ERM Is Vital to the Future of CAS

The CAS should take a leadership role in the development of Enterprise Risk Management (ERM) as a modern management discipline, according to the Final Report of the Advisory Committee on Enterprise Risk Management. The complete report, which was accepted by the CAS Executive Council in December 2001 and includes the committee's charge, work process, results, recommendations, and additional thoughts, is available on the CAS Web Site in the Research section under Committee/Task Force Projects.

To guide its work, the committee developed a working definition of ERM as "the process by which organizations in all industries assess, control, exploit, finance, and monitor risks from all sources for the purpose of increasing the organization's short- and long-term value to its stakeholders." The committee concluded that ERM presents an opportunity to create a compelling business-relevant framework for the currently unconnected parts of the casualty actuarial discipline. Properly unified, these component strengths should make CAS members the primary candidates for chief risk officer positions, allow the actuarial knowledge base to be perceived as a valuable commodity in industries well beyond insurance and financial services, and aid in the recruitment of young professionals to the actuarial career.

The committee conducted a thorough and systematic assessment of CAS research and education needs on the subject of ERM, the centerpiece of which was a formal survey of the CAS membership. Its report provides a set of specific recommendations to meet those needs, all of which the CAS Executive Council (EC) approved.

In the area of research, the committee recommended that 12 specific topics within ERM be the subject of focused research. The committee also recommended that a standing ERM Research Committee be formed to direct and monitor this research and take responsibility for related tasks such as maintaining an updated ERM bibliography (the committee has drafted an initial bibliography), providing advice and content to the CAS committees that plan ERM-related seminars and workshops, partnering with other professional organizations as appropriate, developing ERM messages for the CAS to communicate internally and externally, and designating ERM media spokespersons.

In the area of education, the committee recommended a series of approaches in specific areas to close the gap between current and desired level of knowledge within each element of the ERM framework, which specifies the risk types covered by ERM and the sequential steps of the risk management process. These approaches range from exam syllabus treatment to annual ERM seminars and ERM tracks or sessions within existing seminars, to self-study guidance, depending on the subject area within the framework. These recommendations reflect the expressed preferences of the CAS membership regarding education methods, and will be carried out through existing CAS committees. To assist these committees, the committee drafted a complete set of "learning objectives" for each element of the ERM framework.

With its work complete, the EC will recommend that the board disband the Advisory Committee on ERM, which was staffed by Michael J. Belfatti, Martin Cauchon, Edgar W. Davenport, Kevin G. Dickson, Charles C. Emma, John J. Kollar, John R. Kryczka, Marc-Andre Lefebvre, Lawrence F. Marcus, Jerry A. Miccolis (chairperson), Mary Frances Miller (EC liaison), Chris E. Nelson, Andrew T. Rippert, Joseph W. Wallen, Bill S. Yit, and Theodore J. Zubulake.