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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3

Strategic risk management

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4

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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5

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

University of CumberlandsReview the chapter from this week’s lesson and provide a 1-2 page summary reflecting on how content from it can be used in your professional career.
Your writeup should include:
1. Title Page [separate page]
2. Content
3. References [separate page if applicable]