Tuesday, April 23, 2013
10:30 – 11:45 a.m.
The biggest challenge we face as risk managers is implementing theoretical models in the real world. Fuel hedging has worked for some and has been a disaster for others. This case study looks at the challenges of analyzing a real world risk problem and then presenting the results to an airline board. The key takeaways from the session are how implementation and execution challenges can kill great ideas and how simple questions can sometimes floor risk consultants and experts.
Presenters: Dragna Pilipovic, President & Founder, Energy Risk WorkDesk; Jawwad Farid, Founder, Alchemy Technologies
In addition to raising many difficult challenges, the global financial crisis also presents unique opportunities for risk management professionals. In particular, the crisis has focused attention on the identification and management of operational risk within an organization. Risk management professionals at the Canadian Western Bank have capitalized on this increased focus to develop an ERM framework at the bank.
Using the CWB experience as a case study, presenters will describe what operational risk looks like for a mid-tier bank, evaluate the greater focus being placed on operational risk as the financial crisis fades away, and describe how that focus was used to develop ERM at the bank. The discussion will also include a review of what has worked well, what is still a work in progress, and the next steps in the ongoing development of both operational risk and ERM at the Bank.
During the session, attendees will:
- Gain an understanding of what operational risk looks like for a mid-tier bank
- Discover the strategies used to develop an ERM framework at the bank
- Gain insight into what strategies have worked, what strategies did not, and why
Presenters: Blair Himmelreich, Director, Group Risk Management, Canadian Western Bank
Moderator: Joseph De Dominicis, Staff Fellow, Society of Actuaries
The new actuarial standards for Risk Evaluation and Risk Treatment bring new help and new issues to actuaries practicing in the ERM field. For new entrants, the standards are good guidelines for preparing comprehensive analyses and reports to management. For more experienced practitioners, the standards lay out expectations for a product worthy of the highly-qualified actuary. However, meeting the standards' expectations is not easy. This session focuses on clarifying key aspects of the standards.
- Learn how an actuary should act when working in an ERM team comprised of at least 50% non-actuaries
- Debate how the qualified actuary should lead a staff of both actuaries and non-actuaries
- Learn how an actuary might apply these standards in providing an independent opinion about an ERM program
- Participate in a discussion contributing to guidance notes for the practice of ERM
Presenters: Maryellen Coggins, Director, PricewaterhouseCoopers; Andreas Graser, Chief Risk Officer, Allianz Life; Eugene Connell
Moderator: David Ingram, Executive Vice President, Willis Re
In this session, we discuss how suboptimal risk disclosures are related to key risks, such as strategy execution risk, litigation risk, and risks related to rating downgrades. Our first panelist will discuss the linkage between the level of candor in shareholder disclosures and the ability to execute strategy. Our second panelist will discuss how a poor linkage between ERM and risk disclosures may result in litigation risk. Our third panelist addresses how ineffective disclosures to a rating agency factors into a company’s rating.
Attendees will learn:
- How shareholder disclosures can reveal which companies are more likely to successfully execute their strategy
- How to diagnose and correct a lack of linkage between ERM and risk disclosures
- How to avoid ineffective communications with rating agencies that could negatively impact the overall rating
Presenters: Laura Rittenhouse, President, Rittenhouse Rankings, Inc; Sim Segal, President, SimErgy Consulting; Howard Rosen, Senior Director, Standard & Poor’s
Moderator: Sim Segal, President, SimErgy Consulting
By Max Rudolph
By Guntram Werther
In this session, we will first share the results of the 6th annual JRMS Emerging Risk survey. We will then discuss techniques to improve predictions of large-scale, large-impact, rare events (LSLIRE). Analysis of the survey focuses on the cognitive biases, combinations of risks, and how risk managers see the future of ERM. We will also present a summary of Dr. Werther's LSLIRE research, which was presented at the seminar preceding the symposium.
