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Risk Evaluation in Enterprise Risk Management
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Enterprise Risk Management (ERM) has been defined as
the discipline by which an organization in any industry assesses, controls, exploits,
finances and monitors risks from all sources for the purpose of increasing the
organization’s short- and long-term value to its stakeholders.
by the Casualty Actuarial Society (2003) and adopted by the Society of Actuaries (2005).
Enterprise Risk Management is a rapidly emerging specialty within the actuarial community and,
with the new CERA risk management educational certification, could well become an area of
practice for actuaries with no tie to traditional actuarial work. The CERA is a globallyrecognized
ERM designation supported by actuarial organizations in 12 countries with rigorous
educational programs. In addition, the 2008 financial crisis makes it desirable for a group with
strong professional standards to take a leading role in the future development of risk
management throughout the economy. Currently no group has specific professional standards for
enterprise risk management work performed by individuals. Other organizations may also be
considering or have started developing standards for ERM work.
The ERM Task Force was formed in the fall of 2009 to consider the need for ERM standards that
were previously addressed by an earlier task force in 2007. In June 2010, the Task Force
presented findings to the ASB and was then asked to go forward with the development of
standards for two broad topics relating to ERM, Risk Evaluation and Risk Treatment.
In March of 2011, discussion drafts for two topics were posted to the ASB website on risk
evaluation and risk treatment. The ERM Task Force reviewed the comments received and based
on those comments, began work on the development of exposure drafts of standards on risk
evaluation and risk treatment for presentation to the ASB.
This ASOP, Risk Evaluation in Enterprise Risk Management, considers the topic of risk
evaluation. The process of risk evaluation is a fundamental part of risk management systems that
are found in organizations. In this context risk is intended to mean the potential of future losses
or shortfalls from expectations due to deviation of actual results from expected results.
Evaluation of expected losses and provisions for expected losses is a common actuarial task that
is not considered directly by this standard.
This standard is proposed to apply to enterprise risk evaluation performed by actuaries. Some
organizations will face requirements and requests for assessment of the risk evaluation part of the
risk management system, in order to evaluate whether their risk management systems are
operating at a level that meets or exceeds professional standards. Regulators in some industries may want similar evaluations.
NONE
Management
English
1-21
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