Companies are improving with DE&I but more progress needed
Success awaits the organizations that create well-developed and formal diversity, equity and inclusion programs.
Diversity, equity and inclusion (DE&I) is gaining greater importance in the business world, with almost one-third of risk professionals indicating their companies’ DE&I progress has improved significantly in the past five years, according to the newly released 2021 Excellence in Risk Management Report from Marsh and RIMS.
The report, which is based on responses to a survey and conversations with risk professionals, C-suite executives, and DE&I experts, details how organizations of all sizes and across sectors are paying closer attention to DE&I issues.
“As society continues to grapple with inequities highlighted by the ongoing COVID-19 pandemic and other recent events, creating a diverse, equitable, and inclusive corporate culture is critical,” Martin South, president, U.S. and Canada Division, Marsh, said in a release. “Now, more than ever, effective risk management requires organizations to embrace diverse opinions. Advancing DE&I is not just the right thing to do — it’s imperative to businesses’ viability and growth.”
A business strategy
It is clear that today’s talent — especially Gen Z and millennials — wants an employer that is committed to diversity. DE&I is also imperative to business resilience. A May 2020 McKinsey report suggests that the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time.
“A resilient organization foresees upcoming threats and capitalizes on opportunities, which, as focus group participants noted, is helped by having a diverse team. It is also a risk professional’s role to underscore the downsides of failing to embrace DE&I,” says the Marsh/RIMS report.
But having a DE&I program isn’t enough. Consider that 45% of respondents said their company has a formal program but has failed to make progress, and more than half said it is not an organizational priority. Another 19% said their company didn’t have a formal DE&I program at the time of the survey but had plans to create one within the next year.
Additionally, the study shows a lag in key areas of successful DE&I strategy, including training, mentorship, and sponsorship. Less than half of survey respondents said their organization offers training to all employees aimed at improving DE&I.
Public companies make progress
The report points to public companies’ visibility and pressure from investors and regulators to address environmental, social, and governance (ESG) issues as potential reasons for the gap. Also, litigation risks create more scrutiny from investment firms on companies’ ESG practices. A report from GoodJobsFirst.org says that 99% of Fortune 500 companies have paid settlements in at least one case of discrimination or sexual harassment.
Private companies, however, shouldn’t be discouraged by the study’s results. Because many private companies are smaller than public firms, their size can bring DE&I advantages, including better DE&I visibility throughout the organization and the ability to make faster decisions, the report says.
For companies planning to go public, having strong DE&I programs is essential, as the road to going public could be more difficult if the firm demonstrates little to no progress in DE&I. According to the report, one example highlighting this challenge is the announcement Goldman Sachs made committing to only helping organizations go public if they have at least one diverse board member.
Recommendations to improve DE&I
To help businesses and risk professionals create resilient organizations with successful DE&I programs, the Marsh and RIMS report suggests the following:
- Focus on recruitment and more: This can be achieved by extending internship opportunities to high schools and colleges in minority communities, establishing mentorship and sponsorship programs, and reviewing development and promotion opportunities for diverse employees.
- Encourage conversations at all levels: This includes discussions around relevant current events while embracing diverse voices, establishing and promoting employee resource groups, and creating DE&I training programs.
- Ensure representation organization-wide: Use data to measure DE&I success and identify areas of improvement; promote diverse leaders and improve board diversity; and leverage supplier diversity initiatives.
- Create a culture that embraces DE&I: Discuss the impact of DE&I as a business risk with leaders and board members; embed the DE&I strategy across the business, engage the C-suite, and invest in continuous programs as oppose to start-and-stop programs.
Visit the Marsh website for more insights from the 2021 Excellence in Risk Management Report.
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