Chapter 25 explained ERM and Efficient Frontier Analysis. Do you agree with the approach to implement an ERM and why? If you could change anything about the reasons to implement ERM in this case study what would that be and why? Would you implement the same ERM approach in your current organization (or future organization)?To complete this assignment, you must do the following:A) Create a new thread by Thursday. As indicated above, reflect on the ERM implementation using Efficient Frontier Analysis, make recommendations and determine if it can be implemented in your current or future organizations.B) Select AT LEAST 3 other students’ threads and post substantive comments on those threads, evaluating the pros and cons of that student’s recommendations. Your comments should extend the conversation started with the thread. Replies should be completed by Sunday.ALL original posts (4 in total) and comments must be substantive. (I’m looking for about a paragraph – not just “I agree.”)NOTE: These discussions should be informal discussions, NOT research papers. If you MUST directly quote a resource, then cite it properly. However, I would much rather simply read your words.Should be zero plagarism
chapter_25_slides.pptx
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ITS 835 ENTERPRISE RISK MANAGEMENT
CHAPTER 25
ERM – USES OF EFFICIENT FRONTIER ANALYSIS IN STRATEGIC RISK MANAGEMENT
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INTRODUCTION
Strategic risk management framework
Modern portfolio theory
Practical application of risk measurement for insurance
Sample case study
Intended uses
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STRATEGIC RISK MANAGEMENT FRAMEWORK
Enables organization to discover risks
Across organizational boundaries
Continuous cycle
Considers interactions of multiple risks
Combines risk appetite and risk tolerance
Defines exploitable risks
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STRATEGIC RISK
MANAGEMENT
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MODERN PORTFOLIO THEORY
Mathematical model – from 1950s
Risk is standard deviation
When portfolio is weighted combination of assets
Rp – return of portfolio
Ri –return of asset i
Wi –weighting of asset i
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PRACTICAL APPLICATION OF RISK MEASUREMENT FOR INSURANCE
Purpose is to optimize insurance placements
And risk limits
Tail value at risk of loss –TVaRL
Expected value of loss, given that an event has occurred
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SAMPLE CASE STUDY
Three basic risks
Earthquake exposure to
buildings
Workers’ compensation
insurance
General liability insurance
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PORTFOLIO
OPTIONS
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EARTHQUAKE OPTIONS
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WORKERS’ COMPENSATION OPTIONS
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GENERAL
LIABILITY
OPTIONS
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COMBINED
PORTFOLIO
OPTIONS
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INTENDED USES
Help large organizations
Risk management
Portfolio management
Insurance and non-insurance risks
Best fit
Established ERM
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