In a new white paper, “National Risk Management: A Practical ERM Approach for Federal Governments,” Sim Segal, FSA, CERA, Academic Director of the Master of Science in Enterprise Risk Management program at Columbia University, provides a practical ERM framework that governments could implement at the national level.
Segal makes the case for such an application by asking a simple question: If you were given the entire national budget and had the freedom to use it any way you wanted, how would you allocate the funds?
“This question starts you down a path of having to clarify the following additional questions,” he writes. “Once questions 1 and 2 are answered, ERM can help us answer the rest.”
What are our critical national objectives?
What are our key metrics for success (that is, for achieving critical national objectives)?
What are the key risks (that impact our key metrics)?
What are the quantitative impacts (and likelihoods) of the possible risk scenarios for each key risk?
What decisions can we make to increase the likelihood of success?
In his paper, Segal further introduces and defines the topic, discusses his approach, and describes how his proposed ERM program can be maintained easily once it is implemented. He concludes by commenting on the role of the National Chief Risk Officer (NCRO), who would be essential to a national ERM program’s success, and some positive trends in national risk management. Throughout, he contrasts his approach with the ERM programs most governments have started implementing: COSO ERM, ISO 31000, and their variants.
Read the report on the Society of Actuaries website and learn more about Programs in Enterprise Risk Management at Columbia’s School of Professional Studies.