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The Faculty & Institute of Actuaries his published a paper called ERM for Insurance Companies – Adding the Investor’s Point of View, on January 22, 2010.

The abstract reads:

A major outcome of ERM activities in insurance companies has been the bringing together of all of the key risks in the company, to be managed together in a holistic fashion. The authors of this paper believe that an ERM framework also needs to look beyond the company, and have regard to the risk management needs of investors, from the point of view of the contribution of the insurance company to the overall risk and reward of their total investment portfolios. To meet these needs, the ERM framework needs to provide sufficient information on topics such as systematic risk, potential correlations of earnings from future new business with macroeconomic trends, other risks to franchise value, and sources of model risk within the company. The paper does not provide solutions for the issues described above; but limits itself to describing and discussing the direction for some important new initiatives in ERM activities.

To read the complete white paper click here.

The big story in Toronto this week is the number of pedestrians getting killed by vehicles. An “epidemic”, one no-talent Canadian news anchor who colours his hair said tonight. About 14 people have been killed so far this month (which apparently is more than is allowed). The public and police are shocked by these events. How could this happen? Why is this happening? The Mayor is suggesting using “technology” (like more of those countdown cross walk lights) and a city councilor is suggesting lowering the speed limit to 10km/hr in the city to fix this. Why not call in the Army and make them crossing guards?

Technology is not the panacea of all of life’s problems. Once again, the problem and solution is people. And in Toronto pedestrians are stupid idiots. I don’t mean to be insensitive to the families and friends of those recently killed but how do you explain why someone got struck by a street car on a fixed track?

I moved to Toronto from Montreal in January 1994 when I was in my mid-20s. Montreal has a reputation for having “crazy” drivers weaving in and out of traffic but somehow I learned how to cross a street there. I cannot think of a day when I didn’t jay walk across Rue Ste-Catherine or any of its perpendicular streets and avenues. I am not advocating this sort of behavior but it just seemed to work in Montreal. And here’s why.

I’ve always believed that the pedestrians and drivers in Montreal did a dance. The drivers looked out for the jay walkers (because at times they were the pedestrian) and vice versa. Whenever I darted through traffic, I could always see the driver and knew the driver saw me. I was not darting covertly. I deliberately crossed because I knew it was safe enough to make it across. This was the dance. And this is quite possibly the reason that Montreal is one of the few places in North America where “right on red” is not permitted. That would simply distort the delicate balance that exists between the dancers.

During my first week in Toronto, I found myself driving downtown and I recall being stopped at the corner of York and University; I was about to experiment with my first “right on red”. I signaled. There was no northbound traffic and I had the pole position. No people were coming. Here comes a right on red. As I started to inch forward, a pedestrian (or a few) walked off the curb and in front of my car. They did not look at my eyes, they did not even ponder what I was planning (but apparently the yellow flashing light was not enough of a clue.) In their minds, they had the right of way. The sign read WALK so they simply walked across the street in front of a moving car turning right. When I managed to avoid hitting anyone with my blue Mercury Topaz, I realized I was in the cross walk and started backing up. By then more pedestrians were crossing from the other direction and walking behind me (which I could see in my rear view mirror.) I narrowly avoided hitting those people too. My confidence was shot and it took me almost another fifteen minutes before I tried the right on red again.

Idiots.

I realized in 1994 that there was no dance here. Pedestrians had a false sense of entitlement that they owned the road when the light was green much in the same way they stood there like lemmings at 7:00 AM waiting for a red lights to change and not crossing when there isn’t a car for 6 blocks. (Think of that scene in Harold and Kumar.)

Idiots. Automatons.

Toronto paradigms would suggest “cross the streets because the light is green and not cross the street when the light is red”. This paradigm is wrong. You should cross when it is safe and not cross when it is unsafe (which is usually when the light is green and red respectively but not always the case.) Like any data set, there are outliers and at least 14 of you have found that out the hard way this month.

I’ve been writing this blog almost every day since August and I’ve been rewarded by your positive feedback and over 6000 hits. In this period, I’ve reported about many ERM-related events: the S&P calls ERM “highly important”; while others suggested ERM should be a “way of life”, called it “vital”, said it would be a great idea at some banks, and declared it is the “forth most influential management idea of the last decade”. It seems like lately everyone is talking about black swans.

Additionally, Aon, actuaries and other authors published documents, surveys and books, the Government of Canada has issued an RFP requiring contractors be certified in ERM, ISO 31000 was published, and the SEC issued new enhanced proxy disclosure requirements and rules around the Board and oversight of risk.

So what I would like to know is… where is the demand for ERM practitioners? Where are the jobs?

Several years ago, there was a steady stream of contractor opportunities for Sarbanes-Oxley (and more recently IFRS) work. Accountants were doing a brisk business as independent contractors. Why are we not seeing the same demand for risk management practitioners, especially from non-financial organizations?

To provide some context, I also live in Toronto – one of the largest cities and financial centres in North America. Toronto is home to banks, insurance companies, pension funds, mutual fund companies and hedge funds. Hundreds of non-financials have their headquarters here as well. This is not Iowa.

And although I see the usual demand for financial risk services at financials, I would like your thoughts about demand for risk management services especially at non-financials?

What are you seeing in your cities? Please leave your comments (along with your location.)

The editors of Harvard Business Review recently published their own top ten list of the last decade calling it “the most influential management ideas of the millennium (so far)” and look what came in at #4.

4. Enterprise Risk Management. Sounds crazy right now to say that the last decade was notable for risk management. But especially after 9/11, companies saw the sense of bringing the many and various pockets of it under the same umbrella. Newly empowered chief risk officers looked for trouble spots on a landscape ranging from financial hedging to pirates on the open sea.

