1 / 13

Value of Enterprise Risk Management

Value of Enterprise Risk Management. MetLife Ruth Sayasith - Vice President & Actuary Corporate Risk Management July 29, 2003. ERM & Envisioned Future. Board and Exec Mgmt Know the Top Ten Risks Strategic Planning is Focused on Risk Appetite and Optimizing Risk versus Return

amyforrest
Télécharger la présentation

Value of Enterprise Risk Management

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Value of Enterprise Risk Management MetLife Ruth Sayasith - Vice President & Actuary Corporate Risk Management July 29, 2003

  2. ERM & Envisioned Future • Board and Exec Mgmt Know the Top Ten Risks • Strategic Planning is Focused on Risk Appetite and Optimizing Risk versus Return • Operational Risk is Minimized Through Effective Compliance and Audit Functions • Aggregate Level and Concentration of Risk is Transparent • Risk Culture is Pervasive

  3. Scenario Testing Oversight Risk Returns on Risk Capital Operational Risk Control Enterprise Risk Management

  4. Scenario Testing Oversight Risk Returns on Risk Capital Operational Risk Control Enterprise Risk Management • Oversight • Board and CEO • Audit Committee • Internal Audit • Controllers

  5. Scenario Testing Oversight Risk Returns on Risk Capital Operational Risk Control Enterprise Risk Management • Operational Control • Self-Assessment • Process Mapping • Compliance

  6. Scenario Testing Oversight Risk Returns on Risk Capital Operational Risk Control Enterprise Risk Management • Returns on Risk • Economic Capital • Diversified Risks • Strategic Planning • Ratings and Regulatory Capital

  7. Scenario Testing Oversight Risk Returns on Risk Capital Operational Risk Control Enterprise Risk Management • Scenario Testing • Liquidity • Predominant Risk Stress Testing • Extreme Scenario Analysis

  8. Economic Capital “A Picture of How it’s Done” Total Enterprise Volatility * Market Benchmarks Required Capital x = Attribution back to risk elements based on their contribution to Enterprise Volatility Vol. Vol. Vol. Vol. ... Risk Elements 200 + * Annual Standard Deviation of Market Value of Surplus

  9. Economic Capital - Fundamentals • Shareholder Perspective - Market Value Focused • Risk Defined in Terms of Volatility and Uncertainty • “Right” Level of Capital for Measuring Risk versus Return (RAROC) • Consolidated across the Enterprise • Marginal Attribution to Products/Businesses (Diversification Measured)

  10. Return on GAAP EquityA Good Indicator of Stock Price ROE Price to Equity 260% 17% 77% Correlation 220% 16% 15% 180% 14% 140% 13% 100% 12% 60% 11% 10% 20% Co. A Co. B Co. C Co. D Co. E Co. F Co. G

  11. Risk-adjusted Return on Capital (RAROC)The Best Indicator of Stock Price RAROC Price to EC 260% 17% 98% Correlation 220% 16% 15% 180% 14% 140% 13% 100% 12% 60% 11% 10% 20% Co. A Co. B Co. C Co. D Co. E Co. F Co. G

  12. Price to EC as predicted by RAROC A P R I C E T O E C 200% Benchmark RAROC where Price to EC = 100% C B D E F G 100% 0% RAROC

  13. Strategic Planning • Rank Products/Businesses - Amount of Shareholder Value Added or Subtracted • Catalyst for Discussion about Risk Appetite and Optimizing Risk versus Return • Know Why We Are “Investing” in a Business and When It Will Payoff • Develop Strategy to Maximize Shareholder Value

More Related