ERM - Enterprise Risk Management Exam: Fall 2023 and Spring 2024

ERM – Enterprise Risk Management Exam
Fall 2023 and Spring 2024
Important Exam Information:
Exam Registration Candidates may register online or with an application.
Order Study Notes Study notes are part of the required syllabus and are not available
electronically but may be purchased through the online store.
Syllabus Readings Readings listed in this syllabus may include study notes, online
readings and textbooks. Candidates are responsible for all readings in
their entirety, including sections such as Appendices, unless it is
stated otherwise in the syllabus.
Introductory Study Note The Introductory Study Note has a complete listing of all study notes
as well as errata and other important information.
Case Study This case study will also be provided with the examination. Candidates will
not be allowed to bring their copy of the case study into the examination
room.
Past Exams Past Exams from 2012-present are available on SOA website.
Updates Candidates should be sure to check the Updates page on the exam home
page periodically for additional corrections or notices to the current
syllabus.
Copyright © Society of Actuaries

Fall 2023/Spring 2024
1. Topic: Enterprise Risk Management Framework and Process
Learning Objectives
The candidate will understand the ERM framework and process and be able to apply them to organizations.
Learning Outcomes
The Candidate will be able to:

a) Recommend an appropriate framework for an organization’s enterprise risk management and an
acceptable governance structure
b) Demonstrate an understanding of the perspectives of regulators, rating agencies, stock analysts,
auditors, and company stakeholders and how they evaluate the risks and the risk management of an
organization
c) Demonstrate how to articulate an organization’s risk appetite, desired risk profile, quantified risk
tolerances, risk philosophy and risk objectives
d) Assess the overall risk exposure arising from an organization's current and emerging risks
e) Propose ERM solutions or strategies that effectively manage risk under different real (case study) and
hypothetical situations facing financial and non-financial organizations
Resources
• Financial Enterprise Risk Management, Sweeting, Paul, 2nd Edition, 2017

o Ch. 8: Risk Identification
o Ch. 14: Quantifying Particular Risks
• Value at Risk: The New Benchmark for Managing Financial Risk, Jorion, Philippe, 3rd Edition, 2007
o Ch. 13: Liquidity Risk (excluding section 13.4)
• ERM-101-12: Measurement and Modeling of Dependencies in Economic Capital, Ch. 4-5
• ERM-106-12: Economic Capital-Practical Considerations, Milliman
• ERM-107-12: Strategic Risk Management Practice, Andersen and Schroder, 2010, Ch. 7: Strategic Risk
Analyses
• ERM-119-14: Aggregation of Risks and Allocation of Capital (sections 4-7, excluding section 6.3)
• ERM-131-18: Leveraging COSO Across the Three Lines of Defenses
• ERM-133-19: Emerging Risks and Enterprise Risk Management, pp. 2-6
• ERM-135-20: Risk Management and the Rating Process for Insurance Companies
• ERM-136-20: Managing Liquidity Risk: Industry Practices and Recommendations for CROs (excluding Ch.
4)
• ERM-137-20: ORSA and the Regulator
• ERM-140-20: Risk Adjustments for Insurance Contracts under IFRS 17: Chapter 3: Risk Adjustment
Techniques & Chapter 7: Validation of Risk Adjustments
1
• ERM-142-20: Data Quality is the Biggest Challenge

• ERM-143-20: Internal Controls Toolkit, Doxey, Ch. 1, pp. 11-17 & 27-35
• ERM-148-22: Agency Theory and Asymmetric Information
• ERM-149-22: Managing 21st Century Political Risk
• ERM-152-23: Managing Environmental, Social and Governance Risks in Life & Health Insurance
Business
• ERM-153-23: Regulatory Capital Adequacy for Life Insurance Companies: A Comparison of Four
Jurisdictions (excluding Appendices)
Excel Model - Regulatory Capital Adequacy for Life Insurance Companies Example (spreadsheet
background only)
• ERM-702-12: IAA Note on ERM for Capital and Solvency Purposes in the Insurance Industry, pp. 9-38
• Regulatory Risk and North American Insurance Organizations, sections 6.1-6.14 & 7
• Risk Appetite: Linkage with Strategic Planning Report
• Economic Scenario Generators: A Practical Guide, pp. 7-17 (pp. 97-112 background only)
• Embedding Cyber Risk in Risk Management: An Insurer's Perspective, pp. 12-15 of Cybersecurity:
Impact on Insurance Business and Operations
2
2. Topic: Risk Categories and Identification
Learning Objectives
The candidate will understand the types of risks faced by an entity and be able to identify and analyze these
risks.
Learning Outcomes

