erm committee priorities, progress and findings
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ERM Committee Priorities, Progress and Findings. Jerry Miccolis, Tillinghast - Towers Perrin Kevin Dickson, Allstate Barry Franklin, Aon Risk Consultants. CAS “Big Audacious Goal” for 2014 Centennial. - PowerPoint PPT PresentationTRANSCRIPT
ERM Committee Priorities, Progress and Findings
Jerry Miccolis, Tillinghast - Towers PerrinKevin Dickson, Allstate
Barry Franklin, Aon Risk Consultants
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CAS “Big Audacious Goal” for 2014 Centennial
“The CAS will be globally recognized as the preeminent resource in educating casualty actuaries and conducting research in casualty actuarial science. CAS members will be recognized as the leading experts in the evaluation of hazard risk and the integration of hazard risk with strategic, financial, and operational risk.”
[emphasis added]
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Discussion Outline
• CAS ERM Advisory Committee (2000/1)– ERM Definition and Framework– CAS Research & Education Priorities
• CAS ERM Research Committee (2002-)– Immediate Priorities– Progress to Date
• Original Research• Directed Research
– Future Plans
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Advisory Committee on ERM: Goals
• Define ERM; develop conceptual framework• Determine current/desired knowledge level• Identify research needs to close gaps• Identify education needs to close gaps• Recommend methods, priorities, timetable• Compile initial ERM bibliography• Recommend additional efforts of
existing/new CAS committees
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ERM Definition
• “The discipline by which an organization in any industry assesses, controls, exploits, finances and monitors risk from all sources for the purpose of increasing the organization’s short- and long-term value to its stakeholders”
• Key elements:– Dual nature of risk– Value creation– CAS relevance beyond insurance industry
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Risk Type
• Strategic• Operational• Financial• Hazard
Risk ManagementProcess Step
• Establish context• Identify risks• Analyze/quantify risks• Integrate risks• Assess/prioritize risks• Treat/exploit risks• Monitor and review
ERM Conceptual Framework: Two Dimensions
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ERM Framework Grid
Risk TypeEstablish Context
Identify Risks
Analyze/ Quantify
RisksIntegrate
Risks
Assess/ Prioritize
Risks
Treat/ Exploit Risks
Monitor and
Review
Risk Management Process Step
Operational
Financial
Hazard
Strategic
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Recommendations -- Research
• Highest priority topics– ERM overview– Value creation through ERM– Risk quantification (financial, operational,
strategic)– Risk correlation & integration
• Other priority topics– Risk tolerances, risk/reward metrics, portfolio
optimization, monitoring, treatment, integrated products
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Recommendations -- Research (cont’d)
• For each topic:– Priority by industry focus
• P/C Industry• Other Financial Services• Other
– Recommended research method• Original research• Funded research• Call Paper programs• Compile existing research
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Recommendations -- Research (cont’d)
• Form standing ERM Research Committee– Direct & monitor research per above– Expand, update, organize, maintain ERM
bibliography– Work with other CAS committees to
coordinate ERM research and provide content for education
– Partner with other organizations– Develop internal and external
communications, designate spokespersons
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Recommendations -- Education• Codified 2005 CAS ERM education needs
– For each element of ERM framework– By degree of desired knowledge level– By type of education vehicle
• Syllabus• Continuing Education
• Developed detailed Learning Objectives for each element of ERM framework
• Publish ERM bibliography• Accomplish through existing committees
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ERM Research Committee -- Immediate Priorities
• “ERM Overview” document• Financial risk quantification• Risk correlation/concentration/integration• Value creation through ERM• ERM bibliography • Coordination with other CAS committees• Coordination with other professions
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“ERM Overview” Document• Associate-level exam material• Contents
– History/evolution of risk management– Reasons/motivations for ERM– ERM definition/framework– Language/measures/models/tools– Applications/case studies– Practical considerations in implementation– Bibliography
• Published May 2003
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Financial Risk Quantification• Literature review: wealth of existing
material• Road map/reviews
– The Practice of Risk Management – Goldman Sachs & SBC Warburg Dillon Read
– Risk Management – Crouhy, Galai and Mark– FRM Handbook, Jorion– Market Models: A Guide to Financial Data Analysis - Alexander
• Reviews on CAS – ERM Website
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Risk Correlation/Concentration/Integration
• Literature review: limited material available• Call for papers• Coordination with other CAS committees• Call Papers published July, 2003
– Advanced Modeling for the New Risk Landscape – Lee Smith and Lilli Segre-Tossani
– ERM and DFA using Active Knowledge Structures – James Brander and Sam Manoff
– The Aggregation and Correlation of Insurance Exposure – Glenn Meyers, Fredrick Klinker and David Lalonde
• Additional Research
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Value Creation Through ERM• Literature review: not enough useful
material available to demonstrate objective value measurement
• Non-insurance industry– Original research needed– RFP to professionals, practitioners,
academics– Co-sponsors from other organizations
• Insurance industry– Case study documentation
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ERM Bibliography
• Abstracts• Organization• Maintenance• On-line access established May 2003
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Coordination with Other CAS, AAA Committees
• DRMC: joint meetings, joint call for papers• VFIC: joint research project• Syllabus/Ed Policy/Continuing Ed/SIS/etc.:
working to develop syllabus materials• RCMS: ERM symposium• COTOR – Risk Measurement• AAA P/C Extreme Events Committee• AAA ERM Committee• SOA Risk Management Section
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Coordination with Other Professions
• GARP – Banking & Finance • AIMR – Investment Research• RIMS – Risk Management & Insurance• Academia – GSU Center for ERM and
Assurance Services
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ERM Research Committee -- Future Plans
• Continue research material production orientation of committee
• Pursue remaining research priorities established by ERM Advisory Committee– See following slide
• Monitor research activities of other professional organizations, academia
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Additional Research Priorities
• Operational & Strategic Risk Quantification
• Risk Tolerances• Optimization, Risk-Reward Metrics• Preliminary Findings
– Material exists– Not consolidated– May or may not need additional research
• Next Steps – develop roadmaps
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Concluding Thoughts
• ERM is a value creation tool• ERM is a unifying framework• ERM is a recruitment tool• ERM is the CAS’s future
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ERM is a Value Creation Tool
• Systematically identifies material threats/ opportunities (re: business objectives)
• Rigorously analyzes capital requirements– Financial efficiency (shareholder view)– Solvency protection (customer view)
• Optimizes strategies under uncertainty -- for improving growth and return
• Exploits natural hedges, portfolio effects• Enhances stability
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ERM is a Unifying Framework• Actuarial subject areas
• Logical structure/integrated whole/ business-relevant
• Cross-silo Chief Risk Officer training
– Pricing– Reserving– Risk modeling– Accounting– Financial performance measurement
– Capital management– Asset/liability management– Reinsurance– Portfolio management
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ERM is an Actuarial Recruitment Tool
• Strong business focus• Re-engagement of CAS candidates and
recent Fellows/Associates• Coordination with AIMR (CFA), GARP
(FRM), et al• The membership wants to go there
– ERM Committees oversubscribed– ERM survey response– ERM Seminar attendance/response
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ERM is the CAS’s Future
“The CAS will be globally recognized as the preeminent resource in educating casualty actuaries and conducting research in casualty actuarial science. CAS members will be recognized as the leading experts in the evaluation of hazard risk and the integration of hazard risk with strategic, financial, and operational risk.”
[emphasis added]