Enterprise Risk Management Case Studies – CS5

1. Enterprise Risk Management Case Studies – CS5 Vinaya Sharma Allstate Financial July 30, 2003

2. Why Enterprise Risk Management • Provide company-wide scope/assessment to risk analysis which currently doesn’t exist • Present how a single relevant economic event affects the company • Reveal natural hedges and portfolio effects • Enhance capital allocation process • Clarify roles/responsibilities

3. Enterprise Risk Mgmt Approach • Analysis of significant risks • Aggregate information • Equity: VA, EIA, Unaffliated common stock, etc • Default: Private Placements, Inv Grade Corp Bonds, Real Estate, etc. • Establish Metrics • Not subject to manipulation • Understandable to the practitioner • Establish Tolerance • Internal considerations • External considerations • Establish scenarios and frequency of measurement • Risk Dashboard (Appendix 1) • Aggregate risks throughout Enterprise • Monthly Risk Report • Catalog of risks (Appendix 2) • Annual Risk Forum • ‘Point’ team on large events that impact the enterprise

4. Enterprise Risk Mgmt Successes • Conduit of information • Aggregation of exposure • Increased discipline • Broader understanding/measurement of risk

5. Enterprise Risk Mgmt Lessons • Turf issues (Appendix 3) • Witch Hunts • You only know what you are told • Risk Mgmt is different to different people • Senior Management buy-in is essential • Quantifying ERM value can be difficult

6. Enterprise Risk Management Case Studies Enterprise Risk Management Symposium July 30, 2003 Appendices

8. Catalog of Risks

9. Responsibility Template