD WITh TOP TeN RIsks

Toppin t it o ri wit ratd o in t pat 12

mont ar onomi owdown and ommodity pri ri

wit 57 prnt a, oowd y tird party iaiity andinrain omptition at 40 and 39 prnt rptivy

(Ta 8)

givn t normity o t oa onomi rii, it i not

urpriin tat oraniation ar xprinin o aoi-

atd wit t owdown Wat i urpriin i tat ti i

not appnin on a roadr a givn tat 60 prnt o

rpondnt indiatd ty av pan in pa to da wit

t onomi owdown, ty may proativy addr-

in iu avrtin ratd o Prap, ad on t

timin o ti urvy, rpon may ao not truy aptur

t impat o t onomi downturn Wi om orani-

ation ary av xprind o, onomi upava

o ti natur at indutri and oraniation at dir-

nt v and in varyin tim ram (Ta 9&10)

It oud aumd tat mot wi xpr in imiar iu

in t omin 12 to 24 mont

lo ratd to ommodity pri ri (57 prnt) wr

urpriin ivn t voatiity in 2008 in rtain om-

modity mart u a oi, oa, mta and ariutur,

wi atd ot uyr and r It i intrtin tat

77 prnt o rpondnt indiatd tat ty av pan in

pa to addr t ri or av undrtan a orma rviw

o t ri, and yt mor tan 50 prnt wr una to

avoid a o

Risk rank Risk descriptionLoss o income in

last 12 monthsLoss rank

1 eonomi owdown 57% 1

2 Ruatory/iativ an 24% 7

3 buin intrruption 30% 5

4 Inrain omptition 39% 4

5 commodity pri ri 57% 1

6 Dama to rputation 9% 10

7 ca fow/iquidity ri 25% 6

8 Ditriution or uppy ain aiur 20% 8

9 Tird party iaiity 40% 3

10 aiur to attrat or rtain top tant 16% 9

Ta 8

lo rom top tn ri

RegionAverage loss o income

experienced rom top ten risksin last 12 months

Midd eat & Aria 39%

Aia Pai 37%

europ 33%

Nort Amria 33%

latin Amria 29%

Ta 9

Avra prnta o rpondnt wit o o inom rom top tn ri y rion




IndustryAverage loss o income

experienced rom top ten risksin last 12 months

conumr ood manuaturin 44%

lumr, urnitur, papr and paain 42%

Parmautia and iotnooy 40%

contrution 40%

Utiiti 39%

Rtai trad 36%

Mainry and quipmnt manuaturin 36%

Mta miin and manuaturin 34%

Non-aviation tranportation manuaturin 34%

Natura rour (oi, a and minin) 34%

Non-aviation tranportation 34%

Woa trad 34%

Rur, pati, ton and mnt 34%

Ariuin 33%

eduation and non-prot 33%

Tommuniation and roadatin 30%

Inuran, invtmnt and nan 30%

hopitaity 30%

Ra tat 30%

Tnooy 29%

ood proin and ditriution 29%

banin 29%

cmia 26%

Proiona and prona rvi 25%

hat ar 22%

Ta 10

Avra prnta o rpondnt wit o o inom rom top tn ri y indutry






sin t our ot orm t or omponnt o TcOR,

tn it mut aumd tat no mor tan 44 prnt o

rpondnt ar atuay train TcOR or tir orania-

tion – a dra o 14 prnt rom t prviou urvy Ti

trnd i au or onrn a it i diut to mana wat i

not maurd givn tat urvy rpondnt indiatd tat

owrin tir TcOR i t top nt o invtin in ri

manamnt, w nd ti trnd urpriin and trouin

A rdud ou on undrtandin and train t or

omponnt o inura ri wi ao dtrat rom t mov

toward manain ri on an ntrpri-wid ai

Ti trnd mot iy rft t rinin i o ri man-

amnt dpartmnt, oupd wit inrad attntion to

y ri y top manamnt somtin a to iv and

prap tr i tim avaia to monitor ativity at tiv howvr, undrtandin t ot o ri i ntia to

ri manamnt and aiur to tra or mana a apt

o TcOR an dtrimnta to an oraniation

Tr i a nra orration twn t i o t

oraniation and t prnta o rpondnt maur-

in tir u TcOR, wit t it (55 prnt) in t

mor tan $25 iion rvnu atory and t owt

(34 prnt) in t tan $1 iion in rvnu atory

Oraniation wit orma ri manamnt dpartmnt

ar ao mor iy to maur tir u TcOR (52 prnt),

a ompard to oraniation witout a orma ri man-amnt dpartmnt (22 prnt) T ndin ar not

urpriin onidrin tat arr oraniation typiay

av ri manamnt dpartmnt, and to orania-

tion wit ri manamnt dpartmnt otn av mor

rour to ou on maurin t u TcOR

IDeNTIYINg MAjOR RIsks

survy partiipant wr ad to idntiy ony t primary

mtod ud to idntiy maor ri ain tir orania-

tion In prati, rpondnt ar proay uin a omi-

nation o mtod to idntiy tir maor ri

Rian on nior manamnt’ intuition and xprin i

ti t mot ommon way oraniation idntiy ri

(iur 6) simiar to t 2007 urvy, 40 prnt ovra ry

on ti approa oowd y 28 prnt wo u uin

unit ri ritr or y ri indiator wort, a mor

ytmati pro buin unit ritr ar it o y ri

ad y t oraniation or uin unit Ri ritr ao

typiay idntiy t xptd iiood and impat o o,

a w a t ri ownr and t mitiation mpoyd

Other

External service provider/advisor

Business unit risk registers or key risk indicator worksheets

Senior management intuition and experience

Board level discussion and analysis

$25B+$15B–$24.9B$10B–$14.9B$5B–$9.9B$1B–$4.9B< $1B

4%4%

18%

50%

23%

6%3%

27%

52%

12%

15%

40%

30%

13%

11%

5%

32%

16%

37%

16%

11%

35%

16%

22%

16%1%

4%

33%

24%

22%

iur 7

Idntiation o ri y rvnu

iur 6

Idntiation o ri y rion

North America

Middle East& Africa

Latin America

Europe Asia Pacific All

9%

4%

28%

40%

18%

6%

6%

52%

22%

14%

7%

6%

32%

27%

28%

6%

13%

41%

19%

22%

12%

12%

53%

24%

11%

1%

18%

55%

15%

Other

External service provider/advisor

Business unit risk registers or key risk indicator worksheets

Senior management intuition and experience

Board level discussion and analysis




T u o uin unit ritr to idntiy, maur and

tra ri manamnt pu t onidration o r i out

to a mu roadr roup, addin dpt to t pro

Ti i dira a on a idntid ri ar in -

inty and tivy ommuniatd to top manamnt,

wo ar poitiond to a t potntia impat o idnti-

d ri to t oraniation a a wo and an dpoy t

appropriat rour or tratmnt

To oraniation ryin on nior manamnt’ intuition

and xprin a t primary and ony mtod or idntiy-

in ri oud awar o om o t oowin iu:

Ri idntiation ad on xprin wi tnd to

mi mrin or nw ri

Ri idntiation ad on intuition may not

onitnt and may not ivn rdn y otr

Tr may a tndny toward ri avrion

Wi ony 18 prnt o oraniation u oard- v

diuion and anayi to idntiy y ri, ti approa

a om a mor ommon prati tan it wa in 2007,

up rom 7 prnt Ti an indiat tat nior xu-

tiv may tain mor ownrip o iu undamnta

to ntrpri-wid ri manamnt

AssessINg MAjOR RIsks

Ovra, t mot rqunt mtod rid upon or a-

in ri i oy pit twn intuition and xpr in

and uin unit quantitativ anayi (iur 8) Ti

vari rom t prior urvy, wr 46 prnt o rpon-

dnt rid primariy on uin unit quantitativ anayi

In today’ dynami uin nvironmnt, onoin and

rout uin unit quantitativ anayi rin vaua,

otiv diipin and onitny to t pro o a-

in t potntia impat o ri It mut undrtood,

owvr, tat ti pro tnd to ou on itoria ri

ratr tan nw or mrin on, a do rian onmanamnt intuition and xprin board-v init

and t prptiv o xtrna rvi providr/advior

ar otn ndd to round out t anayi

It i intrtin to not tat, ovra, oard v anayi i

inrain Atou ony 12 prnt indiatd ti a tir

primary approa or ain ri, ti amount wa a 50

prnt inra ovr t rut o t prviou urvy

extrna advior wit pia xprti an o tn providinit and uidan on mrin ri and tir potntia

to impat t oraniation

In trm o i, oraniation wit tan $5 iion in

rvnu ary ry mor aviy on intuition and xpri-

n to a ri, a ompard to oraniation wit

ir rvnu wo oud mor on uin unit ri

ritr or oard- v quantitativ anayi (iur 9)

