The purpose of this seminar is to give you a thorough introduction to "Enterprise Risk Management" as a strategic management tool and a good and practical understanding of how ERM can used by financial and non-financial firms to manage risks and seize opportunities related to the achievement of their objectives.
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, more regulation and other 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 three generally accepted frameworks, COSO, CAS and RIMS, 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 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 system and its components is monitored through ongoing monitoring activities and separate evaluations.