Description: In this article, the author explains what a CAT model is.

Description: Risk management and capital budgeting are two critical components of the corporate decision process. They often need to be considered jointly at the corporate level because of their natural interaction through the dependent risk exposures and other synergetic relationships within an intricate corporate structure in a dynamic business environment. . This paper develops an integrated framework that aligns these two important corporate strategies across business divisions to optimize the streamlined enterprise strategic goal in a multi-period setting. The proposed integrated framework can serve as a practical guideline for corporate executives to optimally coordinate capital budgeting and risk management at the enterprise level.

Description: This paper demonstrates that extreme value theory (EVT) can be used as a tool to model policyholder behavior in the extreme tail. This paper applies EVT to the study of variable annuity dynamic lapse behavior in the extreme tail. It illustrates a process whereby a company can fully model policyholder behavior, including the extreme tail, with existing data. No judgment about the extremal behavior is necessary.

Description: This article reviews the sixth survey of Emerging Risks, sponsored by the Joint Risk Management Section and completed in fall 2012.

Description: European insurance regulation pretends to capture and rely on the 1-year 1-in-200 VaR. But there cannot exist any scientific calibration of such measure. Why?

Description: This article discusses incentive compensation metrics set to motivate performance, retain people, satisfy legal constraints and Say-on-pay and promote good risk management. Alignment discussion between actual metrics characteristics and the behavior they promote.

Description: Abstract: Project portfolio risk management and risk analysis form one of the critical components of enterprise risk management. Organizations measure and analyze risks associated with projects, project portfolios, and programs. The important step of the process is quantitative risk analysis of project schedules using event chain methodology (ECM). ECM is a stochastic modeling technique for schedule risk analysis. All risks, including schedule and nonschedule-related risks, are assigned to a particular project and within this project to the particular activity or resource. Further, ECM allows one to model the relationship between project risks by defining risks that cause or trigger other risks. All risks and relationships between them will be presented on the project or portfolio Gantt charts using event chain diagrams. After risks are assigned to project and portfolio schedules, Monte Carlo simulation of the project schedule is performed. ECM simplifies complex risk analysis process.

Description: The article is based on a study of causes of insolvency and decisions made by management, regulators, and policyholders over the life cycle of the insolvency.

Description: Although crisis management remain often seen through a “communication lens”, it has in reality more in common with risk management than usually thought. Both crisis and risk management are anticipatory endeavors, with most of the work being carried out in peace time; both require a deep understanding of the organization’s activities and ecosystem; both have the same overarching objective to enable the organization to survive a brutal change to its usual operating conditions. Developing integration between the two functions would thus go a long way toward a more resilient organization.

Description: An overview of the articles in the August 2012 issue of Risk Management and a list of winners of the most recent call for papers, “Risk Metrics for Decision Making and ORSA.”