From London, Aon Team Builds Risk Management Business in Italy

Insurance broker Aon Corp. is launching an effort to break into the enterprise risk management market in Italy using a team based in London.

Aon Global Risk Consulting has created a London-based ERM unit with a focus on the Italian market. The idea, according to Anastasia Grazioli, a member of the team, will be to transfer ERM skills to colleagues in Italy, with an eye on the eventual establishment of an Italian-based ERM team.

Aon is looking for medium to large Italian corporates with annual turnover upwards of 1 billion euros (903,000 pounds) The initial target will be luxury goods companies.

Building a Base

The project, Grazioli said, started with an ERM contract Aon carried out for a large Italian multinational luxury goods company that she would not identify. Aon defines ERM as a “strategic process that considers the threats and opportunities across all functions of an organization that could materially impact its objectives.”

An early foray by Aon into the Italian risk management sector uncovered gaps in risk managers’ knowledge, Grazioli said. This “led us to think that maybe the rest of the Italian market was quite underdeveloped in terms of risk management, too,” she said.

Italy offers an attractive ERM client base: large, influential family-owned organizations with centralized power. But such companies tend to be focused on the short-term, Grazioli said. And would-be customers can be skeptical about such fine-sounding theoretical concepts as enterprise risk management, she added.

“They cannot really see the value of risk management in the long term,” Grazioli said in an interview at Aon’s offices in London. “But, on the other hand, it was quite a big opportunity for us to develop ERM.”

Grazioli, herself an Italian, has an insurance brokering background, with a concentration in the Italian luxury goods and fine art sectors. She and her team in London have daily contact with Aon colleagues in Italy and access to Aon’s extensive Italian network. The London ERM team, Grazioli said, has been in operation for nearly a year.

The idea of enterprise risk management is new in Italy, where Aon confines itself to brokering and some basic risk management services, Grazioli said.

Adding Structure

Michael Porteous, a principal consultant with Aon Global Risk, and Grazioli’s boss, regards the first stage of the initiative as having been completed. Not only is the ERM team in place in London, he said, but there has been some success with captives. The team will also be involved in risk financing.

Porteous hopes to persuade Italian companies to be less piecemeal in their insurance buying. By contrast, he said, U.S. and U.K. companies, long used to concepts of risk and regulation, tend to look upon insurance as a total package.

Grazioli would like Italian risk managers to be given more status within their organizations. “The risk manager has quite an undefined role” in Italy and likely would not have a seat on the board, she said.

Too often, Grazioli said, the Italian corporate risk manager is either given responsibility for everything that goes wrong or is simply asked to arrange all the insurance.

Porteous sees relationship-building as particularly important in reaching the Italian ERM market. “And that’s quite slow, as you can imagine,” he said.

Porteous said enterprise risk management offers its own particular challenges. “It’s quite nebulous, and time scales are quite long,” he said.

Organizations that do not take risk management seriously enough, Porteous said, may find themselves in trouble with regulators over health and safety issues. No longer is it acceptable for workers to walk around construction sites smoking cigarettes near acetylene torches or to work at height without safety helmets, he said: “That’s got to stop.”

The message is getting through, as companies find themselves filing insurance claims and suffering increased reputational damage because of bad safety practices, Porteous said. “It’s an educational process,” he said.

ERM, Porteous said, bolsters the broker’s traditional role of placing business by providing a clearer picture of potential exposures. This can affect costs by suggesting areas where coverage or financing might be adjusted, he said.

“That’s a very good advertisement for corporate governance,” he said, “because we know that all the risks are being managed correctly.”

Grazioli expects to learn things in Italy that will be useful in other Southern European markets, such as Portugal, where Aon also has ambitions. In such markets, she said, it is important to “show tangibility and give clients added value as soon as possible.”

(By Robert O'Connor, London editor: [email protected])