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A Credential On The Cutting Edge

A Credential On The Cutting Edge

By Chaundra McGill

Staying abreast of industry trends and adjusting your business strategies accordingly is pivotal to providing your clients with effective risk solutions. One business practice that has been gaining intense momentum in the world of risk in the last few years is the application and study of enterprise risk management (ERM).

A former buzzword of the 1990s, ERM is transforming into a standard business practice that corporations implement to prevent losses and convert risk into opportunity.

Defined as the process of coordinated risk management that focuses on cooperation among departments to manage the organization's full range of risks collectively, enterprise risk management practices require professionals who work with the C–Suite to implement the most beneficial risk strategy for the company as a whole; previously the focus had been on self–contained lines of business, also known as the "silo" approach.

Taking this comprehensive approach to risk management yields many benefits, such as enabling organizations to be more transparent, dealing with security and technology issues, preparing for disaster and business continuity in a post–9/11 world, and maintaining competitive balance in a globalized environment.

Slow to Change

Though many companies across all industries have voluntarily initiated a holistic approach to risk management, some companies are still relectuant to implement an enterprise risk management program.

"There are two primary reasons that companies do not implement enterprise risk management programs," explained Max Rudolph, FSA, CFA, CERA, MAAA, owner of Rudolph Financial Consulting, LLC. "One is when a company doesn't understand enterprise risk management and its benefits. These companies focus on the costs of implementing an enterprise risk management program rather than the value the program can bring to the company. The second reason is driven by the firm's risk culture. If a company's leadership is dictatorial, transparency and differing opinions will be discouraged. In one case, they don't understand the benefits, and in the other they don't want to hear from someone who disagrees with their opinion."

Despite the tendency of some organizations' leadership to ward off transparency, the recent business climate has caused many organizations–particularly large national and international financial institutions–to implement an enterprise risk management framework as a form of checks and balances.

For instance, the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board in 2007 placed increased scrutiny on top–down risk assessment and included a specific requirement to perform a fraud risk assessment. In addition, rating agency Standard & Poor's (S&P), among others, has included a series of questions about risk management in its company evaluation process.

Sheetal Kaura, ASA, CERA, associate director of Insurance at Fitch Ratings, has noticed the shift in focus from financial risk to enterprise–wide risk. "As more information becomes available to the public, companies will be forced to think about the risks in all aspects of their business," she said.

As ERM evolves from best practice to standard practice, it is important to have individuals with deep knowledge of the dynamics of risk to help organizations mitigate risk and apply a forward–looking, comprehensive approach.

The Fast Track

The Chartered Enterprise Risk Analyst (CERA) credential teaches professionals to do just this. The most comprehensive and rigorous demonstration of ERM expertise available, the CERA credential signifies the best enterprise risk management training in the market today. Offered by the Society of Actuaries (SOA), the CERA credential has the same standards of actuarial training that have always set members apart.

Like the other SOA credentials, a CERA must complete a rigorous exam process, which consists of three to four years of course work in probability, financial mathematics, actuarial models, advanced finance/ERM and operational risk management. The rigorous exam curriculum is the primary selling point for some who decide to pursue the CERA credential.

"Risk management has always been a familiar concept, but it wasn't until I read through the content on the Society of Actuaries' exams that I truly became interested in ERM and realized the possibilities for actuaries to become involved in non–traditional roles," Kaura said.

However, not all SOA members will be required to complete the examination process to obtain the CERA credential. Members who have a minimum of three years of substantial experience and demonstrated expertise in ERM may be eligible for the Experienced Practitioner's Pathway. Upon acceptance into the Pathway through an application process, Experienced Practitioners must complete a two–day seminar to earn the credential. The Experienced Practitioner's Pathway is a great opportunity for members to have their experience in enterprise risk management work to their advantage.

"There are many actuaries who are already doing excellent ERM work and have the kind of knowledge that we are teaching CERAs," said Mike McLaughlin, FSA, CERA, FIA, MAAA, global leader, A&IS of Deloitte Consulting LLP. "This credential recognizes that set of skills."

Many Benefits

By obtaining the credential, CERAs will be certified as internationally–recognized ERM experts, which distinguishes them from other risk professionals in a competitive marketplace. This knowledge will invariably help leaders get a clear view of how their organization can convert risk into opportunity.

As roles in enterprise risk management continue to grow, CERAs will be qualified for risk management leadership roles in all types of organizations, including insurance, benefits, broader financial services and the energy, manufacturing, transportation and health care industries.

"Obtaining the CERA credential shows a potential client or your employer that you are knowledgeable about and interested in enterprise risk management. You can leverage your knowledge and interest to offer them ideas they would not have otherwise considered to bring about solutions," said Rudolph.

For more information on the CERA credential and the Experienced Practitioner's Pathway, visit Ceranalyst.org.

Chaundra McGill is marketing & communications project specialist–CERA at the Society of Actuaries.