INARM

A 2008 White Paper, published by the CFO Magazine and written by Frank Edelblut, outlined the 7 Deadly Sins of ERM – Lack of a Clear Vision, Building Unnecessary Organization, Function and Process, Lack of Support from Leaders, Bottom-up Approach, Risk Confusion, Overly Complex Risk Assessment and Making ERM the Endgame. While most if not all of these sins sadly still take place within the enterprise, a whole year has passed since the publication and their amount is not decreasing, if not the opposite.

In true actuarial fashion we extended the upper limit on the sins to N and relied on the wisdom of the crowds, in particular on the INARM listserv and the LinkedIn Group. What followed is presented below.

ERM does not need introduction, although perhaps we flatter ourselves. While the abovementioned white paper credits the beginning of ERM to the Committee of Sponsoring Organizations (COSO) – Enterprise Risk Management – Integrated Framework, brought forward in 2004, or perhaps even further back to 1970’s, people are still unaware of the necessity of its implementation. Moreover, and sadly at that, the exposure of the actuaries as the prime candidates for the role is something to be desired. Just ask anyone in Europe what a CERA (Chartered Enterprise Risk Analyst) is!

Luckily, the Society of Actuaries (SOA) in the States, along with a slew of other bodies, is doing an excellent job at promoting CERA and the brand of actuaries as the best people for the job of a risk manager. There is even talk of 16 actuarial bodies working on agreement in principle regarding worldwide recognition of the designation, but again, it is too soon to tell.

Yes, the companies out there are implementing ERM, not as many as we would like to see, but it is a great start. However, just to start thinking about it and staff the risk management team is not enough. ERM is a mindset and should be prevalent in the whole institution. Below are some of the things you should not do in your quest to ERM nirvana:

Read the rest of this entry »

The results of the second INARM poll are in. The response was far from overwhelming again, but hopefully as the new site gets more exposure more people would participate. If you have a question to ask the INARM audience, please drop us a line.

And now, to the results:

Read the rest of this entry »

Date: December 1, 2009

Time: Times vary by location

Location: This webcast takes place via the Internet.

ERM is a unique field that is developing in all parts of the world at more or less the same time; therefore it is a new practice area where a global actuarial community of practitioners is developing. The webcast includes speakers from Europe and Asia/Pacific, as well as the Americas, and allows risk officers to share emerging risk management practices across different geographical regions.

The objective of this webcast is to provide the global actuarial community with new and emerging enterprise risk management (ERM) practices from different geographical regions. This webcast will include speakers from Asia/Pacific, Europe and the Americas offering insight into ERM best practices.

The webcast objectives

• Disseminating and promoting global ERM best practices to the actuarial community
• Offering accessible information about ERM to actuaries
• Facilitating the discussion of practical and theoretical ERM issue and possible solutions
• Promoting global standards of best practices in ERM

Who Should Attend

• Actuaries who are currently practicing in the ERM area within Insurers or consultancies and
• Actuaries and actuarial students who wish to get exposed to ERM practices so they can participate in ERM programs at insurers in the future
• Other non-actuarial risk officers

Register

Agenda
Additional Information
Contact the SOA
Continuing Education Credit
FAQs
Registration
Sponsors

The global actuarial profession has confirmed it is hosting its third global enterprise risk management (ERM) webinar on 1 December , 2009 with Tom Wilson, Allianz’s chief risk officer, confirmed as one of this year’s European keynote speakers.

The global actuarial profession ERM webinar will run over an 18-hour period with sessions in Asia, Europe and Africa and finally the US and the rest of the Americas. Each region will have its own set of speakers — two for each session — but will stick to the same four topics.

The event is not for profit, so entry costs will be kept as low as possible, the organizers have said. Last year the event attracted over 1,000 delegates around the world.

The sessions will be:

Read the rest of this entry »

If some of you wandered onto this site only to find a mysterious image and some background music a little while ago, please do not be alarmed. INARM.org seemed to have been hacked, but things are back to normal now.

If you are a Subscriber, please login and change your password to Strong.

We are taking the necessary steps to prevent this from happening in the future.

Anton

Some of the readers of this blog may know David Merkel, CFA, FSA in person. Did you know he publishes a blog?

The Aleph Blog has been David’s brainchild since early 2007 and contains his musings on “teaching investors about better investing through risk control, and tying all of the markets into a coherent whole”.

