Enterprise Risk Management: UK Actuarial Profession commissions research
The Management Board of the UK Actuarial Profession has identified enterprise risk management (ERM) as an area of growth, particularly within the financial sector. It is an area which offers opportunities for actuaries, working with other disciplines, to move out of their traditional sectors of employment, with the skill set required fitting well with an actuary’s training and practical focus. The Board has worked with the Profession's ERM Practice Area Committee to identify the topics that they feel most suited to external research where the outputs will have a broad strategic value to the financial services sector.
The Profession has called for research proposals in the following areas:
(1) How should firms define and use “risk appetite”? Research outputs should be practically grounded and expressed.
(2) How should firms identify and assess the hard-to-define risks – what techniques are available and how do they work in practice? This topic could possibly be linked with practical techniques for reporting on emerging risk and strategic risks, to mirror certain text from the recent Walker Report on corporate governance in UK banks and other financial industry entities (see paragraphs 6.8 and 6.9 and recommendation 27 of the Final Recommendations).
(3) How should firms report and communicate tail dependencies and correlations to stakeholders, including senior management, the Board and regulators? This includes mechanisms for reporting, and the need for effective communication. Note that the credit for diversification benefit can often be the largest single item in a firm’s assessment of its capital requirements, and hence it can be “worth millions (if not billions)” to get this right.
The Profession is encouraging proposals that concentrate on the development of future practice in this area that is innovative, but also practical and attainable, and that will make a significant contribution to the development of thought.
Further details including the application process can be found on the UK Actuarial Profession's website.
The closing date for applications is 30th June 2010.