Riskviews's Blog (12)

Writing an ORSA Report

Insurance regulators have made the Own Risk and Solvency Assessment (ORSA) into one of the global Insurance Core Principles that need to be adopted in all countries.

By Dave Ingram

Several countries have already adopted an ORSA…

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Added by Riskviews on October 29, 2014 at 11:30am — No Comments

Calibrating Capital to Risk Management rather than to History

The way that we calculate capital requirements is one of those embedded assumptions that has existed for so long that we fail to think about whether it really makes any sense or not.  And if you do stop and take a step back, you will realize that it actually does not necessarily make much sense. 

We calculate capital requirements looking backwards, when the thing that we will need capital for is in the future.  That backwards capital requirement is only broadly close to being correct…

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Added by Riskviews on May 10, 2014 at 4:00pm — 2 Comments

You can't Always Get What You Want...

You want a risk management program that conforms to a particular STANDARD.  Standards usually present highly organized risk management systems.  But that is not what is needed for many of the threats that our firms face.   What We really need is a risk management program that fits our threats.

  • If your threats are severe and intense, you need a highly cooperative risk management system.
  • If your threats are highly complex, you need a…
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Added by Riskviews on December 6, 2012 at 8:44pm — No Comments

WHAT IS RISK QUALITY?

In an earlier blog post, the idea of managing both quantity and quality of risk was introduced.  

But what exactly is Risk Quality?  

At the most simple level, risk quality can be indicated as the rate of risk per unit of activity.  

 

Risk Quantity = Business Activity Level x Risk Quality

 

So the suggestion is that a risk management system should pay close attention to that rate of risk as well as the Quantity of risk.  See Riskviews Post on…

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Added by Riskviews on October 1, 2011 at 8:34am — 1 Comment

How Big is your Default Put?

In ancient times, the ultimate collateral was the debtor’s personal freedom. A person who defaulted on a debt became an indentured servant of the lender in the case of default. This idea persisted in one form or another until the 1800s when debtors prisons became out of favor. The US was one country that led the way on this movement. The US has always had a much easier attitude to bankruptcy. There has always been much less stigma attached to bankruptcy along with the easier legal…

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Added by Riskviews on September 17, 2011 at 5:51pm — No Comments

ERM with No Presumptions

Many ERM discussions presume that some basic risk management is already taking place. That is not always so. The risk manager needs to work without presumptions.



There are six things that the risk manager needs to check on:



1. Risks need to be diversified. There is no enterprise risk management if a firm is just taking one big bet.



2. Firm needs to be sure of the quality of the risks that they take. This implies that multiple ways of evaluating risks are needed to… Continue

Added by Riskviews on August 6, 2011 at 4:14pm — 1 Comment

Seven Deadly Sins of Risk Measurement

Measuring risk means walking a thin line.  Balancing what is highly unlikely from what it totally impossible.  Financial institutions need to be prepared for the highly unlikely but must avoid getting sucked into wasting time worrying about the totally impossible.

Here are some sins that are sometimes committed by risk measurers:

1.  Downplaying uncertainty - Uncertainty increases when loss size increases.  Do your users know that?

2.  Comparing incomparables  -  Do you…

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Added by Riskviews on March 2, 2011 at 2:52am — No Comments

Business Risks

US News and World Report had a recent feature “20 Companies that Cratered in 2010“.

Reading their article, I can only come up with four reasons why the 20 firms went bankrupt:

  1. Overconcentration in the mortgage backed securities market.  (Ambac)
  2. Failed to adapt to competition with a new approach to the business (Affiliated Media, Mareican Media, Penton…
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Added by Riskviews on January 8, 2011 at 9:44pm — 2 Comments

Is it Better to be Lucky than Smart?

It certainly is cheaper and easier. But is it BETTER?



The main difference between lucky and smart is that smart is more likely to be able to repeat than luck.

But I think that there are two different types of smart, and one is much better than the other.

  • The first type of smart is able to discern patterns and trends. This type of smart can do momentum trading. They figure out what works in this phase of the cycle of the part of the world that they are…
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Added by Riskviews on December 5, 2010 at 2:04pm — No Comments

Lightning or Lightning Bug

Mark Twain once observed that there was a difference between Lightning and Lightning Bug. An important difference.

The difference between the almost right word & the right word is really a large matter–it’s the difference between the lightning bug and the lightning.

Might there be a similar…

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Added by Riskviews on October 1, 2010 at 4:10am — No Comments

When your Parachute Doesn't Open

Do you have a plan for what to do when your parachute doesn’t open?



Well, if you do not, pay attention. Here is a 6 step checklist for what to do:

  1. Signal your Buddy.
  2. Get close with your Buddy.
  3. Link your arms through his/her straps.
  4. Open his/her chute.
  5. Let your Buddy steer the chute.
  6. Suggest that he/she look for an extra soft place to land…
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Added by Riskviews on September 14, 2010 at 4:53am — 1 Comment

ERM only has value to those who know that the future is uncertain.

First they need to have a product or service that people will buy. They need revenues.

Second they need to have the ability to provide that product or service at a cost less than what their customers will pay. They need profits.



Once they have revenues and profits, their business is a valuable asset. So third, they need to have a system to avoid losing that asset because of unforeseen adverse experience. They need risk management.



So Risk…

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Added by Riskviews on August 29, 2010 at 3:34am — No Comments

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