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ERM SOA (Eight components (COSO) (Internal Environ ~ (Risk context),…
ERM SOA
Eight components
(COSO)
Internal Environ ~ (Risk context)
Objective setting ~ (aligned with risk appetite)
Risk ID
Risk Assessment
Risk Response/Decision
Risk Control / Implementation
Monitoring
Communication & Reporting
ERM Limitations
(COSO)
No absolute assurance to meet objective
Judgment
Bad judgment due to time and info constraints
Breakdowns
Errors from fatigue, lack of training
Collusion
Cost&Benefit
Asymmetries of valuing benefits and costs
Management override
Intervention on prescribed control process
ERM Objectives
Competitive Advantage
Strategic goals
Shareholder value
Management Transparency (Reduction of agency cost)
Decision-making
Policyholder as stakeholder
Give confidence to policyholders
Stakeholder demands
Management / BOD
Manage capital
Manage earnings volatility
Comply with regulations
Employee
Stay or leave
Policyholder
Enough credit rating for confidence of contractual solvency
Rating Agency
Rating agency capital
Regulators
Minimum required capital (RBC)
Four categories of objectives
(COSO)
Strategic
Operations
Reporting
Compliance
Four themes of ERM
process
Risk Control
Strategic RM
Catastrophic RM
RM Culture