T dirn in approa may xpaind ad

on op o opration, ompxity o ri ad, and ratr

avaiaiity o rour to prorm ativiti

Oraniation wit no ri manamnt dpartmnt ry

mor on manamnt intuition and xprin (46 prnt)

vru oraniation wit a ri manamnt dpartmnt

(31 prnt) Ti rut i not urpr iin, onidrin tat

oraniation witout ri manamnt dpartmnt wi

not av ddiatd ri manar to oordinat, prorm

or ad t mor dtaid typ o anay

North America

Middle East& Africa

Latin America


7%

8%

38%

35%

12%

9%

6%

48%

25%

13%

9%

9%

34%

29%

19%

9%

25%

38%

9%

19%

18%

53%

29%

6%

6%

36%

44%

8%

Other

Consult with external service provider/advisor

Business unit quantitative analysis

Management intuition and experience

Board level quantitative analysis

iur 8

Amnt o ri y rion




DeTeRMININg lIMITs O INsURANce

A mtod itd aov ar ativy ud y urvy rpon-

dnt to p dtrmin wat imit o inuran to uy;

owvr, ryin on a ror or indpndnt onutant

(30 prnt) i t mot ommon approa (iur 10)

Ti i oowd oy y nmarin aaint pr and

quantitativ anayi or mtri (21 prnt) To a r

dr, oraniation ry on manamnt intuition in t

tion o imit

T diion on wat v o ri to tranr via inuran

a two omponnt: t optima attamnt point andt tota imit o ovr to pura bot diion ar t

drivn y quantitativ anayi upportd y inormation

drivd or t otr mtod Wat i rit or on ora-

niation may not wor or anotr, and onidration mut

away ivn to t impat tat rtaind o may av

on t aiity o t oraniation to aiv it otiv

compard to t at urvy it appar oraniation ar

ryin on nmarin aaint pr (down rom

29 to 21 prnt) ompard to ryin on ror or ind-

pndnt onutant (23 prnt in prior t urvy, now 30

prnt) in dtrminin imit Ti i a poitiv trnd, a a

ror or an indpndnt onutant typiay woud ta

a mor omprniv approa, utiiin a omination

o t mtod diud to advi tir int on t mot

appropriat imit to pura

cint ar omin mor oniou o t imitation o

ony uin nmarin in dtrminin imit and ar

roniin tat pi ri pro ar quay i not

mor important It appar many oraniation, piay

arr on, ar innin to inorporat a mor anaytia

approa, u a nario anayi and Mont caro imua-

tion, to aumnt t mor t raditiona mtod o anayi

Other

Consult with external service provider/advisor

Business unit quantitative analysis


Board level quantitative analysis

$25B+$15B–$24.9B$10B–$14.9B$5B–$9.9B$1B–$4.9B< $1B

4%

9%

28%

43%

17%

5%

10%

37%

40%

8%

11%

4%

46%

29%

11%

13%

5%

45%

24%

13%

8%

49%

22%

11%

10%11%

14%

39%

27%

10%

iur 9

Amnt o ri y rvnu

North America

Middle East& Africa

Latin America


5%4%

21%

19%

30%

21%

4%

6%

25%

19%

34%

10%

5%

8%

24%

17%

29%

16%

9%

13%

25%

34%

6%

13%

6%

18%

53%

12%

4%12%

18%

27%

22%

29%

Other

Specific study or structured workshop

Quantitative analysis or metrics

Rely on broker or independent consultant


Benchmark against peers

iur 10

Dtrmination o imit o inuran y rion




or dtrminin imit (iur 11) A oraniation ontin-

u to mov to an ntrpri-wid approa to ri mana-

mnt, ti trnd wi mot iy inra

Wi to wit ri dpartmnt u a otr our mtod

airy vny, oraniation tat do not av a orma ri

manamnt dpartmnt ry mot aviy on ror or

indpndnt onutant (47 prnt) Ti ur i not ur-

priin onidrin tat mot oraniation witout a orma

ri manamnt dpartmnt may not av t ri man-

amnt xprti or rour avaia in-ou to a

t option and vauat t impiation o variou oi

beNeITs O INVesTINg IN RIskMANAgeMeNT

Wn ad aout t privd nt o invtin in ri

manamnt (Ta 11), t maority o rpondnt itd“owrin tir tota ot o r i – inudin prmium, rtn-

tion ot and ri manamnt ot” (69 prnt) a t top

nt, oowd vry oy y “in a to ma mor

inormd diion on ri tain/ri rtntion” (67 prnt)

T two y nt itd y rpondnt ar ntia

mnt o tiv ri manamnt, and ow w t

mnt ar manad i rftd in t u o t ri

manamnt untion witin an oraniation

A oud xptd, oraniation witout a orma ri

manamnt dpartmnt pad vau in a n-

t notd a ompard to to oraniation wit a orma ri manamnt dpartmnt T art ap in

privd vau a into two atori: mor inormd

diion-main on ri-tain and ri rtntion, and

improvd tandard o ovrnan T ap in prp-

tion may rft a a o undrtandin o t tru vau

tat an rout to an oraniation y proiona ri

manamnt xprti or may impy indiat tat to

opratin witout a orma dpartmnt av manad to

nd way to t ap

Other

Specific study or structured workshop

Quantitative analysis or metrics

Rely on broker or independent consultant


Benchmark against peers

$25B+$15B–$24.9B$10B–$14.9B$5B–$9.9B$1B–$4.9B< $1B

3%

2%

17%

18%

47%

13%

6%

4%

17%

17%

30%

25%

4%

9%

24%

17%

20%

27%

11%

18%

32%

26%

13%

5%2%

38%

16%

19%

16%

6%5%

27%

6%

31%

29%

iur 11

Dtrmination o imit o inuran y rvnu




eXTeRNAl DRIVeRs OR RIsk MANAgeMeNT

Wn ad to idntiy t iu ovr t pat two yar

tat av n t mot important xtrna drivr to

trntn ri manamnt (iur 12), rpondnt

indiatd onomi voatiity a t numr on atayt

(43 prnt), oowd y an inrad ou rom rua-

tor (35 prnt), and dmand rom invtor or ratr

diour and aountaiity (27 prnt) T rut ar

aiy xpaind y t mor rnt and widprad o-

nomi downturn Tr i ratr awarn o t nd to

prott at and t aan t rom unxptd o

and to aur u ompian wit ot nw and xitin

ruation and diour prati

Benefts AllWith risk mangement

departmentWithout risk management

departmentDierence in perceived

benefts

lowr tota ot o inura ri 69% 73% 60% 13%

Mor inormd diion onri tain/ri rtntion

67% 74% 47% 27%

Improvd intrna ontro 50% 53% 39% 14%

Improvd uin traty 48% 50% 41% 10%

Improvd uin ontinuity pannin 40% 42% 33% 9%

Inrad arodr vau 39% 42% 28% 14%

Improvd tandard o ovrnan 37% 42% 20% 22%

Inrad rturn on invtmnt 26% 28% 22% 6%

Rdud ompian ot 16% 17% 15% 2%

Otr 1% 1% 0% 1%

Ta 11

Primary nt o invtin in ri manamnt

Political uncertainty

Workforce issues

Pressure from customers

Other

Natural weather events

Demand from investors for greater disclosure and accountability

Increased focus from regulators

Economic volatility

6%

17%

20%

35%

43%

27%

18%

16%

iur 12

extrna drivr trntnin ri manamnt (pat two yar)




Without riskmangementdepartment

With riskmangementdepartment

All

7%

29%

17%12%

39%

27%

47%

29%

6%

53%

25%

9%

iur 13

board o dirtor or a oard ommitt tat av

taid ri manamnt poii y ri manamnt

dpartmnt

Don't know

Partially

No

Yes

bOARD OVeRsIghT AND INVOlVeMeNTRisk leadership at the top

A ri inra aro indutri around t word, oard o dirtor ar

tain a adin ro in rpondin to itnd rutiny and dmand

or aountaiity Tr out o our ompani av taid or partiay

taid poii on ri ovrit and manamnt and amot nin out

o 10 ompani av oard-v invovmnt in tir urrnt approa to

ri manamnt

POlIcIes ON RIsk OVeRsIghT ANDMANAgeMeNT

board ar ary awar o t importan o ri mana-

mnt and t danr o not addrin it tivy Ri

i now a top priority or oard-v anda, atou t

approa vary onidray

board o dirtor or oard ommitt otn aiitat

ri manamnt initiativ y taiin poii onri ovrit and manamnt simiar to t goa Ri

Manamnt survy ondutd two yar ao, 76 prnt

o our rpondnt aid tat a oard ommitt a ta-

id or partiay taid poii on ri ovrit and

manamnt (iur 13) O a t rion urvyd,

Aia Pai ad t it prnta o rpondnt

wit taid or partiay taid poii at 91

prnt, oowd y t europ wit 85 prnt

smar oraniation otn av prur rom inv-

tor and may not puiy itd Tror it i not

urpriin tat 59 prnt o oraniation wit tan$1 iion in rvnu (iur 14) wr not a iy to av

taid or partiay taid poii, wra 74 to

94 prnt o arr oraniation did, a ty tnd to

mor ruatd and rutinid, and xptd to dmon-

trat ood orporat ovrnan




Aro indutri, t oowin indiat t it rat –

ratr tan 85 prnt – o avin taid or part iay

taid poii:

banin

hat ar

Inuran, invtmnt and nan

lumr, urnitur, papr, and paain

Non-aviation tranportation manuaturin

Non-aviation tranportation rvi

cmia, parmautia and iotnooy ar amon

to indutri wit t owt rat Ti may -

au t indutri ar aviy ruatd and tror

ri ovrit and manamnt i oud on ruatory

ompian

Oraniation wit ri dpartmnt ar mor iy tan

to witout a ddiatd dpar tmnt to av a oard

ommitt wit taid or partiay taid poii

on ri ovrit and manamnt

APPROAch TO RIsk MANAgeMeNT AT ThebOARD leVel

Amot nin out o 10 ompani av om oard-v

invovmnt in tir urrnt approa to ri manamnt

(iur 15) O t approa itd, annua oard rviw

and approva ar rand mot popuar, oowd y t

oard onidrin pi uin ri

$25B+$15B–$24.9B$10B–$14.9B$5B–$9.9B$1B–$4.9B< $1B

9%

25%

32% 19%

39%

27%

34%

35%

7%

39%

7%

31%

8%

53%

8%

22%

8%

62%

8%

32%

3%

57%

2%

17%

4%

77%

25%

9%

Don't know

Partially

No

Yes

iur 14

board o dirtor or a oard ommitt tat av

taid ri manamnt poii y rvnu

Without riskmanagementdepartment

With riskmanagementdepartment

All

5%

15%

32% 29% 41%

4%

42%

18%

3%

45% 31%

12%

4%6%

12%

Don't know

Board systematically participates

Board considers specific business risks

Board reviews and approves annually (or periodically)

