Cambridge Core - Finance and Accountancy - Financial Enterprise Risk Management PDF; Export citation 1 - An introduction to enterprise risk management. — Financial Enterprise Risk Management PAUL SWEETING is Professor of Actuarial Science at the University of Kent, where he teaches. Financial enterprise risk management / Paul Sweeting. p. cm. – (International series on actuarial science) Includes bibliographical references and index.
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Financial enterprise risk management / Paul Sweeting Sweeting, Paul · View online 1 online resource (xii, pages): digital, PDF file(s). , English, Book. download Financial Enterprise Risk Management (International Series on Actuarial Science) on trovotinuldes.gq ✓ FREE SHIPPING on Paul Sweeting (Author). [Paul Sweeting] -- "Financial Enterprise Risk Management provides all the tools needed to build and maintain a comprehensive ERM framework. As well as.
Actuarial skills are well suited to this environment because of their training in analyzing various forms of risk, and judging the potential for upside gain, as well as downside loss associated with these forms of risk D'Arcy They analyze business prospects with their financial skills in valuing or discounting risky future cash flows, and apply their pricing expertise from insurance to other lines of business.
For example, insurance securitization requires both actuarial and finance skills Krutov Actuaries also act as expert witnesses by applying their analysis in court trials to estimate the economic value of losses such as lost profits or lost wages Wagner Mathematician Nathaniel Bowditch was one of America's first insurance actuaries. Need for insurance[ edit ] The basic requirements of communal interests gave rise to risk sharing since the dawn of civilization.
For example, people who lived their entire lives in a camp had the risk of fire, which would leave their band or family without shelter.
After barter came into existence, more complex risks emerged and new forms of risk manifested. Merchants embarking on trade journeys bore the risk of losing goods entrusted to them, their own possessions, or even their lives. Intermediaries developed to warehouse and trade goods, which exposed them to financial risk. The primary providers in extended families or households ran the risk of premature death, disability or infirmity, which could leave their dependents to starve.
Credit procurement was difficult if the creditor worried about repayment in the event of the borrower's death or infirmity. Alternatively, people sometimes lived too long from a financial perspective, exhausting their savings, if any, or becoming a burden on others in the extended family or society Lewin , p.
Early attempts[ edit ] In the ancient world there was not always room for the sick, suffering, disabled, aged, or the poor—these were often not part of the cultural consciousness of societies Perkins Early methods of protection, aside from the normal support of the extended family, involved charity; religious organizations or neighbors would collect for the destitute and needy.
By the middle of the 3rd century, 1, suffering people were being supported by charitable operations in Rome Perkins Charitable protection remains an active form of support in the modern era GivingUSA , but receiving charity is uncertain and is often accompanied by social stigma.
Elementary mutual aid agreements and pensions did arise in antiquity Thucydides. Early in the Roman empire , associations were formed to meet the expenses of burial, cremation, and monuments—precursors to burial insurance and friendly societies.
A small sum was paid into a communal fund on a weekly basis, and upon the death of a member, the fund would cover the expenses of rites and burial. Other early examples of mutual surety and assurance pacts can be traced back to various forms of fellowship within the Saxon clans of England and their Germanic forebears, and to Celtic society Loan Non-life insurance started as a hedge against loss of cargo during sea travel. Anecdotal reports of such guarantees occur in the writings of Demosthenes , who lived in the 4th century BCE Lewin , pp.
The earliest records of an official non-life insurance policy come from Sicily , where there is record of a 14th-century contract to insure a shipment of wheat Sweeting , p. In , Lenardo Cattaneo assumed "all risks from act of God, or of man, and from perils of the sea" that may occur to a shipment of wheat from Sicily to Tunis up to a maximum of florins.
Development of theory[ edit ] U. In , a London draper named John Graunt showed that there were predictable patterns of longevity and death in a defined group, or cohort , of people, despite the uncertainty about the future longevity or mortality of any one individual. This study became the basis for the original life table.
