Description: The costly, time-consuming and complicated process of enterprise risk management (ERM) can be improved in many companies and made less tedious for managers by using reasonable data and templates obtained from peer group entities. The models used to calculate economic capital (EC) often underestimate its value because they do not consider decision-maker perception about risk. We assume here that managers, as the decision-makers, have appropriate business understanding and they can provide substantial information about risk characteristics regarding all business processes. Therefore we are focused, in this paper, on collecting data from managers across the different businesses to derive the appropriate knowledge about risky events, the importance of particular types of risk, the relationship between the risk outcomes and the level of risk control in a particular industry. We conclude that the collected data has a high potential for use as a benc hmarking reference and analysis for improving ERM models for individual businesses.

Description: The U.K. Pension Protection Fund (PPF) was established in April 2005 to protect the pensions of members of U.K. private sector defined benefit pension schemes that have insufficient assets and whose corporate sponsor fails. The Fund takes over the pension scheme assets and assumes responsibility for the payment of compensation to the former members of the scheme. The PPF is funded by a levy on the population of eligible schemes. To improve its ERM framework, the PPF has undertaken a reverse stress testing exercise. This analysis provided the organization with new insights into its risk profile, the scenarios leading to the PPF’s potential “failure,” and interactions between these scenarios. This paper discusses the principles and objectives of reverse stress testing in the special case of the PPF and then illustrates the application of complex system science techniques for the purpose of reverse stress testing.

Description: An introduction to the Goals-Progress-Strategy (GPS) strategic risk management framework: an original synthesis of scenario based ERM, the Logical Framework Approach, and new metrics and methods. GPS improves strategic planning and execution and enables practical management of the risks a company faces in pursuit of its business goals. The framework provides a portfolio view of a company’s strategic objectives, a return on risk-adjusted capital measure, risk-intelligent decision making, and risk-adjusted performance measurement/compensation.

Description: Description of considerations and perspectives to be taken into account by incentive compensation plans.

Description: This article discusses some of the ideas of pension finance, how to present such information, and how it was presented to the New York City Retirement Systems (NYCRS) in a way that made it available to other interested parties, including the public.

Description: In summary, the goal of this report is to foster better industry-wide education, training and practice that decreases the future range and scope of what leading risk management professionals will henceforth label as being unpredictable as events now commonly thought to be so.

Description: Forming a view on what the tail looks like for various risk factors involves both technical know-how and considerable judgment. The presenters focus on what needs to be addressed when setting financial market risk and insurance risk assumptions, in particular when assessing the question of diversification and the treatment of tail dependencies between risks and lines of business:

Description: This paper cautions against using expected utility theory for measuring insurance risk, because of the numerous inherent difficulties associated with it. Instead, an approach for loading gross premiums that is based on risk-measure functions is explored. Discussions of this paper are included.

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: 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.