Description: In the current environment of global competition, the question of how much, and in what way, the enterprise risk management (ERM) function contributes to the creation of shareholder value will only increase in importance and urgency.

Description: The paper discusses the arguments supporting the need for risk culture to transition into ERM culture to be embedded across financial organizations. Creating and maintaining strong ERM culture is paramount to a lasting and meaningful ERM program. It is essential for organizations to understand what ERM culture is, how it gets established and in what way affects the process of ERM implementation. Often, the implications of financial enterprises not focusing on the significance of ERM culture manifested in severely compromised ability to generate sustainable value and market competitive advantage. This paper calls for rethinking the role of ERM culture in the context of managing risks.

Description: Obsolescence of physical assets and processes is a major component of operational risk for some companies. A simulation experiment shows that managers, who consider the retirement and replacement of individual assets in isolation, have rational incentives, due to risk aversion and uncertainty, to defer the replacement of assets past a time that is optimal from the perspective of the shareholder who owns the entire portfolio of such assets. This results in measurable wealth destruction, —and a demonstrable opportunity to significantly enhance a company’s value. A practical decision model for the replacement timing of fixed, physical assets, which creates wealth by minimizing the long-term consumption of scarce resources, is provided.

Description: In the recent years, Enterprise Risk Management (ERM) has emerged as a new Risk management technique aimed to manage the portfolio of risks that faces an organization in a integrated, enterprise-wide manner. Unlike traditional risk management, where individual risk categories are managed from a silo-based perspective, ERM involves an holistic view of risks allowing to take into account correlations across all risk classes. The academic literature on ERM is focused on two main aspects: the analysis of the factors that influence ERM adoption and the effect of ERM adoption on the firm performance. No studies have been conducted yet to propose robust and rigorous models to evaluate the quality, or maturity, of ERM programs implemented by organizations. The aim of the research described in this paper is to fill this gap in the literature.

Description: Interest rate changes and volatile equity returns have contributed to significant funding and expense volatility for defined benefit plans in recent years. This paper will describe the design of an option contract with payouts that are tied to the combined impact of interest rates and investment returns on the funding level of a defined benefit pension plan. Current derivatives used by plan sponsors can limit exposure to one of these risks; however, a derivative that combines these risks may provide more targeted protection to a plan sponsor at lower cost. This paper discusses several considerations in designing such a derivative. It will also briefly discuss pricing of the option. Finally, the difference in potential outcomes between plan funding with and without option ownership will be demonstrated. As an outcome of the design work, a new way to visualize pension risk that may be useful in sponsor accounting disclosures will be shown.

Description: Accurate determination of the appropriate time to retire and replace a physical asset is important for large ensembles of such assets when taken as a whole, and concerns the fate of tens of trillions of dollars in assets, such as airplane engines, vehicles, or any other kind of physical asset susceptible to obsolescence. A decision model to accomplish this is derived using the concept of actuarial present value applied to an economic theory of cost minimization. Since this is a theory coupling investor wealth creation with the long-term optimization of the use of scarce resources, it can also be offered as an economic model relevant to sustainability.

Description: Odd patterns in mortality curves can be caused by bad data. The author hypothesizes that the negatively sloped mortality rates at the highest ages for U.S. males are caused by overstating age at death, and the low mortality rates for Japanese females by failure to report deaths. The paper upholds the first hypothesis but soundly defeats the second. The paper also demonstrates the impact of mishandling incurred but unreported deaths.

Description: Abstract: Odd patterns in mortality curves can be caused by bad data. The author hypothesizes that the negatively sloped mortality rates at the highest ages for U.S. males are caused by overstating age at death, and the low mortality rates for Japanese females by failure to report deaths. The paper upholds the first hypothesis but soundly defeats the second. The paper also demonstrates the impact of mishandling incurred but unreported deaths.

Description: Abstract: Despite a considerable accumulation of empirical and theoretical evidence in the last two decades in favor of a slowdown in the rate of mortality increase with age, the veracity of mortality deceleration observed at very old ages among humans was recently called into question on the basis of: (1) inaccurate data, (2) invalid assumptions, and/or (3) inadequate mixture of birth cohorts with different mortality experiences. In this article, we use a highly reliable set of individual-level data on French-Canadians centenarians born between 1870 and 1896 and who died between 1970 and 2009 to compute new estimates of the age-trajectory of mortality at ages 100 and over. Our results suggest that the rate of mortality increase with age tends to slow down at very old ages, even when special care is taken to avoid issues (1) to (3) outlined above.

Description: Abstract for Sex Differences in Predictors of Health Decline: Results from a 16-Year Longitudinal Cohort Study