Attendees will learn:
- How emerging risk priorities have trended
- How companies are developing leading indicators for emerging risks
- Differences between Black Swans and LSLIREs
- Ways to improve analysis of future events
Presenters: Guntram Werther; Max Rudolph, Rudolph Financial Consulting
Moderator: Max Rudolph, Rudolph Financial Consulting
In a rush to formulate rules to address the economic/financial crisis, have regulators misdiagnosed the problem and therefore maybe inadvertently sowed the seeds of the next crisis, as well as provided a false sense of security? In this technical session, you will learn how central banks and some market participants are attempting to quantify these two critical factors.
Presenter: Alan Laubsch, Kimmo Soramaki
At Malaysia Deposit Insurance Corporation (“MDIC”), the Deposit Insurance Organization of the Year for 2011 by the International Association of Deposit Insurers, the CRO reports directly to the board of directors via the Audit Committee, and administratively to the CEO, which provides a platform for independent and impartial advice on the principal risks of MDIC. The independent role of the CRO is critical for decision making and value creation to MDIC a) in establishing risk appetite/tolerance and risk parameters; b) in the divisional and corporate-wide interconnectedness risk assessment; c) in selecting risk treatment options and preparing preliminary risk action plans; d) in follow up on implementation of risk action plans; e) in monitoring the effectiveness of risk action plan implementation and reassessing the impact on risk rating.
Key Takeaways for Participants:
- Compare the roles of CRO and ERM function of his organization to MDIC
- Evaluate the importance of having an independent CRO and ERM functions for his organization in providing independent and unbiased advices on significant risks and ERM-related matters in the decision making process
- Select the best reporting structure and roles of the CRO that support the board of directors’ ability to discharge its responsibilities in oversight of the significant risks
Presenters: Chen Voon Chong, Chief Risk Officer and General Manager, Perbadanana Insurans Deposit Malaysia; Affeiz Abdul Razak, Deputy General Manager, Malaysia Deposit Insurance Corporation
3:00 – 4:00 p.m.
By Danny Saenz
By Sara Stehlik
To satisfy the Own Risk and Solvency Assessment (ORSA) requirements, many U.S. and Canadian insurance companies will need to significantly advance their ERM program sophistication. Yet, many insurers have not yet fully focused on ORSA to assess the time and efforts that will be needed. In this session, we outline the key criteria of the ORSA requirements, the challenges they present, and techniques companies can use to address these challenges.
Attendees will learn:
- What will be required to achieve a top-tier ORSA review, including formal guidelines as well as other helpful hints
- Aspects of ORSA that pose the biggest challenges for insurers
- Techniques companies can use to efficiently identify and correct any preparedness gaps
Presenters: Danny Saenz, Senior Associate Commissioner, Texas Department of Insurance; Sim Segal, President, SimErgy Consulting; Sara Stehlik, Chief Risk Officer, Progressive Insurance
Moderator: Sim Segal, SimErgy Consulting
Mexico’s recently-approved Law of Insurance and Bonds Institutions, based on a Solvency II framework and aligned with IAIS recommendations, takes effect January 1, 2015. Though Mexican insurance regulators plan to set a specific calendar for smoothing the transition, many issues remain unresolved. Mexican law already incorporates many aspects of Solvency II—corporate governance, integral risk management, a solvency capital model (although one based on factors) and a dynamic solvency test. The new law should lead to better risk quantification, more involvement from board members, stronger governance and risk management practices, as well as improved market transparency. All of these are expected to contribute to market development, but will also require insurance supervisors to redefine their roles. In this session, we discuss the current situation and outline the key challenges identified by the Mexican Association of Insurance Companies.
At the end of the session attendees will learn/gain:
- How will look like the fist regulatory framework type Solvency II implemented
- Possible effect on foreign investment and potential aspects inducing regulatory arbitrage
- How this model compares to other Latin American regulatory frameworks
- What lessons can the Mexican Market share
Presenters: Maria de los Angeles Yanez, Strategy Director, AMIS; Masashi Kikuchi, Chief Control Officer, Reaseguradora Patria SAB; Jorge Luis Lopez Araiza, Prudential; Irma Medina, Chief Actuary, GNP Mexico
Moderator: Irma Medina, Chief Actuary, GNP Mexico
Risk Governance is a critical aspect of any ERM framework. Decisions made at the Board and senior executive levels of the organization must align with the organization's risk appetite. Direction that is inconsistent with the organization's risk appetite often concludes with significant negative impact. In this session, we discuss case studies of both successful and unsuccessful risk governance.
