Enterprise Risk Management (ERM) is the process by which organisations in all industries assess, control, exploit, finance, and monitor risks from all sources, for the purpose of increasing the organisation's short and long term value to its stakeholders.
The Growth of ERM
Against the backdrop of international risk management developments, the evolution of regulatory frameworks (e.g. APRA LAGIC, Solvency II and Basle II), the global financial crisis, and an increasing complexity and interdependency of risks in the financial world, the need for strong ERM has gathered considerable momentum in Australia. ERM has become an established and critical part of the management framework of companies across all industries.
The Role of Actuaries in Enterprise Risk Management
As experts in risk and uncertainty, actuaries are natural leaders in Enterprise Risk Management in:
- Insurance – pricing, reserving, setting risk appetite, monitoring, supervision and risk reporting;
- Banking – pricing, operational risk and credit risk modelling and assessment;
- Superannuation and wealth management – risk management framework design and implementation, prudential standards advice, unit pricing process risk advice and asset liquidity risk assessment;
- Utilities – establishing risk appetite statements and oversight of trading;
- Education – advice on risk management and related ongoing governance; and
- Other businesses – assessment of strategic, reputation, financial, product, operational and other risks and opportunities.
The business world, along with the public sector, currently faces multiple challenges in an increasingly complex environment. The greater uncertainty arises from a number of challenges, including a more competitive local and global business environment, market volatility, capital scarcity, changing regulations and legislation. Businesses need to adopt better risk management practices to succeed in maximising their opportunities and meet the expectations of all stakeholders.
Actuaries have a long and proud tradition of consistently demonstrating strong insight, and being integrally embedded as key business advisors in insurance, superannuation and wealth management, assessing risk and its implications by way of pricing, valuation, governance, administration and investment. Using these core skills, actuaries have developed influential roles in the wider risk management of enterprises in areas, outside the financial risks with which actuaries are more usually associated.
Actuaries are expanding the horizon of activity in the risk management space to meet the growing needs of the wider business world, while simultaneously using the skills of the profession’s growing membership to provide useful, stimulating and well-rewarded employment.
Chartered Enterprise Risk Actuaries (CERAs) are the risk professionals best qualified to lead an organisation’s enterprise risk management (ERM) program. Find out more about becoming a Chartered Enterprise Risk Actuary.