By: Max Rudolph

Max Rudolph — Tue, 15 Sep 2009 20:05:02 +0000

Thanks for sharing this white paper on ERM at colleges and universities. These institutions of higher learning have just lived through emerging risks they thought would never happen, leading to required downsizing of some degree programs and reducing job security to tenured professors for the first time in decades. ERM clearly requires someone to oversee the endowment managers, setting the appropriate risk appetite. This is a great time for these schools to reconsider where their best opportunities lie in the future. This will be hard to implement without a risk culture that encourages skeptical thought and open discussion, something often lacking at universities. When the Society of Actuaries developed an ERM strategy in 2004, leading ultimately to the Chartered Enterprise Risk Analyst (CERA) designation, we were one of the first professions to move beyond the downside of risk to recognize that an optimized strategy must consider both risk and return at the same time. Universities that embrace such a discussion will enjoy a clear competitive advantage over their bureaucratic peers going forward.

The AGB/United Educators report provides useful action steps, including a desire to evolve the process each year. ERM is a process, not a project, and emerging risks along with the risk culture will force regular reviews of a new world. This process should be both top-down and bottom-up for success. A committee or chief risk officer should look at these risks holistically across the enterprise, while each department identifies and prioritizes risks they deal with. Based on this survey educators have a long way to go to implement ERM successfully, but the paper will help someone get started who wants to take this path.

Max J. Rudolph, FSA CERA CFA

Comments on: More ERM at colleges and universities

By: Max Rudolph