No board involvement

iur 15

Approa to ri manamnt at oard v y ri

manamnt dpartmnt




In trm o riona omparion, europan oard

ontinu to adr wit 98 prnt onidrin ri

iu at om v

T top pot a n tan ovr y latin Amria at 100

prnt; owvr, it may tat riona di rn ar

no onr iniant a tr a n a armoniation

o ovrnan pro drivn y to xan itin

rquirmnt and prur rom invtor

Oraniation wit tan $1 iion in rvnu (iur

16) ar twi a iy to not av om oard-v invov-

mnt in it urrnt approa to ri manamnt

simiar to t prviou urvy, anin ad a 100 prnt

oard-v invovmnt in t urrnt approa to rimanamnt at om v, oind ti yar y umr, ur-

nitur, papr, and paain, non-aviation tranportation

manuaturin, rur, pati, and ton and mnt

hopitaity ad t at oard invovmnt

Don't know

Board systematically participates

Board considers specific business risks

Board reviews and approves annually (or periodically)

No board involvement

$25B+$15B–$24.9B$10B–$14.9B$5B–$9.9B< $1B $1B–$4.9B

8%

19%

34%

12%

37%

9%15%

4%

45%

6%

31%31%

14%

5%

35%

22%

5%

45%

38%

5%

21%

43%

30%

2%

25%

52%

5%

3%

iur 16

Approa to ri manamnt at oard v y rvnu




RIsk MANAgeMeNT DePARTMeNT AND UNcTIONDoing more with less

compani ar uttin a on rour and rinin ri manamnt

dpartmnt wi tryin to arpn t ou and trntn t

inratrutur o t tam

Manain ri on an ntrpri-wid ai ontinu to

aat in importan givn t inrain ompxity

o ri or oraniation o a i, t impmntation o a proativ, mor oiti approa to t pro om

vn mor ritia Ri i no onr t rponiiity o

t w: rom t oard trou opration, tr mut

a ntwor o pop worin in onrt to idntiy and

addr iu tat oud av ntrpri-wid impat

bUsINess AcTIVITY PRIORITIes

survy rpondnt indiat tat tir pannd prioritiation

o ri manamnt ativiti ovr t omin two yar(Ta 12) wi rmain onitnt wit wat ty ar doin

now, poiy indiatin tat ty ar now in to uid

out and trntn tir ri manamnt inratrutur

Business activities 2007 RankingCurrent priority

rankingPriority rankingnext two years

Change betweencurrent & uture

ranking

Ri idntiation, quantiation and anayi 1 1 1 –

Manain ri on an ntrpri-wid ai 4 2 2 –

lo ontro/prvntion 3 3 3 –

Ruatory ompian and rportin 2 4 4 –

Inuran uyin 7 5 6

Ri ommuniation/trainin intrnay witmanamnt and opration

5 6 5

Ri nanin 8 7 7 –

emrny/ontinny pannin 6 8 8 –

caim manamnt 9 9 9 –

Ri ommuniation - xtrnay wit uinpartnr, utomr or t pui

10 10 10 –

Ta 12

Prioriti




It m vryon today i in ad to do mor wit

and ti appar to inrainy tru or ri man-

ar and tir dpartmnt Du to irin ontraint,

attrition, rtirmnt, and o imination, ri manamnt

dpartmnt ar rinin, tou ri onrn ar

arnrin inrad attntion and ovrit y nior

manamnt and oard

T urvy data t u tat or oraniation wit rvnu o

$1 iion or mor, ri manamnt dpartmnt ar rin-

in In 2009, 35 prnt o rpondnt aid ty av a tota

ri manamnt dpartmnt ta o ony on or two pop

(iur 17), wi in 2007 ony 26 prnt aid ty ad a

ta o ti i – a 6 prnt inra in two yar

Ti trnd i payin out aro oraniation wit rvnuup to $15 iion or oraniation wit rvnu o $1

iion to 5 iion, 48 prnt now av a dpartmnt o on

to two individua, ompard to ony 34 prnt two yar

ao – a 38 prnt it In t rvnu and o $5 iion to

149 iion, 30 prnt av a ri manamnt dpartmnt

o on to two individua – a 24 prnt inra

or int wit rvnu aov $15 iion, t movmnt

pattrn ar mu ar, xpt or oraniation ain

witin t rvnu and o mor tan $25 iion In ti

rvnu and, tr wa iniant itin twn at-

ori or dpartmnt o up to 20 pop; owvr, tr

i no an in t tota

evn tou ri manamnt dpartmnt ar rinin

ovra, 6 prnt do av mor tan 40 pop in tir

ri manamnt dpartmnt T ditriution o t

rpondnt a mor aviy in oraniation wit rv-

nu o $25 iion or ratr a w a witin t indutry

tor o anin, natura rour (oi, a and minin),

non-aviation tranportation rvi, proiona and pr-

ona rvi and tommuniation and roadatin

T i o ri manamnt dpartmnt vari onidr-

ay y indutry, a dirnt indutri av dirnt andprap mor ompx nd It appar tat rvnu i

ao pay a ro in ri manamnt dpartmnt i, ut

t orration i not aout larr oraniation otn

av mor ompx ri pro, iniant o ativity,

oa opration, opitiatd ri nanin proram,

and uin opration tat rquir maor tranationa

ativity upport A o ti driv ratr tan nd

Over 40

16-40

12-15

6-11

3-5

1-2$25B+$15B–$24.9B$10B–$14.9B$5B–$9.9B$1B–$4.9B< $1B All

6%

7%

6%

16%

29%

35%

12%

5%

5%

14%

4%

50%

26%

48%

7%

4%

4%

39%

30%

32%

12%

29%

16%

21%

15%

6%

14%

10%

13%

26%

45%

26%

16%

7%

2%

3%

3%3%

26%

15%

9%

iur 17

Dpartmnt tan y rvnu




chIe RIsk OIceR

T rowin nd to mana ri on an ntrpri-wid

ai do not m to av promptd mor rm to r-

at t i ri or (cRO) ro Ti may indiat tatmot oraniation pan to vra xitin tam and u

ri ommitt or drivin an ratr tan tai a

parat and ditint oraniationa ro

Twnty-v prnt o rpondnt o ti yar’ urvy

rport avin a cRO and a ur tr 10 prnt may appoint

on (Ta 13) Wr t ro o cRO xit, t untion

inud ri manamnt or ity mor tan a o

t oraniation, an inra rom 2007, wn 32 prnt

rportd u an ainmnt T inuion o inuran ri

manamnt rponiiiti wit t ro o cRO tnd to

inra wit oraniationa i

Wi tr i no in, ary dnd ro or a cRO,

t individua typiay av rponiiity or our main

ri ara:

crdit ri

Mart ri

Ruatory ri

Oprationa ri

Oprationa ri rponiiiti may or may not inud

inuran/aard ri T cRO may and t rponi-

iiti dirty or mana to wo do

sixty-two prnt o rpondnt rport not avin and

not pannin to rat a cRO poition ompard to 60

prnt in 2007 Rvnu i do m to av om

arin on wtr or not t cRO poition i in pa

or may ratd Oraniation wit rvnu tat

$1 iion ar ar iy to rat a cRO poition – 70

prnt ar not pannin ti an (arr rvnu and

ar ity mor iy to av or pan t cRO poition)

ompard to oraniation wit rvnu o mor tan $25

iion, wr ony 49 prnt av no intrt in ratin

ti poition

rom an indutry tandpoint, t ro o t cRO i ti

mot ommon in tor tat ar iy ruatd, inud-

in anin and inuran ompani, oowd oy y

parmautia and iotnooy and tn y natura

rour/utiiti

Role All

Y, ut ti ro do not inud inuran ri manamnt 11%

Y, and ti ro do inud inuran ri manamnt 14%

No, ut w ar onidrin ratin ti poition 10%

No, and w do not pan to rat u a poition 62%

Do not now 3%

Ta 13

Ro o t cRO y rion




RIsk MANAgeMeNT/INsURANceDePARTMeNT

In vry oraniation, someone i manain ri, wtr

it i a pridnt, cO, traurr or anotr xutiv woadd ri manamnt to tir otr duti or mar to

