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The Actuary The magazine of the Institute & Faculty of Actuaries
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Finance, Investment & Risk Management (FIRM) Board news

Enterprise risk management

Agreement has been reached on extending the existing partnership arrangements between the actuarial and civil engineering professions on risk management. This partnership has already produced the successful RAMP Handbook, which sets out a practical methodology for managing project risk, and a guide for directors on strategic risk, which incorporates the STRATrisk methodology. The partnership will now widen its horizons, with the aim of developing a centre of excellence for enterprise risk management (ERM). This will involve the following activities:

  • further development of the methodologies for strategic and project risk management;
  • studies of operational risks;
  • recommendations on how the management of all three categories of risk can be knitted together holistically, without gaps or overlaps, taking the perspective of the enterprise as a whole.

New organisational arrangements for the partnership will facilitate the involvement of other professions and risk management groups, so as to give access to a wide cross-section of ideas and experience. There will also be more opportunities for interested actuaries to participate.

Chris Lewin, who has led the partnership for more than ten years, comments: ‘Many businesses wish to strengthen their risk management, prompted partly by regulators and credit rating agencies and partly by an increasing recognition that this is one of the keys to business success. There will be new approaches to risk right across the economy, not just in the financial services industry. It is appropriate for the actuarial profession to be at the forefront of this trend, placing actuaries in a position to advise on the broader issues as well as on technicalities such as risk analysis, scenario planning, stochastic modelling, investment appraisal, concept maps, and the achievement of risk efficiency.’

References

RAMP – Risk Analysis and Management for Projects, Thomas Telford, second edition, 2005Strategic Risk – a Guide for Directors, Thomas Telford, 2006

This initiative is in parallel with the profession’s broader risk management initiative, covered in the ‘Risk is our business’ opposite.