I was a bit surprised that Sustainability only came it at #10 since five years ago I never heard the term and now it seems it’s all the rage.

View the remaining nine and the dozens of reader comments posted since it was published on January 1 by clicking here.

There is a link on the Aon.com homepage for their latest ERM survey conducted in 2009 Q3.

Aon writes:

The study was designed to show the extent to which ERM has been successfully implemented across organizations globally; the effect ERM has had on harmonizing organizational needs, culture and stakeholder requirements; and how ERM is being used proactively to balance risk, opportunity and value.

In addition to survey results, several case studies are also provided including Eli Lilly and Pirelli Group.

I am just having my first look at the document right now and hopefully will post some additional comments in the next days.

Tim Leech’s IIA blog discusses some of the many risk management designations and certification available and whether or not one of these may be the cost of entry in the future. I would like to know if anyone out there is interested in replying to this post with thoughts, pros, cons, benefits, etc., for the many designations out there.

For example years ago, I entertained the FRM certification from GARP but found the study material a bit too quantitative for the risk management I was interested in. (If memory serves me right, I think there was a calculus test!) I’ve look at the RIMS CRM certification and find their website is too poorly written to understand what is explicitly required: they sort of send you off to a list of Canadian universities to take some courses then come back and apply. There is a new certification at GRCSI.org which talks about a body of knowledge and is vague on their exam.

So, I’d like to open this up to the masses. Do you have one of these or others? Are you thinking of getting one of these? What’s been your experience?

And have a read of Tim Leech’s post as well (see link above).

Trevor

I’ve given some thought to what makes a good risk manager. When I started writing this, it occurred to me that I had seen a lot of those characteristics before.

In 2004, the Richard Ivey School of Business at the University of Western Ontario, in London, Ontario, Canada, began The Ivey Ring Tradition. And since 2004, every Ivey grad takes the Ivey Pledge and receives a number ring. I wear my #2128 every day because it reminds me of what I believe in and stand for. I bring these beliefs to my engagements and jobs.

Do you want to know what makes a great risk manager? Find a quiet place, in your office or house and read the Ivey Pledge (or replace the Ivey parts with whatever you want.) Hopefully, you will distill enough of the attributes from this text which you can apply to your situation.

Please understand that as a risk manager, you will experience a lot of resistance to what you are trying to carry out. But believe in your passion and above all believe in the truth. In risk management there is no right or wrong; there is only the truth. For many, they would rather obfuscate the truth because it makes their stock options more valuable or it conceals their inadequacies. Only once you cut through the organizational bullshit and find the truth, will any real risk management happen.

Ivey Pledge

I, _________, standing before my mentors and my peers, commit myself to venerate the traditions, reputation and integrity of the practice of business.

I accept entry into an exclusive network of Ivey Business School Alumni. I acknowledge the responsibilities and value the benefits of being a member of such an association.

I will, to the best of my ability, act honourably and ethically in all my dealings, in the belief and knowledge that doing so will lead to a greater good.

I will express my ideas and opinions openly and without reservation, so long as they do not impinge on the rights and freedoms of others, whoever they may be.

I will endeavour to act with moral clarity, grace and nobility.

I understand that I am now a member of a distinguished community.

I will strive to uphold the standing of the community, with special obligation placed on encouraging and championing the pursuits of my fellow members.

I will acknowledge my limitations and my mistakes so that I may learn from them.

I will continue to seek new knowledge, never resting on past wisdom or successes.

Above all, I will aspire to make a positive contribution to my society.

I promise to uphold the traditions, integrity and high standards set by those Alumni that came before me.

I promise this to myself, my family, my fellow Alumni and my School.

I accept this Ivey Pledge freely and upon my honour.

I would like bring to your attention the blog by Donald van Deventer from the Kamakura Corporation.  We may both write about risk management but on a risk management scale, Don is to Thomas Jefferson what I am Bart Simpson. Don is the real deal.

He writes about his experiences in risk management with quotes by Lance Armstrong woven through the post. It’s very good so please have a look.

http://kamakuraco.com/Company/ExecutiveProfiles/DonaldRvanDeventerPhD/KamakuraBlog/tabid/231/EntryId/169/Risk-Management-Lessons-from-Lance-Armstrong.aspx

I was reminded recently of these appetite suppressant pills that my mom must have purchased when I was a kid in the late 70s. They were called AYDS. Worried about your reputation and your brand? What could be worse that your brand being associated with a terrible disease? (Well, I recall there being a sushi place called Osama Sushi in Toronto about 10 years ago which is no longer there/or they changed their name.)

Read more at Wikipedia http://en.wikipedia.org/wiki/Ayds

Time Magazine wrote in1993:

The problem: a deadly disease breaks out that has a name that sounds the same as that of a well-known diet product. Question: What should the marketer do to avoid possible confusion?

Jeffrey Martin Inc., the distributor of Ayds appetite-suppressant candy, has faced just this issue since AIDS, or acquired immune deficiency syndrome, began getting public attention in mid-1981. Jeffrey Martin acquired the Ayds marketing rights from Purex at about the time of the first report of AIDS.

Sales of the diet candy had been sluggish for years when Jeffrey Martin took over the product. Says Martin Himmel, company president: “We have repackaged it, redesigned it, readvertised it and given it a new breath of life.” Perhaps as a result, retailers say, the disease is not hurting the product. Says Elliot Dworkin, vice president of Revco D.S. Inc., which operates 1,661 drugstores in 28 states: “Ayds sales have never been better.” Read more: http://www.time.com/time/magazine/article/0,9171,926056,00.html#ixzz0cK0XgdPI

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