Description: The author constructed the efficient frontier of new business sales by modeling the embedded value and economic capital against a universe of possible growth rates of the three lines of business in a typical three-year planning horizon. The ERM function can use the efficient frontier of new business to provide a more rigorous analysis of the impact of growth rates on the firm’s overall capital efficiency and value creation, hence forming a feedback loop with the businesses in the planning process to optimize the growth strategy.

Description: When companies engage in risk management activities, they can be seen as modifying their distributions of future outcomes. Often, this takes the form of trading off a sure cost for a decrease in some potential risk of loss. Companies may carry out these activities with several goals in mind, such as reduction in earnings volatility or preservation of capital. This paper will demonstrate a method for evaluating possible strategies by dividing the effects on costs and risks into three tranches: earnings, impact and estate. The tranches can be associated with different interests of the various stakeholders. This trifurcation analysis can help to explain the risk-reward trade-offs of different risk treatment alternatives and can aid in risk-related decisionmaking.

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: Many top-performing businesses aren’t just risk aware, but rather risk intelligent. Such a posture helps prepare companies for a major event and can demonstrate to a regulator or auditor that an appropriately strong control framework is in place. Better still, companies gain real strategic value from a “risk adjusted” understanding not only of their threats and vulnerabilities, but also the upside opportunities associated with various risks. It starts with having both qualitative and quantitative information to identify, assess and manage risks. Strategic risk management, at its core, is about creating value by increasing transparency and accountability, and quality of information. More than a mere compliance exercise, effective risk management enables more informed strategic decision making, increased accountability and transparency, a greater likelihood of organizational success, and – ultimately – competitive advantage, as borne out by many studies that correlate risk management and financial results.

Description: This article discusses a good way for insurance companies to calibrate economic capital (tail risk level) that is consistent with the market opinion on its risk. It also establishes a bridge between a risk neutral evaluation and a real world evaluation.

Description: Financial institutions have and continue to suffer substantial financial losses because of their exposures to various operational risks and insufficient risk management. Quantifying operational risk is a critical component of an institution’s ability to manage risk. The model described in the article provides a numerical measure for operational risks existing in a business entity through statistical methods. It takes experience data to reflect both the general features and company specifics of the defined operational risks, while also allowing for managerial discretion. An important achievement is to suggest a level of capital to hold against potential losses arising from operational risks.

Description: To be financially "well" is unique to an individual. Following a hierarchy of needs is key, along with saving more than the talking heads tell you to.

Description: Many top-performing businesses aren’t just risk aware, but rather risk intelligent. Such a posture helps prepare companies for a major event and can demonstrate to a regulator or auditor that an appropriately strong control framework is in place. Better still, companies gain real strategic value from a “risk adjusted” understanding not only of their threats and vulnerabilities, but also the upside opportunities associated with various risks. It starts with having both qualitative and quantitative information to identify, assess and manage risks. Strategic risk management, at its core, is about creating value by increasing transparency and accountability, and quality of information. More than a mere compliance exercise, effective risk management enables more informed strategic decision making, increased accountability and transparency, a greater likelihood of organizational success, and – ultimately – competitive advantage, as borne out by many studies that correlate risk management and financial results.

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.