Combining this idea with that of compound interest and annuity valuation, it became possible to set up an insurance scheme to provide life insurance or pensions for a group of people, and to calculate with some degree of accuracy each member's necessary contributions to a common fund, assuming a fixed rate of interest.
The first person to correctly calculate these values was Edmond Halley Heywood In his work, Halley demonstrated a method of using his life table to calculate the premium someone of a given age should pay to download a life-annuity Halley Early actuaries[ edit ] James Dodson 's pioneering work on the level premium system led to the formation of the Society for Equitable Assurances on Lives and Survivorship now commonly known as Equitable Life in London in This was the first life insurance company to use premium rates that were calculated scientifically for long-term life policies, using Dodson's work.
After Dodson's death in , Edward Rowe Mores took over the leadership of the group that eventually became the Society for Equitable Assurances.
It was he who specified that the chief official should be called an actuary Ogborn , p. Previously, the use of the term had been restricted to an official who recorded the decisions, or acts, of ecclesiastical courts, in ancient times originally the secretary of the Roman senate , responsible for compiling the Acta Senatus Ogborn , p.
Development of the modern profession[ edit ] Main article: Actuarial science Actuary speaking at a health care event In the 18th and 19th centuries, computational complexity was limited to manual calculations. The actual calculations required to compute fair insurance premiums are complex. The actuaries of that time developed methods to construct easily used tables, using sophisticated approximations called commutation functions , to facilitate timely, accurate, manual calculations of premiums Slud Over time, actuarial organizations were founded to support and further both actuaries and actuarial science, and to protect the public interest by ensuring competency and ethical standards Hickman , p.
Since calculations were cumbersome, actuarial shortcuts were commonplace. Non-life actuaries followed in the footsteps of their life compatriots in the early 20th century. In the United States, the revision to workers' compensation rates took over two months of around-the-clock work by day and night teams of actuaries Michelbacher , pp.
Actuaries began to forecast losses using models of random events instead of deterministic methods. Computers further revolutionized the actuarial profession.
Sweeting, P. Annals of Actuarial Science. Abstract View in KAR View full text The funding position of a defined benefit pension plan is often closely linked to the performance of the sponsoring company's business.
For example, a plan sponsor whose financial health is dependent on high oil prices may struggle during periods of oil price weakness.
In this paper, we propose an approach to dealing with joint plan and sponsor risk that can provide protection against extreme adverse events for the sponsor. Our methodology relies on an asset allocation framework which takes into account the impact of serial correlation in asset returns, as well as the negative skewness and leptokurtosis resulting from the non-normal shape of marginal distributions of historical asset returns.
We also make use of copulas to measure the dependence between asset class returns. Calculating and communicating tail association and the risk of extreme loss. British Actuarial Journal [Online] Abstract View in KAR In this paper we examine two aspects of extreme events: their calculation and their communication. In relation to calculation, there are two types of extreme events that are considered. The first is the extent to which extreme events in two or more variables occur together.
This can be gauged by using measures of tail association. Higher levels of tail association are useful for highlighting the extent to which there are concentrations of risk.
We investigate the range of approaches used to measure tail association and propose a pragmatic alternative, the coefficient of finite tail dependence.
The second type of extreme event arises from combinations of losses from a series of risks that together result in total losses exceeding a particular level. This is measured using ruin lines or, in higher dimensions, planes and hyperplanes. The probability of ruin and the economic cost of ruin are considered here.
The communication of extreme events is discussed not just in terms of the numbers that can be used, but in terms of the graphical methods that can be used to aggregate information on a range of risk combinations. This involves communicating not just the level of risk but also the importance of the risk considered. What SSAP24 can tell us about accounting quality.
Whilst this was a major step forward, it allowed a significant degree of discretion. This discretion meant that SSAP 24 was an observable measure of the quality and quantity of accounting disclosure for firms.