Attendees will learn:
- Factors that led to misaligned decisions in case studies of poor risk governance
- Answers to the question: "What could the ERM practitioner have done to help avoid or mitigate the consequences?" in cases studies of poor risk governance
- Characteristics of good risk governance
Audience participation is expected and encouraged.
Presenters: Kevin Madigan, Director, PricewaterhouseCoopers; Kay Rahardjo, SVP and Chief Operational Officer, The Hartford
Moderator: Eugene Connell
Effectively demonstrating value through risk management is a challenge faced by all organizations, especially in times of fiscal restraint. The Canada Revenue Agency has made great strides toward embedding a culture of risk management within the organization and integrating the risk management function with corporate strategic planning. A key to the successful risk management strategy has been an increased understanding of the importance of Risk Interconnectivity.
This session will describe innovative approaches used to identify and qualify relationships between enterprise risks. Presenters will detail how understanding the interconnectivity of the various risks can help raise an organization’s Risk Intelligence – enabling it to increase the effectiveness of its risk mitigation plans, avoid unanticipated consequences, and ultimately, capitalize on a holistic risk management approach in a large, complex, and diverse public-sector organization.
During the session, attendees will:
- Gain insights into the risk management value proposition for large public-sector organizations
- Discover new and innovative approaches employed to manage risk
- Develop a better understanding of the nature and importance of risk Interconnectivity
Presenters: Brian Philbin, CRO, Canada Revenue Agency
Moderator: Laura Brown, Senior Enterprise Risk Management Analyst, Canada Revenue Agency
This session is a continuation of this afternoon’s general session: Regulatory Reform: Responding to Complexity with Complexity. We will explore and discuss the increasing complexity of models in response to recent events in regulation, as well as in our pursuit of alpha. The question to be asked and further explored in this session is: Given the proliferation of rules and new capital regimes, in our pursuit of rules to forestall the next crisis, as well as the pursuit of alpha, have we lost sight of RISK.
PresentersJames Allison, Manager Global Risk, ConocoPhillips; Matthew Hunter, Deputy Director, Division of Market Oversight Surveillance Branch, US Commodity Futures Trading Commission; Alan Mendelowitz, Former Director & Chairman, Federal Housing Finances Board; Stuart Wason, Senior Director, Office of the Superintendent of Financial Institutions of Canada; Andrea Danese, Global Head of Data Solutions, Bloomberg; David Ingram, Executive Vice President, Willis Re
Moderator: Alan Laubsch, Principal, Winhall LLC
This panel will explore the differences between techniques for risk assessment in the financial and intelligence communities, and discuss where the fusion of the best methods might enhance risk measurement and make more actionable risk mitigation in each.
Topics to be discussed include:
- The Intelligence Community’s acknowledgement of systemic financial risk as a major risk to national security;
- The general contrasting emphases and resultant types of models: probability for the financial community, versus plausibility for the intelligence community;
- Methods for using “all-source” intelligence, including both public and proprietary information;
- The use of “big data” to enhance sense-making efforts to provide more insight into the nature of risk drivers and dependencies (i.e., from data to information to knowledge);
- Creation of live “Indications and Warnings” of specific or systematic disruptions, used to dynamically inform risk assessment models.
Presenters: Chris Ray, Senior Managing Director for Market Intelligence, Omnis Inc; Bryan Ware, CEO, Digital Sandbox; Gary Nan Tie, SVP, Investment Division
Moderator: Bob Mark, Black Diamond Risk
In conjunction with the Call for Papers, the Paper Committee has selected two papers for presentation of operational perspectives on ERM. They are “A Structural Model of Sovereign Credit and Bank Risk” by Dan DiBartolomeo, President, Northfield Information Services and Emilian Belev, Head, Enterprise Risk Analytics, Northfield Information Services, and “Integrating Utility Risk Management and Social Media Strategies” by Charles Tooman, PA Consulting Group.
