ASOP 46

Question 1

ASOP #46 - Definition of ERM

Answer 1

The discipline by which an organization in any industry assesses, controls, exploits, finances, and monitors risks from all sources for the purpose of increasing the organization’s short- and long-term value to its stakeholders

Question 2

ASOP #46 - Processes included in the ERM control cycle (7)

Answer 2

1. Risks are identified
2. Risks are evaluated
3. Risk appetites are chosen
4. Risk limits are set
5. Risks are accepted or avoided
6. Risk mitigation activities are performed
7. Actions are taken when risk limits are breached

Question 3

ASOP #46 - Considerations when performing services related to risk evaluation (4)

Answer 3

1. Info about the financial strength, risk profile, and risk environment of the organization. For example, the nature and complexity of the risks faced by the organization, and the degree to which the organization’s different risks interact with one another.
2. Info about the organization’s risk management system, including:
   a. The risk tolerance of the organization
   b. The risk appetite of the organization
   c. The components of the organization’s ERM control cycle
   d. The knowledge and experience of management and the board of directors regarding risk assessment and risk management
   e. The actual execution of the organization’s ERM control cycle
3. The relationship between the organization’s financial strength, risk profile, and risk environment and the organization’s risk management system
4. The intended purpose and uses of the actuarial work product

Question 4

Required disclosures for communications subject to ASOP #46 on risk evaluation in ERM (7)

Answer 4

1. The results of the economic capital model, their intended use, and any known limitations of the model
2. The results of the stress and scenario tests, their intended use, and any known limitations of these tests
3. The methodologies and sources of info for identifying and evaluating emerging risks
4. Any material changes in the system, process, methodology, or assumptions from those previously used
5. Significant assumptions used in the risk evaluation and interdependencies among risks and statistical distributions
6. The risks included in the risk evaluation and their relative significance, as well as known material risks not included and the rationale for not including them
7. Whether and how the modeled future economic conditions have been reviewed and tested for reasonableness