Survey of Actuaries, Risk Experts Shows No Clear Shift with Businesses' Approach to Risk; Enterprise Risk Management Increasingly Embraced, but Support May Be Soft
A survey of actuaries and other risk experts examines how the economic crisis has affected organizations' risk appetites. Forty-six percent of respondents' organizations have assumed less risk following the recent economic crisis, while 37 percent made no change in their risk approach. Just six percent said their organizations had taken more risk. Other findings relate to the level of support for enterprise risk management (ERM) within organizations and if ERM is deeply integrated within corporate culture.
Schaumburg, Ill. (PRWEB) May 14, 2009 -- The global economic downturn has undoubtedly caused organizations of all types to take a renewed look at their risk profiles, but their subsequent approaches are not necessarily clear cut. A recent survey of actuaries and other risk experts found that 46 percent of the respondents' organizations have assumed less risk following the recent economic crisis, while 37 percent made no change in their risk approach. Just six percent of the respondents, however, said their organizations had taken on more risk.
The survey was conducted in conjunction with the 2009 Enterprise Risk Management (ERM) Symposium held in Chicago in late April. It was hosted by the Society of Actuaries (SOA), Casualty Actuarial Society (CAS), Canadian Institute of Actuaries (CIA) and Professional Risk Managers' International Association (PRMIA). The symposium highlighted the importance of anticipating and managing risk in uncertain economic times. It included information on improving board risk oversight and risk management, emerging risks, economic capital and the current financial market crisis.
Nearly 94 percent of the survey respondents said ERM is embraced by their senior leadership, but that support may be relatively soft. Of that group, only 26 percent strongly agreed that senior leadership embraces ERM. And while 70 percent of respondents said ERM was deeply integrated within their corporate culture, only 18 percent of them strongly agreed with that assessment. This indicates that more needs to be done to fully integrate ERM into the corporate culture, including more support from leadership.
"Given the recent market challenges in mitigating risk, the microscope is focused on ERM like never before," said Max Rudolph, FSA, MAAA, CERA, ERM Symposium chair and owner of Rudolph Financial Consulting LLC. "ERM is not just a cost of doing business. It needs to be a central aspect of any corporation's business strategy, fully integrated throughout the organization." Rudolph noted that actuaries have led the drive to help all types of financial services organizations develop strong ERM programs.
The survey results also found that 56 percent of respondents ranked financial risk as the most severe concern for their company or clients. Strategic and operational risks were the next two risks of most concern. So what actions are risk professionals taking to mitigate risks? In the financial risk category, they are hedging, improving analytics, stress testing and enacting internal controls. To alleviate strategic risks, businesses are incorporating a higher level of strategy review and adapting or expanding ERM capabilities. They are also acquiring companies or expanding their own business, as noted by the survey respondents.
"Senior management can take the lead by incorporating ERM into their business strategies to anticipate and manage risk head on," said Rudolph. "With ERM as a core function, businesses can enhance their reputations, ultimately increasing stakeholder value."
About Actuaries
Actuaries bring a complex future into focus by applying unique insight to risk and opportunity. Known for their comprehensive approach, actuaries enable smart, more confident decisions.
About the Sponsoring Organizations
The CAS fulfills its mission to advance actuarial science through a focus on research and education. Among its 5,000 members are experts in property-casualty insurance, reinsurance, finance, risk management, and enterprise risk management. Visit www.casact.org.
The CIA is dedicated to serving the public through the provision, by the profession, of actuarial services and advice of the highest quality. Visit www.actuaries.ca.
Formed in January of 2002, PRMIA is a higher standard for risk professionals, with more than 65 chapters around the world and nearly 50,000 members from 180 countries. A non-profit, member-led association of professionals, PRMIA is dedicated to advancing the standards of the profession worldwide through the free exchange of ideas. Visit www.prmia.org.
The Society of Actuaries (SOA) is the largest professional organization dedicated to serving 20,000 actuarial members and the public in the United States and Canada. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of financial risk. To learn more, visit www.soa.org.
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