1.

4:Enterprise Risk Management

Prof. C. K. Parhi
Updated: 7th July,2011

Objectives
To understand

ERM Basics Identifying Risk Exposures Emerging Role of CRO ERM in Insurance

ERM Basics

Credit Risk Management -1970s Financial Risk Management -1980s Enterprise Risk Management-recent A holistic view of total risk management exercise focused on core business processes with more sophisticated analytical tools and risk management technologies.

ERM Basics

ERM is differentiated from Hazard Risk Management by addressing strategic, operational and financial risks. Managerial decision making based on integrated approach is bound to be better than piece-meal approach Financial institutions , energy and utility companies follow CRM

Identifying Risk Exposures

Popular identifiable categories of risks of an organisation are

Environmental Assessment Exposure Assessment Threat Scenarios

Low probability and high consequence events (disasters, sabotage, terrorism & fraud)

Risk Exposures

Market Place Risk Operational Risks Financial Risks International Risks M & A Risks

Market Place Risk

Changing Markets Evolving Product Lines New Operations Increasing Customer Expectations De-regulations Effects of Globalisation

Operational Risks

Technology Human Resources Property Legal & Liability

Financial Risks

Capital Management Asset Liability Management Related Tax Related

International Risks
Economic Political Cultural Demographic

Merger & Acquisition Risks

Strategic Failures Integration Issues Operational Exposures

Emerging Role of CRO

Establishment of RMIS Creating Risk Information database Communicating Strategy to levels Training of key participants Continuous evaluation of philosophy

ERM in Insurance

Management of Exposures

Scenario Analysis

Identification & mitigation

Disaster Response

Managing extreme events through sophisticated modeling techniques To evaluate alternative financial responses

ALM:

Relationship Management

optimising for solvency & profitability

Thanks