ERM is a hot topic these days. What is driving this interest? What steps are you taking internally to develop an ERM plan?
Over the past several months, we have been receiving more and more industry emails, newsletters and webinar invitations on topics related to Enterprise Risk Management (ERM). For example, I attended Strategic Risk Solutions Inc.’s webinar “ERM for Captives.”
The Casualty Society of Actuaries defines ERM as:
“… the discipline by which an organization in any industry assesses, controls, exploits, finances, and monitors risks from all sources for the purpose of increasing the organization’s short and long-term value to its stakeholders.” Or put more simply, it is the assessment and management of the entirety of an organization’s risks – not just the risks analyzed in a typical loss reserve or loss forecast actuarial analysis.
The focus on ERM has been driven by both external and internal factors. Not only are new regulations and rating agencies driving the push for an organization to develop an ERM plan, but there are internal pushes as well. Boards of both parents and captive companies as well as service providers are suggesting a more enlightened approach to risk management that strives to encompass all risks outside the more readily quantifiable ones.
Developing an ERM plan can seem overwhelming as there is no boilerplate approach that will apply to all organizations. We, as actuaries, can assist management in quantifying and assessing all risks and can tailor the ERM plan to the individual business. We can also work with captive owners to determine which coverages to incorporate into the captive structure to cover more unusual risks and assist in determining the premium level. However, like any analysis, the ERM program will need to be monitored and revised over time.
Are you feeling pressure to implement an ERM plan? Have you already done so? What are your concerns with ERM and your plan going forward?