Presenters: Emilian Belev, Head, Enterprise Risk Analytics, Northfield Information Services; Charles Tooman, Vice President, Pace Global
Moderator: Steve Siegel, Research Actuary, Society of Actuaries
Wednesday, April 24, 2012
9:45 – 11:00 a.m.
Actuaries primarily identify and quantify financial risks. On a national level, many risks have the potential to destabilize best laid plans, notably healthcare. Across the world, healthcare costs are escalating and projected to grow exponentially due to aging populations. Despite the implementation of many promising initiatives over the last decade, healthcare remains a top national concern. Holistic ERM with actuarial methods can help with this crisis.
The Canadian and US healthcare systems were similar universal ones until 40 years ago when the US introduced a multi-payer arrangement alongside Medicaid and Medicare. Debate about the pros and cons of each continues, but the US spends more (17% of GDP) on healthcare than any other developed nation while infant mortality and life expectancy is comparable to other developed nations. Access to employer sponsored plans among low-income workers is declining, insurance premiums for employer sponsored plans increased 114% over the last decade, and 16% of Americans (44 M) have no health insurance at all. However, the US system does better with accountability, quality, and safety.
Costs in health systems are driven by a variety of high-risk factors such as chronic condition incidence. This session will focus on how predictive analytics have improved the health status of patients and lowered costs.
- History and Current State of Canadian Healthcare and the US Healthcare Industry
- Predictive Analytics to Improve Outcomes in Healthcare and in the Healthcare Industry
- Case Studies - Predictive Analytics in British Columbia, Canada and across the US Healthcare Lifecycle
Presenters: Ella Young, Director, Vancouver Coastal Health; Mo Masud, PricewaterhouseCoopers
Moderator:Shannon Patershuk, Senior Consulting Actuary, Johnson Inc
The ongoing evolution in rating agency and regulatory expectations for the insurance industry, witness Solvency II and ORSA, can effectively empower Internal Audit for strengthening enterprise risk management. This session will describe practical ways in which an Internal Audit function can help drive efforts to embed ERM in an organization’s processes and ultimately its culture. The session’s examples will have an insurance company focus. The session will focus on:
- How internal audit can hold management responsible for moving toward best practices around the embedding of ERM
- Practical examples of how internal audit can utilize the risk management principals embraced by regulators and rating agencies to enhance the usual business case for making change
- Illustrations which include use of models, strategy and decision making, tone at the top, governance, roles and responsibilities, controls, and more
- The role of internal audit in model validation
Presenters: John Burkett, Global Quantitative Audit Director, Axis Capital; Thomas McIntyre, Principal, KPMG
When risk appetite exercises are well executed in the boardroom, managers can build or reinforce trust with the board and integrate ERM into strategic processes. From a board of directors viewpoint, determining risk appetite for key strategic risks is a both a critical risk oversight role and a governance tool. Yet often these opportunities are lost to poor planning and inferior facilitation that ultimately create career risks for managers.
This presentation will feature the viewpoints of both an experienced corporate director and a seasoned ERM consultant about what works practically in the boardroom when defining organizational risk appetite. The session will include: an introduction to key terms and risk appetite concepts; an overview of methods that are used in several sectors; and a simulation of the difficult to determine qualitative risk appetite.
Presenters: Leslie Thompson, President, LESRISK, Debt and Risk Management; Diana Del Bel Belluz, President, RiskWise
Moderator: Miranda Ma, PricewaterhouseCoopers
The low interest rate environment continues to put pressure on the life insurance industry. This session will explore actions that companies are taking to identify impacts, communicate about them, and manage their businesses within the environment. Emphasis will be on real-life examples of actions that can be taken, even as rates stay low.
Attendees will learn:
- Approaches to quantify exposures and communicate about them
- Practical actions to manage exposures, including taking advantage of the current yield curve
Presenters: Suzette Huovinen, 2nd VP and Actuary, Securian Financial; Geoff Hancock
Moderator: Kathryn Hyland, Swiss Re
While many risk management principles fall in the scientific realm, how a corporation approaches and uses risk management analysis is very much defined by the corporate risk culture. In this session, we will discuss real-market case studies from the Energy and Financial Services sector with the attempt to answer the following questions:
- Who in the corporation defines the risk culture? Who is responsible when it fails (and just how many 'rogue traders' are really out there)?
