Description: An update on the activities of the JRMS Council.

Description: The underlying premise of this paper is that enterprise risk management (ERM), as it continues to evolve as both a process and a collection of risk management techniques, can benefit from several different (but ultimately somewhat related) “megatrends.” The core of this paper concentrates on the impact on ERM of one of those megatrends: the emergence of a behavioral economics perspective, which is beginning to have a large impact on our understanding of the economy and on certain economic and business processes. The evolution and context of behavioral economics are described, and potential implications for the practice of ERM are discussed. The paper culminates with a variety of specific suggestions for ERM practice in response to findings from behavioral economics research, specifically a number of human cognitive dissonances inconsistent with traditional economic theory.

Description: Here we are led to draw a distinction between “wild” markets and “free” markets. A wild market is unregulated and unscrutinized. Information flows are purposely impeded for competitive reasons and reduced to trickles from rumor and espionage. No one knows what anyone else is doing, and pricing is blind and haphazard. In such a market, there are no safeguards against anticompetitive behavior and no guarantees that the market will clear. The only guarantee is that there will be liquidity crises.

Description: The roots of the crisis are understood on a simplified basis, by 3 Ls: a Lack of accountability b Leverage and c Liquidity. Historically, people requiring mortgages sought their mortgages from local institutions that would conduct the evaluation and hold the risk. Loan officers of these institutions were accountable for the outcomes of their decisions – defaults were a direct reflection on their judgment. Leverage was a second key factor. Institutions guaranteed mortgages against default. The third L, liquidity, because a problem. When property values eventually evidenced their inevitable fall, defaults occurred at historically high rates.

Description: The central question is that of viability. Specifically, is the configuration of life insurers’ products and balance sheets economically viable under current accounting and ongoing market conditions?

Description: The current financial crisis underscores the need for companies to take a sobering look at their approach to risk management. Among the many lessons to be learned, one is immediately clear: The subprime debacle represents a failure in risk management, rather than a failure of risk management.

Description: Property-liability insurers use reinsurance as a cost-efficient substitute for capital, but in a disruptive event, reinsurance prices and availability can change sharply.

Description: This article provides a brief summary of the 2004 ERM Symposium.

Description: Full version of Risk Management Newsletter, July 2004, Issue No. 2.