While not all of the posts written by David are directly relevant to the actuarial community, only in the general informative manner, one of his most recent posts is:

With banks, the grand weakness is in the assets, and the analysis should focus on two things:

• Liquidity of the assets versus liquidity of the liabilities.
• Potential credit losses of the assets versus the surplus of the bank.

I write this because of the commentary of Taleb and Bookstaber.  They are bright men, but they have never managed the risks of a financial institution.  Leverage ratios are not enough.  One must dig into the loss experience and analyze whether emerging losses might overwhelm the capital of the institution.  One must also look at risk-based liquidity — what is the likelihood  of running out of cash?

There is always a tension between rules versus principles.  What must first be admitted is that both can be fuddled by sinful men.  Rules can be observed, and cheaters bring items that meet the letter of rules, but violate the spirit of the rules.  Principles can be bent by those that implement the principles.  Neither is a perfect solution — better to settle on one way of regulating, though, and understanding the soft spots, than to vacillate.

Perhaps the banks need to employ actuaries.  I don’t say that so that friends might find work, but because many banks do not get how to preserve their existence.  Actuaries think longer-term; they think about scenarios where loss experience might prove to be unsustainable.  They are more skeptical on risk compared to most bankers.

I invite you all to periodically browse through David’s blog.

In May 2008, Standard & Poor’s Ratings Services announced its intention to include enterprise risk management (ERM) assessments in ratings of nonfinancial companies (see “Standard & Poor’s To Apply Enterprise Risk Analysis To Corporate Ratings ,” published May 7, 2008, on RatingsDirect). Since the third quarter of last year, our analysts have begun to incorporate specific ERM discussions into their regular meetings with the companies we rate, focusing on risk management culture and strategic risk management as two universally applicable aspects of ERM.

Among other things, we’ve been reviewing risk management structures, the roles of staff responsible for risk management, internal and external communication, and risk management policies and metrics. Our analysts have explored managements’ views of the most consequential risks that their firms face, their likelihood of occurring, how these top risks are identified, monitored, and updated, and the influence of risk sensitivity on liability management and financing decisions.

The complete Progress Report is available erm-update-22-jul-09.

Atlanta – The ERM-II Research Workshop on “Systemic Risks: Regulatory and Policy Responses” successfully took place on August 18th & 19th at Georgia State University. Professor Shaun Wang initiated this conference, and he was joined by Wayne Fisher (Executive Director, ERM-II), Dave Ingram (Senior Vice President, Willis Re) and Dave Sandberg (Vice President, Allianz Life of North America) as co-organizers.

This was a multi-disciplinary gathering. It drew 35 participants from banking, insurance, and other economic sectors, including leading academics, regulators and risk management professionals. Through prepared presentations and interactive discussions, workshop participants jointly developed several key policy recommendations addressing three topics. Below is a summary.

Read the rest of this entry »

Jawwad Farid is “a self employed Karachiite with a questionable work ethic and a penchant for founding companies that run into trouble”. Nonetheless, he is the author of The Blue Screen of Death and CEO of Alchemy Technologies – one of the largest Enterprise risk and Actuarial firms in Pakistan with a portfolio of several blue chip customers. Jawwad is a Fellow Society of Actuaries, an MBA from Columbia Business School and a Computer Science graduate. During the last 15 years, he has worked as a consultant in North America, the Middle East, Pakistan and United Kingdom with a number of blue chip clients. Jawwad is also the appointed Actuary for State Life Corporation of Pakistan and Dawood Family Takaful Limited. Jawwad’s core areas of expertise include Asset/Risk Management, Investments, Product development, Derivatives, the financial services Middle Office and the Basel II Regulatory Frame work.

In early Spring Mr. Fawad launched Pakistan Risk Review – “a dedicated periodical that quantifies the risk associated with Pakistani securities using a consistent, objective benchmark”. Currently on its third issue the periodical is going strong and picking up momentum. The Editor’s Notes to the Second and Third Issues are worth noting. They have been linked to below, with permission from Jawwad.

Read the rest of this entry »

The following post is from Dave Ingram:

Dave Sandberg and I will be participating in a couple of workshops this summer to map out priorities and corresponding strategies as challenges and opportunities continue to emerge due to the current economic crisis and the resulting government reactions. We are unofficially asking the INARM group for help with providing some suggestions that we could bring to the discussion of what the actuarial and ERM professions should be doing. We are particularly looking for those famous “outside-the-box” ideas that might not otherwise be considered.

To give you an idea of what we mean by “outside-the-box”, here are some examples:

Read the rest of this entry »