mid-id oraniation ti ro may andd y t

pridnt or cO, wi arr oraniation av a orma

ri manamnt dpartmnt d y a proiona ri

manar Ovra, oraniation tat vra ri mana-

mnt to ma ttr diion y inorporatin ri/rturn

onidration into a apt o uin ar mor iy to

omptitiv

Ri manamnt dpartmnt to iminat or rdu

t impat o unxptd o on an oraniation’ aiity

to aiv it oprationa and nania oa To aom-pi ti, ri manamnt typiay ri on t aurat

and timy idntiation, amnt, pr- and pot-o

mitiation, tranr and undin o atua and potntia

aidnta vnt, wi oud rut in an unxptd

o Tr mut a ar ou on prottin taodr

intrt, prrvin arnin powr and aurin t ai-

ity to divr on ommitmnt

svnty-it prnt o urvy rpondnt av a orma

ri manamnt/inuran dpartmnt (iur 18) Tr

wa om varian y rvnu i, ain into two maor

roupin – mor tan and tan $1 iion in rvnu

A wa t a in 2007, an ovrwmin 90 prnt o a

rpondnt wit rvnu o $1 iion or ratr indiatd

tat tir oraniation a a orma ri manamnt/inur-

an dpartmnt

Tr i a ar orration twn a ompany’ tota

rvnu and wtr or not ty av taid a orma

ri manamnt dpartmnt Ninty-v prnt o

rpondnt wit rvnu o $5 iion or mor av a ri

manamnt/inuran dpartmnt, ompard to ony 82

prnt o oraniation wit rvnu o $1 iion to $49

iion, and ony 48 prnt o oraniation wit rvnu

o tan $1 iion

contrary to ndin in 2007, tr ar no iniant

riona varian Indutri mot iy to av a orma

ri manamnt untion inud anin, ovrnmnt,

rtai trad, tnooy, tommuniation and woa

trad (a ratr tan 90 prnt)

O t rpondnt tat do not av a ri manamntdpartmnt (iur 19), 43 prnt rport tat ti untion

i andd y t cO, 15 prnt aid it i andd y t

i xutiv or pridnt and 9 prnt rport tat it i

andd y t traurr Rpondnt ooin t “otr”

atory indiat t untion in andd ary y

ri ommitt, a, uman rour, aty/urity or

intrna audit

Wi rom a riona prptiv tr ar dirn in

wo and ri manamnt rponiiiti in t an

o a orma inuran/ri manamnt dpartmnt (iur

20), tr i no dirna pattrn or varian wit t x-

ption o Aia Pai – t ony rion wr ri mana-

mnt/inuran i not typiay andd y t nan un-

tion In tat rion, a ri ommitt or t i xutiv

or pridnt ovr ri manamnt rponiiiti

0 20 40 60 80 100

$25B+

$15B–$24.9B

$10B–$14.9B

$5B–$9.9B

$1B–$4.9B

< $1B

All Yes No

Yes

Yes

No

No

No

No

Yes

Yes

No Yes

No Yes

%

iur 18

orma ri manamnt/inuran dpartmnt

43

Chief Executive, President

5

2

Human resources

Legal

6Risk committee

2

3

Other 15

Internal audit

Safety/security %

Chief Financial Officer 9

17

Treasurer

iur 19

Rponiiity or ri in t an o an inuran

dpartmnt




Other

Risk committee

Internal audit

Safety/security

Human resources

Legal

Treasurer

Chief financial officer

Chief executive, president

North America

Middle East& Africa

Latin America

Europe Asia Pacific

15%

23%

8%

15%

8%

31%

20%

4%

4%

4%

48%

8%

12%

20%

60%

20%

50%

2%

25%

5%

25%

7%

16%

7%

48%

13%

2%

iur 20

Rponiiity or ri y rion

clAIM AND sAeTY/RIsk cONTROl ROles

In-ou tan o aim and aty/ri ontro un-

tion dramatiay at t i o t ri manamnt

dpartmnt A ound in 2007, arr ri manamnt

dpartmnt typiay inud mor aim and aty/o

ontro ta, rftin t tndny o ar oraniation

toward an inrad v o in-ou manamnt or

t two ara

T maority o rpondnt (78 prnt) rport avin

on to two aim ta , wit it variation rionay

(Ta 14&15) Twv prnt ovra av a aim ta

o tr to v pop looin at t rvnu and, tr

i a ir prnta o rpondnt wit a ta o 10 or

mor in t $15 iion-pu and (Ta 15)

A wit aim, t maority o rpondnt (75 prnt)

indiat tat ty av on to two aty/ri ontro ta

(Ta 16) itn prnt av a aty/ri ontro ta o tr to v pop Riona dirn ar not ini-

ant, wit t xption o Aia/Pai, wr rpondnt

rport a ir v o in-ou tan T numr o

ta ao tnd to ir or oraniation wit rvnu

o $5 iion or ratr (Ta 17) stan v vary y in-

dutry, wit t it onntration o aty/ri ontro

ta rpor td y ompani in anin (33 prnt) and

tommuniation and roadatin (28 prnt)




Region 1-2 3-5 6-9 10+

A 78% 12% 5% 5%

Aia Pai 62% 20% 8% 10%

europ 76% 12% 6% 6%

latin Amria 57% 38% 5% 0%

Midd eat & Aria 75% 17% 8% 0%

Nort Amria 84% 7% 4% 5%

Ta 14

caim ta witin ri manamnt dpartmnt y rion

Revenue 1-2 3-5 6-9 10+

< $1b 88% 7% 5% 0%

$1b – $49b 83% 10% 3% 3%

$5b – $99b 82% 9% 4% 4%

$10b – $149b 76% 12% 3% 9%

$15b – $249b 55% 32% 10% 3%

$25b+ 53% 16% 12% 19%

Ta 15

caim ta witin ri manamnt dpartmnt y rvnu

Region 1-2 3-5 6-9 10+

A 75% 15% 3% 7%

Aia Pai 49% 25% 4% 22%

europ 80% 7% 2% 11%

latin Amria 52% 29% 5% 14%

Midd eat & Aria 50% 25% 17% 8%

Nort Amria 83% 13% 3% 1%

Ta 16

saty/ri ontro ta witin ri manamnt dpartmnt y rion




Revenue 1-2 3-5 6-9 10+

< $1b 71% 21% 7% 2%

$1b – $49b 82% 12% 3% 3%

$5b – $99b 79% 7% 3% 10%

$10b – $149b 71% 12% 0% 18%

$15b – $249b 71% 16% 3% 10%

$25b+ 57% 27% 2% 14%

Ta 17

saty/ri ontro ta witin ri manamnt dpartmnt y rvnu

RIsk MANAgeMeNT DePARTMeNT RePORTINgT oraniationa oation and rportin rationip o

t ri manamnt untion vari y oraniation and i

raty infund y nior manamnt’ approa to ri,

itoria approa and t prption o t vau rout

y t ri manamnt untion In addition, t ai mi-

ion o t oraniation and t typ o xpour ad (it

ri pro) pay a part in dtrminin t rportin in

conitnt wit ndin in 2007, a maority o rpondnt

(62 prnt) wit a r i manamnt dpartmnt indiat

tat ti untion rport to t cO/nan/traury

(iur 21) compx ri nanin proram, iniant

ri rtntion and aptiv nania manamnt ma

inuran ri manamnt a natura t witin t nan/

traury untion o mot oraniation

Oraniation wit iniant ri rtntion or ompxontratua, aim and itiation iu otn oo to

ain t ri untion wit a Ti ainmnt i mot

nota in oraniation wit rvnu o $25 iion or

ratr, wr 14 prnt indiat tat ri manamnt

rport to nra oun

Ony ix prnt o rpondnt indiat tat t ri

manamnt untion rport to t cRO Mot prominnt

witin ti roup wa t anin indutry, at 44 prnt

Otr mot rqunty notd rportin in inud (in

dndin ordr) t i xutiv/pridnt, ompany

rtary, i adminitrativ or, uman rour,ontror, aty/urity and intrna audit

62

8

1

General counsel

6

Controller Chief administrative officer

2

Other

6Chief executive, president

Chief risk officer (CRO) %

CFO/finance/treasury

3

9

Company secretary

12

1

Internal audit

Safety/security

Human resources

iur 21

Oraniationa rportin or ri manamnt




ThIRD PARTY seRVIce PROVIDeRs

lan tan o in-ou ri manamnt dpartmnt

untion ontinu to driv rian on tird parti or

t inuran and ri manamnt ativiti (iur22) som 71 prnt o rpondnt (up rom 67 prnt

in 2007) rport rian on indpndnt onutant or

prot wor and 71 prnt (up rom 59 prnt in 2007)

or onoin onutation Ovra, ompani u tird party

onutant mot otn in t ara o atuaria/ri arin

apaity/ri modin, proprty o ontro, aptiv man-

amnt/adminitration, and ontrat rviw (Ta 18)

Dirn mr wn omparin ompani wit a

orma ri manamnt dpartmnt to to witout

Wr a orma ri manamnt dpartmnt a not n

taid, rpondnt ar 41 prnt iy to outid onutany or aptiv mattr, 40 prnt

iy to proprty o ontro onutin, 28 prnt

iy in t atuaria/ri anayi atory, and 27 prnt

iy or ontrat rviw convry, ti mnt i 30

prnt mor iy to outid xprti in t ara o

worr ompnation/at and aty advi

som riona dirn ao mrd:

