1 / 10

Enterprise Risk Management Case Study 5

Enterprise Risk Management Case Study 5. Ron Harasym Sun Life Financial Casualty Actuarial Society / Society of Actuaries Enterprise Risk Management Symposium July 30 2003, Washington DC. Outline of Presentation. Market Risk Tolerance Limits (MRTLs) Progression to Earnings-at-Risk (EaR)

faris
Download Presentation

Enterprise Risk Management Case Study 5

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Enterprise Risk ManagementCase Study 5 Ron Harasym Sun Life Financial Casualty Actuarial Society / Society of Actuaries Enterprise Risk Management Symposium July 30 2003, Washington DC

  2. Outline of Presentation • Market Risk Tolerance Limits (MRTLs) • Progression to Earnings-at-Risk (EaR) • Comparison with other tools • Sample Earnings-at-Risk report • ERM moving forward

  3. Development of Market Risk Tolerance Limits • Senior management was surveyed as per risk tolerance. • Limits were established on interest, equity, and currency risk at the company and business group level. • Stylized capital market shocks were defined. • An income sensitivity testing standard was developed. • Income sensitivity is now tested against these limits. • Business groups must explain and justify if beyond these limits. • Compliance report is presented to the Executive Risk Committee and the Risk Review Committee of the Board.

  4. Progression to Earnings-at-Risk • Quantifies both the frequency and severity of scenarios • Forward looking: • can identify exposures • can act as an early warning system • High information density: • identification of cross-operation risk diversification • identification of intra-operation risk diversification • Complex stochastic modeling required • heavy computational demands • use of representative scenarios helps • Communication challenges

  5. Comparison: Business Plan, MRTL, EaR (1) Business Plan: consists of a single projection • (2) Market Risk Tolerance Sensitivities: • 4 interest scenarios • 4 equity scenarios • (3) Earnings-at-Risk ,,,,,,Sensitivities: • Additional 16+ ,,joint interest/equity ,,scenarios

  6. Comparison of Approaches (Continued) • (4) Earnings-at-Risk Simulation • simulation of typically 10,000 economic scenarios via interpolation into the earnings surface

  7. Comparison With Other Tools

  8. Sample Earnings-at-Risk Report

  9. Sample Earnings-at-Risk Chart

  10. ERM Moving Forward • MRTL & EaR are decisions support tools, directed at supporting risk based decision making by senior management • It will take a number of years to: • to include other risk factors such as mortality/morbidity, credit risk,.... • to fully embed in the organization with • greater drill down • greater linkage between decisions made in front/operational lines and resultant impact on risk exposure • Finally, the process is still evolving.

More Related