- Are different risk cultures appropriate for different types of companies?
- What do failed risk cultures have in common? How about the successful ones?
- It is easy to see the risk management failures in hind sight, but are there any tell-tale signs of a failing risk culture?
- When companies or economies fail, can you really blame the models?
We will conclude with a discussion on which companies have the incentive to learn from past mistakes.
Presenters: Dragana Pilipovic, President & Founder, Energy Risk WorkDesk; John Wengler, Director of Market Risk Controls, Hess
During the last few years, the life insurance industry has been making significant investments in models for monitoring and analyzing risk capital at an overall group level. This activity has been motivated in particular by challenges insurers experienced during the financial crisis, as well as evolution of global solvency regulations. Central goals for ERM modeling include monitoring of solvency metrics with high frequency, evaluation of the impact of potential market events and strategic actions, and efficient production of actionable data to support management decisions.
In this session, attendees will learn:
- Important insights that insurers can gain from successfully implemented EC models
- Key capabilities that provide a foundation for a comprehensive EC evaluation framework
- Practical considerations for building models that provide robust, timely, and consistent analytics across business units
Presenters: Anna Berezovskaya, Principal & Consulting Actuary, Milliman; Phil Jones, VP of Quantitative Strategies, Ameriprise Financial
Moderator: Hyeji Kang PricewaterhouseCoopers
By Lucy Currie
By Damon Levine
In conjunction with the Call for Papers, the Paper Committee has selected two papers for presentation on measuring and monitoring ERM. They are “The GPS Framework: A New Approach to Comprehensive Strategic Risk Management” by Damon Levine, and “An Application of Modern Social Sciences Techniques to Reverse Stress Testing at the UK Pension Protection Fund” by Neil Cantle, Consulting Actuary, Milliman, Jean-Pierre Charmaille, Chief Risk Officer, Pension Protection Fund, Martin Clarke, Executive Director of Financial Risk, Pension Protection Fund, and Lucy Currie, Actuarial Practice Leader, Pension Protection Fund.
Presenters: Damon Levine, Vice President, ERM, Assurant; Lucy Currie, Pension Protection Fund
Moderator: Al Weller
11:30 a.m. – 12:45 p.m.
By Stuary Greenbaum
By David Ingram
This session pairs a conceptual presentation with a complementary practically oriented one. The former provides a framework for thinking about the rapidly evolving, some would say amorphous, subject of ERM, especially as applied at financial institutions. The latter develops seven principles of ERM and considers their (mis)application in a variety of organizational settings. The takeaways are both foundational and practical.
- The seven principles of risk management
- A guide to success and failure in the application of the seven principles
- Essence of ERM: Risk management v. risk mitigation
- Morphology of ERM: Form v. function
Presenters: Stuart Greenbaum, Former Dean and Bank of America Professor of Managerial Leadership, Olin Business School, Washington University in St.Louis; David Ingram, Executive Vice President, Willis Re
Moderator: Mike Stein, Chief Risk Officer, RGA
The recent financial crisis showed the serious limitations of existing economic and financial models. Mathematical models of risk proved insufficient for decision making in the markets and by regulators, who ultimately had to rely more on their experience, intuition and judgment. With new regulatory data and progress in the research on financial network models, we now can develop better maps of the financial system. These maps can aid in decision making, in understanding systemic risks and contagion, and they can be used as a basis for enhanced stress testing models. The session will present and discuss these new models and visualization techniques.
Presenters: Alan Laubsch, Principal, Winhall LLC; Dr. Kimmo Soramaki, Founder & CEO, Financial Network Analytics
Successful implementation of ERM is largely determined by how strongly your people buy-in. Setting the right tone for your organization comes from the top down. Many ERM programs fail to gain traction because little or no consideration is given to what kind of ERM culture is desired or how it will be developed. This interactive session will explore the role of leadership in developing a healthy ERM culture, 12 organizational culture traits that are essential for effective ERM, pragmatic strategies for motivating desired ERM behavior and for overcoming resistance to the ERM discipline.