Aia Pai tird party advi mot otn in t

ara o aim advoay, proprty o ontro and ind-

pndnt inuran proram anayi

europ tird party advi mot otn in t ara

o aptiv, aim advoay and proprty o ontro

latin Amria i mot oud on advi in t ara o

ntrpri ri manamnt and proprty o ontro

Midd eat and Aria oo or outid xprti mot

otn in t ara o aim advoay, uin ontinuity

pannin, ontrat rviw, and aptiv

Nort Amria i t rion wr atuaria/ri anay-

i onutation i mot rqunty out, oowd y

proprty o ontro and aptiv

rom ti inormation w an onud tat proprty o

ontro i t mot widy out ara o outid xpr ti

aro a rion

0

10

20

30

40

%

50

60

70

80

90

Project work Ongoing consultation Outsource support / sta

$ 2 5 B

+

$ 1 5 B

– $ 2 4

. 9 B

$ 1 0 B

– $ 1 4

. 9 B

$ 5 B –

$ 9. 9 B

$ 1 B –

$ 4. 9 B

< $ 1 B

All

iur 22

U o indpndnt onutant y rvnu




Activity AllWith risk

managementdepartment

Without risk managementdepartment

Percentagechange

Atuaria, ri arin apaity anayi and ri modin 51% 54% 39% -28%

Proprty o ontro 51% 55% 33% -40%

contrat rviw 47% 49% 36% -27%

captiv 46% 50% 29% -41%

Worr ompnation/at & aty advi 36% 34% 44% 30%

Indpndnt inuran proram anayi 35% 34% 39% 13%

crdit 34% 34% 35% 1%

Ri manamnt inormation ytm 30% 34% 15% -57%

environmnta 27% 28% 23% -19%

Ri nanin and atrnativ ri tranr 27% 29% 17% -40%

buin ontinuity pannin 23% 25% 16% -36%

entrpri ri manamnt, ri amnt 21% 22% 19% -14%

Mrr and aquiition 20% 21% 19% -9%

Prmium aoation/prmium tax traty 15% 16% 9% -42%

caim advoay 13% 13% 12% -8%

s-inurd ompian 12% 10% 17% 66%

Woror pannin, inudin adrip dvopmntand uion

7% 7% 7% 0%

Tant rruitmnt trati 4% 5% 3% -42%

Ta 18

Typ o rvi providd y tird parti




INsURANce MARkeTsFinancial stability – the highest priority

givn t onoin onomi rii, oraniation ar mor oud tan

vr or on partnrin wit arrir wit tron nania ratin and

on-trm nania apaity to pay aim inania taiity a n

rand a t primary onrn wit rard to rpondnt’ oi o

inuran arrir

T urvy, ondutd durin t ourt quartr o 2008,

idntid ow int viw inuran mart, inudin

ow variou ator ar rand in an oraniat ion’ oi

o inurr Not urpriiny, ivn t wpin oa

nania rii tat ad n tadiy rowin durin

t a o 2008, t mot ritia ator or rpondnt

wa nania taiity/ratin (Ta 19), unand in

t prviou urvy inania taiity i rand rt y a

iniant marin, and importanty, i onitnty ratd

rt in a rion (Ta 20), a arrir mut n to

naniay ta to naviat trou t nania rii andpay aim wn ty matur Mor tan vr or, ta-

iity wit rard to ratin and nania trnt i ritia

and mot oraniation ar rutiniin a pamnt

Rand ond ovra i vau or mony, oowd oy

y aim rvi and apaity Vau or mony and aim

rvi ar traditiona tandard in wi inurr ar

onitnty vauatd capaity a iy mad it way to

t top tr or a w raon: It i an iu routiny ad

y ar oraniation and to oraniation tat ar in

i-ri indutri Additionay, xpour, u a wind,

av xprind ir tan xptd o rativ tot rt o t indutry, wi a ontriutd to rdud

apaity a w

or a rpondnt t prioritiation o pd and quaity

o doumntation i t owt rand itm ovra and a

droppd inianty in t prior urvy Ti may man

tat wi important, doumntation i not n a a dir-

ntiatin ator twn inurr, partiuary in ti mart,

or tat t indutry’ tandard av improvd ovra,

main ti o an iu

A xptd, mar oraniation (undr $5 iion in rv-

nu) ran vau or mony ir, and apaity and aiity

to divr a oa proram owr tan arr rm bot o

t attr itm ar o mor priority or arr oraniation

a ty typiay pura ir imit, av mor ompx

ri pro, and ar mor iy to av oa opration

Rardin vau or mony, mar oraniation prapiv ti itm ir priority a ty typiay av o-

pitiatd ri nanin proram and rtain ri tan

tir arr ountrpart Tror, a ratr portion o

tir prmium ar dirty aoiatd wit ri tranr

irm wit a ri dpartmnt vau apaity, fxiiity/inno-

vation/rativity, and t aiity to divr a oa proram

mor iy tan to witout (Ta 21) convry,

t rm pa mpai on on-trm rationip,

indutry xprin and prompt ttmnt o ar aim

Ti may au wit inrad intrna ri mana-

mnt xprti, t rm ar ttr a to nviionanin inurr, and ar ao riant on t inurr’

indutry nowd Tr i ao a i orration – arr

rm ar mor iy to av a ri dpartmnt, o t

inrad onrn wit apaity and aiity to divr a

oa proram may impy a rftion o i




Factors Rank

inania taiity/ratin 1

Vau or mony 2

caim rvi 3

capaity 4

Indutry xprin 5

lon-trm rationip 6

xiiity/innovation/rativity 7

Aiity to divr a oa proram 8

Prompt ttmnt o ar aim 9

spd and quaity o doumntation 10

Ta 19

Prioriti in oi o inurr

Factors Asia Pacifc EuropeLatin

AmericaMiddle Eastand Arica

NorthAmerica

inania taiity/ratin 1 1 1 1 1

Vau or mony 8 4 8 9 2

caim rvi 2 9 5 6 3

capaity 3 3 3 3 5

Indutry xprin 7 5 4 2 7

lon-trm rationip 4 7 6 7 6

xiiity/innovation/rativity 9 8 9 8 4

Aiity to divr a oa proram 5 2 2 5 9

Prompt ttmnt o ar aim 6 6 7 4 8

spd and quaity o doumntation 10 10 10 10 10

Ta 20

Prioriti in oi o inurr y rion




Ta 21

Prioriti in oi o inurr y ri manamnt dpartmnt

DesIReD chANges IN The INsURANceMARkeT

Atou t prnta av droppd in t 2007

urvy, t ran ordr i xaty t am or dird

an in t inuran mart (iur 23) compani

ar ooin or mor fxiiity rom tir inuran arrir,

aon wit t aiity on t par t inurr to roni and

rward intrna ri manamnt trou owr prmium

and roadr ovr

Oraniation ar onitnty xpod to nw ri and

an, piay wit t urrnt oa nania

rii compani ar ooin to tir inurr to or mor

fxi oution or mtin ri manamnt otiv

A diud arir in t rport, rpondnt av pri-

oritid uin ativiti in upport o ri idntiation,

quantiation and anayi, and manain ri on an

ntrpri-wid ai wi an aumd wi drivmor onitnt tratmnt o ri and owr t ovra ri

to t oraniation T ativiti an rquir a iniant

invtmnt and ommitmnt o rour, and oraniation

woud i to ronition o ti y arrir in t orm

o owr prmium

FactorsWith a risk

managementdepartment

Without a risk managementdepartment

inania taiity/ratin 1 1

capaity 2 7

Vau or mony 3 2

caim rvi 4 5

xiiity/innovation/rativity 5 8

Aiity to divr a oa proram 6 9

lon-trm rationip 7 4

Indutry xprin 8 3Prompt ttmnt o ar aim 9 6

spd and quaity o doumntation 10 10 Nota dirn




More sophisticated informationtechnology (IT) systems

Increased capacity

Better quality of service

Broader cover

Increased ability to recognize internal riskmanagement through lower premiums

More flexibility

26%

31%

49%

50%

61%

63%

iur 23

Dird mart an

Ta 22

Desired market changes by region Asia Pacifc EuropeLatin

AmericaMiddle East

& AricaNorth America

Mor fxiiity 48% 65% 56% 63% 66%

Inrad aiity to roni intrna ri

manamnt trou owr prmium66% 58% 76% 75% 59%

broadr ovr 53% 42% 56% 50% 53%

bttr quaity o rvi 52% 46% 60% 50% 48%

Inrad apaity 37% 32% 28% 25% 30%

Mor opitiatd inormationtnooy (IT) ytm

16% 25% 44% 13% 28%




RIsk INANcINgLooking at limits and retentions

At t tim o t urvy – t ourt quartr o 2008 – oraniation

rportd ty wr omorta wit v o umra/x iaiity

and dirtor and or iaiity (D&O) imit purad, a w a t

rtntion maintaind Ti tm rom t onoin ot mart and t

avaia apaity in t martpa

Dpit anin onomi tim and ontritin a,

ompani ar omorta wit urrnt imit and do not

appar to tain on additiona ri It i important to

not tat t rut wr atrd in t ourt quartr

o 2008 I t mart ardn and apaity om mor

rtritd, it wi intrtin to i tr wi addi-

tiona ri tan, wtr in owr imit or ir rtn-

tion to ontro prmium pndin

UMbRellA/eXcess lIAbIlITY

Du to t urrnt onomi ondition, it m tatoraniation’ approa to uyin atatrop iaiity

inuran tnd to drivn y a omination o t pr-

ivd potntia or o in t atatropi ayr, ot o

t inuran imit and t impat on tat oraniation’

