Third Annual ERM Symposium Held in May
By Members of the Joint CAS/SOA Risk Management Section

Over 500 risk management professionals participated in the 2005 Enterprise Risk Management (ERM) Symposium held in Chicago on May 2-3, 2005. The symposium was sponsored by the Casualty Actuarial Society, theProfessional Risk Managers' International Association (PRMIA), and the Society of Actuaries. It featured six general sessions and over 30 concurrent sessions with presentations from more than 100 ERM practitioners.

...Risk management process and improved senior management communication around risk management were being recognized as critical competitive advantages.

Many of the presentation slides and audio files from the presentations are available on the ERM Symposium website. To entice you to explore further what you may have missed if you were unable to attend, we've selected some highlights from the general sessions to share with you.

Current Thinking on Risk Management: Not Fooled By Randomness
Shaun Wang, director of the actuarial science program, risk management, and insurance department for Georgia State University, introduced the need to define and evolve ERM frameworks beyond the silos that exist, involving both practitioners and academic thinkers to build the theoretical foundation for this new discipline. Nassim Taleb, author of Fooled By Randomness, stressed that attendees need to discard their Gaussian views and look at alternative risk measures for such processes where the outliers contain all the information. Leslie Rahl, president of Capital Market Advisors Inc., expanded on the galaxy of risks and the importance of valuations.

Proper Alignment of Senior Management Measures and Incentives
Bennett Stewart, senior partner of Stewart Stern & Company, discussed common pitfalls from several case studies that identified earnings that may be manipulated by management as a poor management performance metric. He went on to state that increasing transparency and offering more frequent financial reporting in the absence of earnings guidance actually decreased stock price volatility. He proposed that to optimally manage businesses, an alignment of management performance measures was needed. He also proposed that incentive caps could actually destroy value. His conclusion was that, in order to achieve optimal growth in long-term firm value, effective performance measures are essential to balancing risk and reward, and the competing interests among shareholders, customers, executive management and all employees, .

CRO Forum
Shyam Venkat, a partner in PricewaterhouseCoopers LLC, led the general session "CRO Forum," which was an outstanding senior insurance risk management practitioner panel. This diverse panel of renowned insurance CROs included Robin Lenna, CRO, Met Life; Steve Manning, head of risk management, Lloyd's of London; Larry Moews, CRO, Allstate; and Don Watson, CRO, Ace. They discussed how they championed, established, and executed development of ERM frameworks in their organizations. They compared organizational structures/committees, objectives, roles, current achievements, goals, and priorities. All voiced increasing demands of them being made by their board, CEOs, and other parties such as regulators, rating agencies, and analysts. A common thread was that the risk management process and improved senior management communication around risk management were being recognized as critical competitive advantages.

Ask The Experts
Dave Koenig, the chairperson of PRMIA, introduced the experts who gave closing remarks and answered questions. Joining him were Ed Dumas, senior vice president and CRO, Federal Home Loan Bank of Boston; Bill Panning, executive vice president and managing director, Willis Re, Inc; and Erwin Martens, senior vice president and CRO, TIAA-CREF. Martens remarked that the CRO role had expanded to include much more than market, credit, and operational risk, and now includes security and business continuity. Dumas contrasted the banking perspectives on ERM. The audience members posed several challenging questions and the panel responded with excellent responses and concluded that there were many remaining issues to address at future ERM Symposiums.

Speaking of which, the ERM Symposium will be back in 2006, again in Chicago. Watch your mailbox and e-mail in-box for more information.