At the conclusion of the session, attendees will be able to:
- Explain how organizational culture is created and influenced
- Explain why culture trumps ERM processes, tools and frameworks
- Appreciate the essential role of leadership in establishing a healthy ERM culture Describe 12 essential culture traits for effective ERM
- Describe the three main sources of resistance to ERM and how to overcome them
- Select practical strategies for cultivating good risk management habits and behaviors throughout the organization
Presenters: Diana Del Bel Belluz, President, RiskWise
Moderator: Shannon Patershuk, Senior Consulting Actuary, Johnson Inc
By Dariush Akhtari
By Loic Grandchamp
We will provide an introduction to economic scenario generators (ESG) with an emphasis on the characteristics of a good ESG for enterprise risk management. The performance of ESGs during the recent global financial crisis and in the current low-yield environment will be reviewed. We will present various applications of ESGs in the insurance industry for pricing and hedging, market risk management, asset and liability management, economic capital modeling and the upcoming US ORSA.
In this session, attendees will:
- Gain an understanding of economic scenario generators
- Learn how an ESG can be used as part of an ERM program
- Learn about applications of ESGs in the insurance industry (life and P&C) for ERM
Presenters: Dariush Akhtari, Managing Director and Head of ALM, AIG; Loic Grandchamp, Product Manager, Moody’s Analytics; Tony Dardis, Head of Insurance – North America, Moody’s Analytics
Risk data typically exists in many locations in any institution, and organizations are challenged to bring it together for effective risk management. Each of the major financial systems typically stores its own data. Risk data may also be separated by region or division. Further, risk reporting, management reporting, regulatory reporting and capital reporting may all use slightly different data sources or calculations. In this session, using credit lifecycle management as an example, we will discuss how different organizations bring risk data to a central location for consistent inquiry and for risk, management, capital and regulatory reporting.
Presenters: Rory McClure, Business Analytics and Optimization, Risk Solutions, IBM
By Luyang Fu
By Benedict Escoto
By Luyang Fu
That new business produces higher loss and expense ratios and lower retention ratios than renewal business is generally well established. Ironically, to add more new business, an insurer needs higher profitability in order to generate additional capital needed to support its exposure growth. Irrational growth is one of the top reasons for the insolvencies of property and casualty insurance companies. This first half of this session presents a method to balance the opposing forces of growth and profitability, which can be effectively employed by property and casualty insurers in strategic planning processes. A case study will follow to illustrate the approach.
Insurance companies model the correlation of their losses in order to allocate capital, determine solvency requirements, and assess the effectiveness of reinsurance. The second half of this session reviews existing methods of modeling loss correlation across portfolios and individual claims, focusing on the claim-level correlation of frequency and severity. The session then presents a simple method of correlating severity that is compatible with existing modeling frameworks yet preserves existing marginal severity distributions. The method’s application will be demonstrated in the context of evaluating an aggregate wind excess of loss reinsurance cover.
Presenters: Luyang Fu, AVP, Department Head, Predictive Analytics, Cincinnati Financial; Benedict Escoto, Assistant Director, Aon Benfield
In conjunction with the Call for Papers, the Paper Committee has selected two papers for presentation on institutionalizing ERM. “Risk Interconnectivity: Increasing Risk Intelligence at the Canada Revenue Agency” Brian Philbin, Assistant Commissioner and Chief Risk Officer, Canada Revenue Agency, Valérie Bournival, Director, Enterprise Risk Management Program, Canada Revenue Agency, and Kristen Petruska, Senior Enterprise Risk Management Analyst, Canada Revenue Agency, and “An ERM Maturity Model” by Barbara Monda and Marco Giorgino of Politecnico di Milano - Management, Economics and Industrial Engineering Department
Presenters: Brian Philbin, Assistant Commissioner and Chief Audit Executive, Canada Revenue Agency; Barbara Monda, Politecnio di Milano
Moderator: Dan Oprescu