Enterprise Risk Management (ERM) is a process by which an organization identifies, monitors, and manages its risks, with the goal of increasing value for their stakeholders.
ERM differs from traditional actuarial work in two key areas:
- ERM can apply to any organization or operation, not just an insurance company or a pension plan where actuarial talent is typically used. ERM can apply to risks found in manufacturing companies or non-profit organizations, just to name a couple of examples.
- ERM is not restricted to financial risks. There are several other sources of risk (reputation risk, operational risk, etc.) which are not financial in nature, but can have a definite impact on the value of an organization.
The actuarial profession has a strong history of modelling and managing traditional risks such as mortality. By bringing these modelling techniques into an ERM framework, actuaries are able to apply their skills in a new area, and provide insights that may not be present from other disciplines. Actuaries can also apply their expertise in risk mitigation, and identify ways to exploit risk opportunities for the betterment of the organization.
Actuaries interested in practicing in the ERM field are encouraged to attain the Chartered Enterprise Risk Analyst (CERA) designation. This can be done concurrently with pursuing actuarial exams, and offers successful candidates a credential that demonstrates strong technical proficiency in risk management and modelling.
For more information, read the following PDF booklet: