Description: Many risk management decisions involve the timing of implementing risk strategies. The cost of hedging, capital raising and securitization changes with the economic environment. The timing of de-risking and investment in new risk management functions affect the cost and benefit of these projects as well. Like investment timing, it is important to consider the timing in risk management decisions to maximize the gain of risk management projects. This paper discusses methods of determining the appropriate timing of implementing a risk management strategy or investing in risk management projects. It explains the human biases that may lead to inferior timing decisions. It also covers the costs and benefits of risk management projects and the impact of new information on the decision-making process. Timing considerations for financial risk hedging, insurance risk hedging and investment in new risk management projects are explained. Factors used for timing decisions include economic conditions, market volatility, credit rating, borrowing cost, capital adequacy and financial resources.

Description: This paper presents the output of in-house research on an emerging area of risk appetite management and our global implementation best practices. It intends to provide readers with detail implementation of risk appetite framework and assessment across an organization. It provides the conceptual risk appetite framework based model- developed by the author, implementation plan, and global best practices of a risk appetite assessment across an organization. It identifies the challenges and exceptions in the risk appetite assessment with an approach to manage it effectively, and helps organizations with cost-benefit analysis. It also includes an illustrative case study.

Description: A common approach to estimating the total amount of savings required to fund retirement is to first apply a generic “replacement rate” to pre-retirement income, such as 80%, to get the desired retirement income need. That need is then assumed to increase annually at the rate of inflation for the duration of retirement, which is generally assumed to be some fixed period, such as 30 years. Using government data along with a fairly simple market and mortality model, we explore these assumptions to more accurately estimate the true cost of retirement

Description: The percentage of the population who are obese has grown dramatically worldwide over the last several decades, although stabilizing recently in the United States. Studies have found the effects on mortality to be inconsistent and controversial because of methodological differences and the complexity of the relationship between obesity and mortality. This paper discusses this relationship and sheds light on the likely effects of this epidemic. Issues associated with the so-called obesity-mortality paradox, where mortality experience is lower for those individuals who are overweight and in some who are obese compared with the mortality of those in the normal weight category, are examined. Although certain recently reported studies of the relationship between mortality and obesity indicate that obesity is related to a reduced percent of additional mortality, this may in part be due to the shorter average time that those currently obese have been exposed to their condition. Nevertheless, the amount of health care costs and rates of disability associated with being obese are significant, contributing to the increase in overall health care costs as they become more numerous and age. Although obesity is being addressed with a great deal of activity and publicity, they will continue to prove challenging for individuals and society to manage and overcome.

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: Investment volatility can lead to unacceptable levels of contribution volatility and wide swings in a retirement plan’s perceived funded status. This paper approaches the volatility problem from a plan design perspective.

Description: Global financial crises like the one recently experienced, affected both large and small institutions.Today, when there is heightened need for enhanced risk management tools, some entities are unable to employ sophisticated mechanisms due to limited data availability. Moreover, from the Basel Committee on Banking Supervision’s point of view via Basel II and Basel III, the internal ratings- based (IRB) approach requires that institutions have some reliable estimates of default probabilities of default for each rating grade. Taking the work of previous researches a step further, this paper intends to propose a new dynamic mechanism to for the risk management industry for to calculateing probabilities of default (PD). Through these estimates for the core model, we generate implied probability of default (PD) through actuarial estimation tools and different probability distributions. This mechanism is specialized to work best for low- defa ult portfolios (LDPs). Furthermore, scenario testing is adopted to validate the model against any model- specific bias

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: Generally, the assets acquired by financial institutions have their values determined by established capital markets. However, the firm's liabilities become customer's' private placement assets and their value must be calculated by the firm. This monograph discusses the theoretical bases for modeling the liabilities consistently with the assets. From Asset-Liability Integration, M-FI02-1.

Description: This paper employs a static-component projection methodology as a first step in a more complex research agenda focusing on developing detailed population projections in which mortality, disability, and disease are represented as linked phenomena with changes in any one impacting the other two. From Retirement Needs Framework, M-RS00-1.

Description: In this article, the current state of the liabilities market is discussed. Two paradigms are then explored for defining and subsequently calculating an insurance liability market value. From Society of Actuaries Financial Reporting Monograph, M-AS99-1.