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Risk management challenges vary by region

Cultural factors are the biggest risk management challenge in emerging markets

Companies looking to implement solid, consistent risk management strategies in emerging markets such as Asia-Pacific or Central America need to pay attention to local cultural factors in order to achieve success in the region. That's according to the results of the latest Aon Risk Maturity Index, which were unveiled recently at the annual meeting of the Risk and Insurance Management Society.

"Just as an organization must consider cultural differences in its decisions around new market or product entry, it must also consider cultural differences when setting its risk management framework strategy," said Michael Joiner, associate director of enterprise risk management for Aon Global Risk Consulting.

To compile its risk management index, Aon asked management at a variety of corporations operating in emerging markets to name the biggest challenges they face. Participants were given the choice between legal/regulatory, logistics/geographic, economic/financial, cultural and human capital/talent. New market operators overwhelmingly chose cultural factors as their biggest challenge.

CEOs, CFOs and COOs operating in different parts of the world, however, face different challenges, which they should take into account when planning an effective risk-management strategy. The Aon index indicates human resource challenges are greatest in North America, while logistics and geographical factors are most prevalent in Australia, New Zealand and Western Europe.

One risk many companies overlook is that of a natural disaster like the earthquake and tsunami that hit Japan last year, devastating supply chains across the country. According to insurance broker and risk management firm Marsh, many risk managers are still unfamiliar with ways to protect against these kinds of events.