nania prorman Nw apaity i avaia in ot

ad and x ara Typiay uin to imit

tir pndin on inuran, wi rut in a oniou

diion to pura ovr witin tir xd udt

Oraniation do onidr iaiity imit purad y

pr witin tir indutry roup and uuay oo to

pura a imiar imit dpndin on tir rvnu ihowvr, a trnd to uy mor imit may trird y

an indutry o or a dirn in t a nvironmnt or

a partiuar xpour in tir uin tor

simiar to t 2007 urvy, t mot ommon imit pur-

ad i $100 miion (iur 24) T avra imit

purad or a rpondnt i $161 miion, and or

ompani wit mor tan $1 iion in rvnu it i $184

miion Ti i a dra rom an avra o $202 miion

rportd in t 2007 urvy or a rpondnt and to

wit ratr tan $1 iion in rvnu

T it imit purad y any oraniation in ti ur-

vy wa $17 iion in europ and t owt purad wa

$1 miion, ompard to t 2007 urvy wr it imit

purad y any oraniation wa $1 iion in t Amri-

a (and t owt rmaind t am) europ ad t

it mot ommon imit purad wit $200 miion

In trm o oraniationa i (iur 25), rpondnt

wit tan $10 iion in rvnu purad t am

mot ommon imit a t “a rpondnt” roup – $100

miion T mot ommon imit purad or ompani

ratr tan $99 iion i trip tat o t “a rpon-

dnt” atory ($300 miion) and in t a o ompa-

ni $25 iion or ratr in rvnu it i v tim mor

($500 miion) In t prior urvy ti numr wa $300

miion

T orration r twn rvnu i and iaiity imit

purad may du to a prption tat a arr om-pany wit a ir pro an rprnt a tart or pain-

ti awyr and ation roup Additionay, t inrain

invovmnt o cO in t purain o inuran may

ad to a dir to prott arodr and avoid iaiiti

impatin a ompany’ aan t a woud our in a

ar aim award xdin t proram imit




eduation and nonprot purad t owt avra imit

$69 miion T it avra imit y an indutry roup

wa purad y t parmautia and iotnooy

indutry at $333 miion Ti i a rftion o itoria o

or aim award vidnd y or witin ti indutry T

indutri av n n a om o t art and mot

voati a o uin or u award In ontrat, du-

ation and nonprot tnd to av owr o pro

On avra, ompani wit ri manamnt dpart-

mnt purad $179 miion, wi i ovr $100 miion

mor tan to witout ri manamnt dpartmnt

($74 miion) Ti di rn may dmontrat ratr

nowd on t part o ri manar wit rard to

aim award and potntia or atatrop o witin

tir indutri In addition, ntworin wit pr and

int indutry roup man tr i a ratr fow o

inormation ratd to uyin ait o u ompani

0

500

1000$M

1500

2000

Maximum

Most Common

Average

Minimum

North America

Middle East& Africa

Latin America


1700 1700

1000 1000

500

400

100151 200

211

150215

100141

931611001 1 5 5

110 1

iur 24

Umra/x iaiity imit y rion

0

500

1000

1500

2000

Maximum

Most Common

Average

Minimum

$25B+$15B–24.9B$10B–$14.9B$5B–$9.9B$1B–$4.9B< $1B

1000 1000 975

1700

640

800

100123

100

204275300 356

500

300

203100851 4 21 20 25 10

$M

iur 25

Umra/x iaiity y rvnu




DIRecTORs AND OIceRs lIAbIlITY

or D&O, t avra imit purad or a rpondnt

i $79 miion (iur 26) or ompani wit mor tan

$1 iion in rvnu it i $94 miion, down rom an avr-a o $108 miion rportd in t 2007 urvy

T it imit purad y any oraniation wa $500

miion in europ ompard to $563 miion in 2007, wi

t owt imit purad wa $1 miion ompard to $3

miion in t 2007 urvy

A in 2007, pui ompany rpondnt on avra pur-

ad imit mor tan dou ($103 miion) wat privat

ompani purad Ti i not urpriin onidrin

tat itoriay, many privat oraniation av t tat

in ty ar not a pui ompany and av no puiarodr, ty av no D&O xpour T orania-

tion may ao iv tat ty ar naniay ound and

wi a to indmniy dirtor or or or any aim

tat may ari

Wi privat ompani may not av t am uri-

ti itiation xpour a pui ompani, ty ti av

xpour to arodr, mpoy, rditor and t

ovrnmnt A anrupty in ontinu to ri, ti

ovra om vn mor important to oraniation,

and tir dirtor and or

Two trnd mrd in 2007 av and rmaind onitnt

or t att urvy: irty, t tion o imit orr-

at wit rvnu i (iur 27), and ondy, europan

rpondnt av t it avra imit o $102 miion

(iur 26)

Rardin indutri, ariuin purad t owt

avra imit wit $22 miion, and anin t it

wit $229 miion

0

100

200

300

400

500

Maximum

Most Common

Average

Minimum

North America

Middle East& Africa

Latin America


500 500

200

450

100

245

10

56

100102

10

73

50

76

2510

79

101 1 5

110 1

$M

iur 26

Dirtor & or iaiity imit y rion

0

100

200

300

400

500

Maximum

Most Common

Average

Minimum

$25B+$15B–$24.9B$10B–$14.9B$5B–$9.9B$1B–$4.9B< $1B

120

250

500

450

250250

5059

92

100

155

200

180

200

150

109

27101 1 1 10 10 10

$M

iur 27

Dirtor & or iaiity imit y rvnu




cOMORT leVels

Umbrella/excess liability (iur 28): A vat maority

(83 prnt) o urvy rpondnt indiatd ty wr

omorta wit t v o umra/x imitpurad, ompard to 77 prnt in 2007

Aia Pai ad t it atiation v amon t

rion (94 prnt) and latin Amria wa t at atid

(61 prnt) In t 2007 urvy, Aia Pai ad t owt

atiation wit imit purad

In trm o oraniationa i and rvnu, t atiation

v drad or to uin wit a $25 iion or

ratr rvnu ran (66 prnt), ompard to t 2007

urvy wr ti roup ad t it atiation and

omort (82 prnt)

Pr indutri, vra roup – mot notay proiona

and prona rvi, ra tat and woa trad –

wr 100 prnt atid wit imit purad comort

v wit imit wa t owt witin opitaity (57 prnt)

and utiiti (62 prnt)

Directors & Ofcers Liability (iur 29): eity prnt o t

rpondnt indiatd tat ty ar omorta wit t

v o D&O imit purad, ompard to 2007 urvy

rut o 74 prnt Aia Pai ad t it atiation

v amon t rion (87 prnt), wi latin Amria

wa t at atid (64 prnt) Intrtiny, in t 2007

urvy Aia Pai ad t owt atiation wit imit

purad

compard to t 2007 urvy, an movd rom in

on o t indutri mot omorta wit it imit (89

prnt) to omin t indutry at omorta wit

it D&O imit (56 prnt) (Ta 23) cmia, inuran,

invtmnt, and nan indutri ao ad a iniant d-

ra in v o omort T anin indutry wa amon

t at atid wit t imit purad, proay duto t onoin turmoi in t nania mart In nra,

ompani’ purain diion ratd to imit ar ind

to on or mor o t oowin our ator:

1) Inrain D&O aim rquny

2) Inrain D&O aim vrity

3) Drain priin nvironmnt

4) conrn aout t nania at o D&O inuran arrir

iur 28

comort v wit imit or umra/x iaiity

4

80

17

%

Limits purchasedshould have been higher

Comfortable withlimits purchased

Limits purchasedshould have been low

iur 29

comort v wit imit or dirtor & or iaiity

4

83

14

%

Limits purchasedshould have been higher

Comfortable withlimits purchased

Limits purchasedshould have been lower




VeRY lITTle chANge IN ReTeNTION leVels

Ovra, t maority o oraniation av indiatd no

an in tir rtntion ompard to tir prior poiy

priod (iur 30) Ti i primariy in drivn y tontinud ot mart in 2008 and t at tat rtntion

ar at u a v tat urtr inra may not yidin

maninu avin

simiary to 2007, t in o ovra wr rtntion

and t mot i proprty ourtn prnt o r-

pondnt indiatd an inra in tir rtntion wi

11 prnt not a dra Inra in rtntion wr

mot iy t rut o an oraniation’ xpour to

natura atatrop ri and advr o xprin

omind wit t dir to ontro prmium pnd

Industry Group% Comortable WithUmbrella/Excess Limit

% Comortable WithDirectors & Ofcers Limit

Ariuin 81% 75%

banin 78% 56%

cmia 75% 63%

contrution 79% 71%

conumr ood manuaturin 81% 94%

eduation and nonprot 89% 100%

ood proin and ditriution 78% 78%

hat ar 89% 89%

hopitaity 57% 86%

Inuran, invtmnt and nan 80% 65%

lumr, urnitur, papr, and paain 93% 86%

Mainry and quipmnt manuaturin 77% 85%

Mta miin and manuaturin 83% 83%

Natura rour (oi, a and minin) 81% 86%

Non-aviation tranportation manuaturin 92% 92%

Non-aviation tranportation rvi 84% 85%

Parmautia and iotnooy 71% 86%

Proiona and prona rvi 100% 86%

Ra tat 100% 67%

Rtai trad 96% 91%

Rur, pati, ton and mnt 80% 60%

Tnooy 85% 73%

Tommuniation and roadatin 82% 76%

Utiiti 62% 77%

Woa trad 100% 90%

Ta 23

comort v wit imit y indutry

Lower Same Higher

Property

Directors and officers liability

Auto liability (not physical damage)

