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?

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Computer Science

University of the Cumberlands

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Would you implement the same ERM approach in your current organization (or future organization)?

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.

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ITS 835 ENTERPRISE RISK MANAGEMENT CHAPTER 25 ERM - USES OF EFFICIENT FRONTIER ANALYSIS IN STRATEGIC RISK MANAGEMENT UNIVERSITY OF CUMBERLANDS 1 INTRODUCTION  Strategic risk management framework  Modern portfolio theory  Practical application of risk measurement for insurance  Sample case study  Intended uses UNIVERSITY OF CUMBERLANDS 2 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 UNIVERSITY OF CUMBERLANDS 3 STRATEGIC RISK MANAGEMENT UNIVERSITY OF CUMBERLANDS 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 UNIVERSITY OF CUMBERLANDS 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 CUMBERLANDS 6 SAMPLE CASE STUDY  Three basic risks  Earthquake exposure to buildings  Workers’ compensation insurance  General liability insurance UNIVERSITY OF CUMBERLANDS 7 PORTFOLIO OPTIONS UNIVERSITY OF CUMBERLANDS 8 EARTHQUAKE OPTIONS UNIVERSITY OF CUMBERLANDS 9 WORKERS’ COMPENSATION OPTIONS UNIVERSITY OF CUMBERLANDS 10 GENERAL LIABILITY OPTIONS UNIVERSITY OF CUMBERLANDS 11 COMBINED PORTFOLIO OPTIONS UNIVERSITY OF CUMBERLANDS 12 INTENDED USES  Help large organizations  Risk management  Portfolio management  Insurance and non-insurance risks  Best fit  Established ERM UNIVERSITY OF CUMBERLANDS 13
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Running Head: ENTERPRISE RISK MANAGEMENT

ENTERPRISE RISK MANAGEMENT
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ENTERPRISE RISK MANAGEMENT

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Efficient Frontier Analysis and ERM
The efficient frontier analysis represents the best combination of securities that give rise
to different intensities of return. Therefore, an efficient frontier analysis in a corporation assists
the plan of ERM to facilitate enhanced analytical frameworks (Tavakoli, 2016). Consequently,
indicating various portfolios that represent the anticipated risk and return in business.
Enterprise Risk Management Approach.
Yes, I agree with the approach to implementing an ERM. According to the Committee of
Sponsoring Organizations (COSO), ERM is a technique to efficiently deal with uncerta...


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