Enterprise Risk Management

• ERM Definition and Evolution
• The COSO and CAS Frameworks
• Identifying Risks and Opportunities
• Risk Modelling Methods
• Risk Management Tools and Instruments
• Policies, Procedures, Monitoring and Control
• ERM Case Studies

The objective of this seminar is to give you a thorough introduction to “Enterprise Risk Management” and a good and practical understanding of how ERM can be used as a strategic management tool in financial as well as non-financial firms.

We start with an overall introduction and explain the rationale for ERM. We describe how the evolution toward ERM can be characterized by a number of driving forces: More and more complicated risks, external pressures, the move to an integrated (holistic) view of risk, a growing tendency to quantify risks, and a growing awareness that risks can also be seen as opportunities.

We present and discuss a general framework for ERM. We conceptualize ERM along two dimensions: One spanning the types of risks included, and the other spanning the various risk management process steps. We introduce and explain the two most well-known and generally accepted frameworks, COSO, CAS and ANZ, and we present a comprehensives case study that we shall discuss throughout the seminar.

We then work our way through the various steps of the ERM framework. We explain and discuss how a firm can establish a philosophy regarding risk management and set objectives that form the risk appetite and risk tolerance of the firm. Further, we explain how to the firm can identify events, differentiate between risks and opportunities, and prioritize and manage risks. We review important and widely used models for quantifying risks (such as “Value-at-Risk”) and we explain how risks can be managed using risk transfer and other techniques. We also explain how the firm can allocate “economic capital” to absorb retained risks and measure risk adjusted performance at the enterprise and the business unit levels.

Finally, we discuss how to establish policies and procedures that help ensure that the risk responses, as well as other entity directives, are carried out. We also explain how the effectiveness of ERM systém and its components is monitored through ongoing monitoring activities and separate evaluations.

 

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Introduction to Enterprise Risk Management

• Definition of ERM
• The Evolution and Drivers of ERM
  • More and more complicated risks
  • External pressures
  • The move to a holistic view of risk
  • Growing tendency to quantify risks
  • Seeing risks as opportunities
• ERM as a Strategic Decision Tool

The ERM Framework

• Conceptualizing ERM
  • Types of Risk
  • ERM process steps
• The COSO ERM Framework
  • Categories
  • Entity levels
  • Components
• The ANZ ERM Framework
• The CAS Framework
• Presentation of the Case Study

12.00 - 13.00 Lunch

13.00 - 16.30 The Internal Environment and Objective Setting

• Establishing a Philosophy Regarding Risk Management
• Recognizing Unexpected and Expected Events
• Establishing the Entity’s Risk Culture and Risk Appetite
• Considering all other Aspects of How the Organization’s Actions may Affect its Risk Culture
• Case Study and Small Exercise

Event Identification

• Types of Risks and their Interactions
  • Business, hazard, operational, market and credit risks
• Internal and External Events
• Differentiating between Risks and Opportunities
• Channelling Opportunities back to Strategy Setting
• How Internal and External Factors Combine and Interact to Influence the Risk Profile
• Case Study and Small Exercise

Day Two

09.00 - 09.15 Brief recap

09.15 - 12.00 Risk Assessment

• Understanding the Extent to which Potential Events Might Impact Objectives
• Relating Time Horizons to Objective Horizons
• Assessing Risk on an Inherent Basis
• Assessing Risk on a Residual Basis
• Qualitative and Quantitative Risk Assessment Methodologies
• Using Risk Models to Quantify Risks
  • Strategic and business risks
  • Hazard and operational risks
  • Market risks
  • Credit risks
  • Liquidity risks
• Case Study and Small Exercise

Risk Response

• Identifying and Evaluating Possible Responses to Risk
• Evaluating Options in Relation to
  • Entity’s risk appetite
  • Cost vs. benefit of potential risk responses
  • Reduction of impact and/or likelihood of event

12.00 - 13.00 Lunch

13.00 - 16.30 Risk Response (continued)

• Transferring Risk
  • Insurance
  • Derivatives
  • Risk securitization
• Assessing and Allocating Economic Capital
• Case study and small exercises

Control Activities, Information and Communication, and Monitoring

• Policies and Procedures
• Identifying, Capturing and Communicating Pertinent Information
• Ongoing Monitoring Activities
• Separate Evaluations
• Measuring and Appraising Performance
• Case Study – Practical Implementation of an ERM Framework

Summary, Evaluation and Termination of the Seminar