Products liability

General liability

Workers compensation 6%

7%

5%

5%

10%

11%

7%87%

85%

5%

8%

8%

90%

87%

8%83%

14%75%

iur 30

can in rtntion v




glObAl PROgRAMsDoing business around the world

larr oraniation wit ntraid opratin mod and ri mana-

mnt dpartmnt ar ar mor iy to pura oa proram

T pura o oa inuran proram i dirt y

ratd to t xitn o a ri manamnt dpartmnt

and t oraniation’ opratin trutur To ompa-

ni wit ntraid opratin mod and t aiity to

impmnt, monitor and mana oa ri nan trat-i wi mor iy to arran oa proram au

ty oo at ri, ot o ri, and approa to r i nan

rom a roadr prptiv

Ri manamnt dpartmnt ar typiay rponi

or undrtandin and prottin t ompany aaint it

xpour to o and to mana and rdu tota ot o ri

In an inrainy oa onomy, nurin tat approa

to t otiv ar ompiant, int, and – wr

poi – onitnt, ma t ta vn mor anin

On tiv way to rdu inuran ot may to im-pmnt a oa proram, wi an typiay rdu pr-

mium pnd y a mu a 20 prnt or any ivn produt

in tat a prviouy n purad on a dntraid

ai, or xut a ountry-y-ountry approa In addi-

tion to ot avin, t ntray notiatd and ontrod

oa proram ao p addr ompian iu, divr

ratr onitny o ovra, and orm t ramwor or

a rm-wid oa ri nan traty y oordinatin y

inuran pura

PURchAseRs O glObAl PROgRAMs

In ti urvy, or ot proprty and auaty nary two

tird o our rpondnt aid ty av purad a oa

inuran proram (iur 31) T pit twn proprty

and auaty i airy vn: In europ, 77 prnt purad

a proprty proram and 80 prnt a auaty proram; in

latin Amria, 70 prnt purad proprty and 74 pr-

nt auaty; in t Midd eat and Aria it i vny di-

triutd at 64 prnt or ot T numr ar ratr

tan to in Aia Pai, wi rportd 53 prnt prop-

rty and 58 prnt auaty, and Nort Amria wit 55

and 58 prnt, rptivy howvr, not tat orania-

tion wit tan $1 iion in rvnu inianty apd

t Nort Amrian rut ompard to otr rion

0 20 40 60 80 100

North America - Casualty

North America - Property

Middle East & Africa - Casualty

Middle East & Africa - Property

Latin America - Casualty

Latin America - Property

Europe - Casualty

Europe - Property

Asia Pacific - Casualty

Asia Pacific - Property

All - Casualty

All - Property No Yes

Yes

No

No

No

No Yes

Yes

No

Yes

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

iur 31

goa proram y rion




Ri dpartmnt and oa proram tnd to o and-in-

and Ovra, oraniation wit a ddiatd ri dpartmnt

ar amot twi a iy to pura inuran in a oa pro-

ram or proprty, 67 prnt purad a oa proram,

wi ony 39 prnt witout a ri manamnt dpartmnt

did o T ndin ar ir or auaty – 70 prnt o a

rpondnt wit a ri manamnt dpartmnt purad

a oa inuran proram or auaty, ompard to ony 44

prnt witout a ri manamnt dpartmnt

A xptd, mar oraniation wit rvnu tan

$1 iion ar iy to pura a oa inuran

proram (39 prnt proprty and 45 prnt auaty) tan

oraniation wit mor tan $1 iion (69 prnt proprty

and 71 prnt auaty) (iur 32) Wi ti urvy wa

imitd to mor typia oa proprty and auatyproram, produt in ar inrainy andidat or

oa proram u a dirtor and or iaiity, rim,

and marin and nvironmnta

A ntraid opratin trutur p nur t u o

a oa inuran proram du to t aiity to xri

ontro and ratr a o adminitration It i tror not

urpriin tat arr ompani tnd to uy mor oa

proram, a mot arr oraniation oprat mor ntray

and irariay, and av ri manamnt dpartmnt

howvr, impy avin a ntraid ri manamnt

dpartmnt in and o it do not nur t u o

a oa approa to ri manamnt To p proram

tat o t art, oa proram din, impmntation, and

notiation mut ad on urrnt inormation rativ to

inuran ruation y ountry; oution avaia in oa,

riona and oa martpa; and rvant inormation

aout mart dynami In addition, tiv oa proram

xution rquir a to ompany-pi inormation rom around t word inudin xpour inormation,

undrtandin o uin pro, a oa viw o ontin-

ny pannin, and a to aurat aim inormation

Wit t addd ator, a oa ri nan oution i not

away a imp or radiy avaia rmdy to a oa ri

0 20 40 60 80 100

$25B+ - Casualty

$25B+ - Property

$15B – $24.9B - Casualty

$15B – $24.9B - Property







< $1B - Casualty

< $1B - Property No Yes

Yes

No

No

No

No Yes

Yes

No

Yes

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

iur 32

goa proram y rvnu




cAPTIVesA saving grace in an economic crisis

In t urrnt onomi nvironmnt, vauatin and rduin ot i a

top priority T mor tan 5,000 aptiv urrnty in xitn ar

providin vau to oraniation in a rion o t word, partiuary

in t nania rvi tor and in arr oraniation epiay in

diut tim, to wo arady av aptiv an quiy a tm

or immdiat ri tratmnt oution

captiv ar ud y oraniation in virtuay a indutry

roup and orapi rion or many, aptiv inur-

an arranmnt an an intra part o t ora-

niation’ ri manamnt proram, partiuary in an

onomi downturn A pur aptiv i a pia purpo

inuran ompany ormd primariy to (r)inur t ri

o it ownr and ratd parti In addition to pur aptiv,

roup and mutua aptiv wit mutip ownr and a

ran o ompany trutur minimi t arrir to

ntry into aptiv

Wtr intratd into an inurd proram or a an

atrnativ to onvntiona inuran, a aptiv inuran

vi an provid vau in a numr o way:

Rdud tota ot o ri trou int aoation

o ri apita

staiid xtrna inuran ot and rdud pr-

mium aa

gratr and mor int a to inuran and

rinuran mart

Inrad prot y upportin auatd ri poition

Rtaind a fow and invtmnt inom

enand manamnt o divr oa proram

cntraid aptur o ri manamnt inormation

wit rpt to rtaind o and xpour

A w nota trnd and pattrn ar mrin in t

u o aptiv In t urrnt tumutuou onomi

nvironmnt, tr i iniant nitivity to apitaia-

tion, inudin any nw aptiv ormation tat woud

divrt mony away rom invtin ativiti T ntran

into t martpa o nw rontin and rinuran

aiiti i drivin ratr trutura fxiiity or aptiv,

manin tat in many a, on aptiv an mor

iy uu to an oraniation and a ond or tird

aptiv may not nary to aompi t am

otiv Unurpriiny, t ontinud ot mart a

urtr rdud t apptit or nw and additiona

aptiv in rnt yar howvr, an in tat rpt

may ortomin i inurr on aain in

to rat inra

ORgANIzATIONs ThAT Use cAPTIVes

Tirty-vn prnt o a urvy rpondnt rportd

avin an ativ aptiv or Prottd c company (Pcc)

(iur 33) svn prnt o rpondnt rportd avin

a aptiv or Pcc in run-o ony and v prnt av aaptiv tat i dormant In nra, ompani urvyd

do not pan to rat nw or additiona aptiv; in at 88

prnt o a rpondnt urrnty rport avin no u

pan (an inra rom 80 prnt in t prviou urvy)

Ti wa onitnt aro rion and rvnu and

Oraniation wit a orma ri manamnt dpartmnt

ar twi a iy to u aptiv ompard to to wo




do not (45 prnt vru 23 prnt) Ti i du to t

prn o a ri manar, wi typiay indiat ratr

opitiation on t part o t uyr, and may ao point

to a ratr dr o undrtandin o t vau aptiv

an rin to ri ovrnan witin an oraniation

A orration xit twn an oraniation’ i and ap-

tiv utiiation Amot a (48 prnt) o oraniation wit

rvnu o mor tan $1 iion rport avin a aptiv or

Pcc, ity tan t 51 prnt rportd in t 2007

urvy (Ta 24) A ound in t 2007 urvy, t prnt-

a o rpondnt tat rport tir oraniation av a

aptiv or a Pcc tnd to inra a rvnu inra, wit

a u 87 prnt o rpondnt (ompard to 76 prnt in

2007) wit rvnu o $25 iion or ratr avin at at

on aptiv in pa captiv utiiation y oraniation

wit rvnu o $15 iion to $249 iion utantiay

inrad, wit 67 prnt avin a aptiv or Pcc a om-

pard to 54 prnt in 2007 convry, ony 19 prnt o

oraniation wit rvnu o $1 iion or u aptiv

T prnta o oraniation wit a rvnu ran o $1

iion to $49 iion tat av a aptiv or a Pcc drad

rom 42 prnt in 2007 to 31 prnt in t att urvy

On ator drivin dirn i tat oraniation wit

ir rvnu av mor ompx ri, and tror

ao av mor ri nanin oution in pa captiv

may attrativ to diion mar wo wi to ta a

ratr ro in t manamnt o to iu

0 20 40 60 80 100

No Yes

Have a captive that is dormant

Have a captive or PCC in run-off only

Have an active captive or PCC

Plan to create a new or additionalcaptive or PCC in the coming year

12%

37%

7%

5%

88%

63%

93%

95%

iur 33

Oraniation wit a aptiv or Pcc y urrnt & utur u

Revenue Have a captive or PCC

< $1b 19%

$1b – $49b 31%

$5b – $99b 53%

$10b – $149b 55%

$15b – $249b 67%

$25b+ 87%

Ta 24

Oraniation wit a aptiv or Pcc y rvnu




Wi u o aptiv rmain i in europ (ir tan

in otr rion), ua vari y ountry (Ta 25) Ti

may du to utura dirn ratr tan any ini-

ant a arrir Room or utantia rowt in aptiv

rmain in otr rion o t word, u a eatrn eu-

rop, latin Amria, t Midd eat and Aia Pai ea

o t rion i at dirnt ta o amiiarity wit t

onpt and pro o aptiv In om o t ara,

iraiation and a o oa ruation aow aptiv

proram to oprat witout iniant ritiona ot or

ruatory rtrition

compard to t 2007 urvy:

europan rpondnt rportd t it u o a

aptiv or Pcc at 55 prnt, yt ti i inianty

owr tan t 71 prnt wo rportd uin aptivin t 2007 urvy

T prnta o Aia Pai oraniation avin a

aptiv or Pcc inrad rom 26 prnt in 2007 to

42 prnt in 2009

Ony 13 prnt o latin Amrian rpondnt rport

tir oraniation u a aptiv or a Pcc

O a t indutry tor, anin rportd t it

u o aptiv at 78 prnt, prap indiatin tat an

ar omorta dain wit dtaid and uniqu nania

trati howvr, in viw o rnt wordwid nania

turmoi it wi intrtin to orv ow many orania-

tion wi ontinu to maintain tir aptiv or o tm

to ra und

Rnty, t nania rvi tor a trtd it dni-

tion o a aptiv, u a uin a aptiv-typ trutur to

mana utomr ri proram, rditor i and warranty

appiation T u o inuran pia purpo vi

a otn an into t “aptiv” dnition a w It i

ardy urpriin, tror, wn w oo at t rowt

potntia or nania produt a mntiond ow

keY RIsks UNDeRWRITTeN

simiar to t prior urvy, proprty (63 prnt) and

nra iaiity (52 prnt) ar, and wi ontinu to ,

t mot otn undrwrittn in o ovra witin a

aptiv (Ta 26) Rpondnt indiatd an intrt v

in vra in o ovra tat woud driv iniant up-

ward movmnt in aptiv undrwritin in t nxt v yar:

crdit/trad rdit (58 prnt)

environmnta/poution (58 prnt)

empoy nt (142 prnt)

inania produt (160 prnt)

surpriiny, t oowin ara ti prnt a an or

t inuran indutry a rpondnt notd a utantia

downward movmnt in undrwritin t in o ovr-

a witin tir aptiv in t nxt v yar:

Proiona/rror omiion iaiity (-23 prnt)

Proprty (-24 prnt)

Produt iaiity/tamprin (-31 prnt)

Aon’ aptiv manamnt piait av notid an

apptit to rat divrity aro aptiv portoio, oni-

tnt wit t inquiri or aptiv xpanion Ti i an ara

wr oraniation ar in to provid mor trati

u o tir aptiv, partiuary or on-trm diaiity

and mpoy i ri byond t oviou mpoy

nt ovra, otr uman rour opportuniti or

trati aptiv xpanion inud uin aptiv to

addr otr iniant itm, u a pnion and rtir

at nt howvr, tr ar utantia urd to

ovrom or mot o t itm to inudd

T utimat viion or aptiv oud to dvop a aptiv-

typ trutur a a tru “ri ntr” or t oraniation uin

it Divriation p apita manamnt and utiation

A a aptiv ompt or ar apita aonid otr ui-

n unit, it wi nd to dvop ratr tan tanat

Region Have a captive or PCC

A 41%

Aia Pai 42%

europ 55%

latin Amria 13%

Midd eat & Aria 43%

Nort Amria 36%

Ta 25

Oraniation wit a aptiv or Pcc y rion




CoverageCurrently

underwritten

Continue/plan tounderwrite same/newrisk in next fve years

Change

Proprty 63% 48% -15%

gnra/tird party iaiity 52% 43% -9%

empoyr iaiity/worrompnation

38% 35% -3%

Auto iaiity 36% 34% -2%

Proiona/rror and omiioniaiity

31% 24% -7%

Produt iaiity/tamprin 29% 20% -9%

Marin 28% 25% -3%

catatrop 27% 22% -5%

Trrorim 22% 21% -1%

crim/dity 22% 22% 0%

Dirtor and or iaiity 18% 19% 1%

hat/mdia 16% 21% 5%

Tird-party uin 15% 15% 0%

empoymnt prati iaiity 14% 17% 3%

li 14% 19% 5%

empoy nt 12% 29% 17%

crdit/trad rdit 12% 19% 7%

environmnta/poution 12% 19% 7%

Otr 11% 14% 3%

Aviation 10% 11% 1%

Warranty 10% 14% 4%

inania produt 5% 13% 8%

Ta 26

currnt and utur ovra undrwrittn

Nota an







MeThODOlOgYTi w-ad urvy addrd ot quaitativ and

quantitativ ri iu Rpondin ri manar, cRO,

cO, traurr and otr providd da and init

on tir inuran and ri manamnt oi, intrt

and onrn

Aon Anayti ondutd ti urvy wit t upport o Aon’

urvy rar piait, wo otd and tauatd t

rpon Otr Aon inuran and indutry piait

providd upportin anayi and pd wit t

intrprtation o ndin

A rpon or individua oraniation ar d ondntia,

wit ony t onoidatd data in inorporatd intoti rport Prnta or om o t rpon may not

add up to 100 prnt du to roundin or rpondnt

in a to t mor tan on anwr A rvnu

amount ar own in Us doar




keY cONTAcTs

AMeRIcAsTra bourdon

group Manain Dirtor

Aon goa Ri conutin

tra_ourdon@araonom

+1 410 381 2407

eMeA AND APAc

Rory Moony

group Manain Dirtor

Aon goa Ri conutin eMeArory_moony@aoni

+353 1 266 6003

AON ANAlYTIcs

lamro lamrou

ci exutiv Or

Aon Anayti

amro_amrou@aonom

+1 312 381 3915

AON glObAl

Taddu Wooy

Dirtor o Martin

Aon goa

taddu_wooy@aonom

+1 312 381 2446

OR MeDIA AND PRess INQUIRIes

ky DrinwinDirtor o Pui Ration

Aon corporation

y_drinwin@aonom

+1 312 381 2684




AON AT A glANce Aon corporation (NYse: AOc) i t adin oa providr

o ri manamnt rvi, inuran and rinuran

rora, and uman apita onutin Trou it mor

tan 37,000 oau wordwid, Aon radiy divr

ditintiv int vau via innovativ and tiv ri

manamnt and woror produtivity oution Aon’

indutry-adin oa rour and tnia xprti ar

divrd oay trou mor tan 500 o in mor tan

120 ountri

Namd t word’ t ror y Euromoney maain’

2008 Inuran survy, Aon ao rand it on Business

Insurance’s itin o t word’ art inuran ror

ad on ommria rtai, woa, rinuran and

prona in rora rvnu in 2008 A.M. Best

dmd Aon t numr on inuran ror ad on

rora rvnu in 2007 and 2008, and Aon wa votd

t inuran intrmdiary, t rinuran intrmdiary

and t mpoy nt onutin rm in 2007 and

2008 y t radr o Business Insurance

or mor inormation on Aon, o on to wwwaonom

Aon Anayti provid int wit orward ooin uin

intin, omprniv nmarin and tota ot o

ri anayi a w a oa mart init uin propri-

tary tnooy i t Aon goa Ri Init Patorm to

na mor inormd and at ad diion mainaround ri manamnt, ri rtntion and ri tran r

oa and otiv

A t word’ adin inuran ror and ri adviory

rm, Aon i ommittd to pin int rpond quiy

and tivy to anin mart ondition tat may

impat tir uin T Aon situation Room™,

ai at wwwaonom, provid int wit at-

ad inormation to p uid tir uin trou

ti voati priod

In t Aon situation Room, int wi nd urrnt inurr

nania trnt ratin and t mot rnt updat rom

Aon’ Mart surity committ on pi arrir

T att nw, iativ ation, and arnin inormation

i inudd on t it a w cint an ao ritr to

riv up-to-dat mai art

Aon gRIPsM i t word’ adin oa rpoitory o oa

ri and inuran pamnt inormation by providin at-

ad init into Aon’ UsD $54 iion in oa prmium

fow, Aon gRIP p idntiy t t pamnt option

rard o i, indutry, ovra in or orapy

T W-ai data produd y Aon gRIP p Aon

ror vauat wi mart to approa wit a pa-

mnt and wi arrir may provid t t vau or

int It ao iv Aon ror a up wn it om to

notiation, main ur vry onvration i ad on

t mot ompt, mot urrnt t o at









Designed by Corporate Communications, US. BC1235 – 04.09



Aon CorporAtion

200 East Randolph Street

Chicago, Illinois 60601

T +1 312 381 1000

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Documents

A on Global Risk Management Survey 2009