a) Describe different definitions and concepts of risk
b) Discuss risk taxonomy, including an awareness of how individual risks might be categorized in
different ways
c) Identify and analyze specific risks faced by an organization, including but not limited to: financial,
environmental, operational, legal, reputational and strategic risks
Resources

o Ch. 1: An Introduction to Enterprise Risk Management (section 1.1 only)
o Ch. 8: Risk Identification
o Ch. 18: Credit Risk Management (excluding Appendices)
• Quantitative Enterprise Risk Management, Hardy, Mary and Saunders, David, 2022
o Ch. 2 Risk Taxonomy
Analyses
4)
• ERM-145-21: IAA Paper: Importance of Climate-Related Risks for Actuaries, pp. 2-14
• ERM-146-21: Covid-19: Implications for Insurer Risk Management and the Insurability of Pandemic Risk
• ERM-148-22: Agency Theory and Asymmetric Information
• ERM-149-22: Managing 21st-Century Political Risk
• ERM-150-22 Exchange Rate Risk Measurement and Management
Business
3
background only)
• ERM-702-12: IAA Note on ERM for Capital and Solvency Purposes in the Insurance Industry, pp.
9-38
• Embedding Cyber Risk in Risk Management: An Insurer's Perspective, pp. 12-15 of
Cybersecurity: Impact on Insurance Business and Operations
• Model Risk Management Practice Note, AAA, May 2019
4
3. Topic: Risk Modeling and Aggregation of Risks
Learning Objectives
The candidate will understand the concepts of risk modeling and be able to evaluate and understand the
importance of risk models.
Learning Outcomes

a) Demonstrate how each of the financial and non-financial risks faced by an organization can be
amenable to quantitative analysis
b) Demonstrate organization-wide risk aggregation techniques that illustrate the concept of risk
diversification by incorporating the use of correlation
c) Evaluate and select appropriate copulas as part of the process of modelling multivariate risks
d) Demonstrate the use of scenario analysis and stress testing in the measurement of current and
emerging risks
e) Demonstrate the importance of the tails of distributions, tail correlations, and low frequency / high
severity events, and the use of extreme value theory to analyze these situations
f) Demonstrate an understanding of model and parameter risk
g) Evaluate and select appropriate models to handle diverse risks, including models that use a stochastic
approach
Resources

o Ch. 7: Portfolio Risk: Analytical Methods
o Ch. 9: Forecasting Risk Correlations (section 9.3 only)
o Ch. 12: Monte Carlo Methods
• Quantitative Enterprise Risk Management, Hardy, Mary and Saunders, David, 2022
o Ch. 5: Extreme Value Theory
o Ch. 6: Copulas
• ERM-101-12: Measurement and Modeling of Dependencies in Economic Capital, Ch. 4-5
• ERM-104-12: Study Note on Parameter Risk, Venter and Sahasrabuddhe (excluding section 3)
• ERM-106-12: Economic Capital-Practical Considerations, Milliman
Analyses
5
• ERM-120-14: IAA Note on Stress Testing and Scenario Analysis (pp. 1-6, 14-17 & 19-25)
• ERM-124-15: Counterparty Credit Risk: The New Challenge for Global Financial Markets, Ch.2: Defining
Counterparty Credit Risk
• ERM-151-22: Developing Key Risk Indicators to Strengthen Enterprise Risk Management
background only)
• Modeling Tail Behavior with Extreme Value Theory, Risk Management, Sep 2009
• A New Approach for Managing Operational Risk, Ch. 8
• Economic Scenario Generators: A Practical Guide, pp. 7-17 (pp. 97-112 background only)
6
4. Topic: Risk Measures
Learning Objectives
The candidate will understand how the risks faced by an entity can be quantified and the use of metrics to
measure risk.
Learning Outcomes

a) Determine risk exposures using common risk measures (e.g., VaR and TVaR) and compare the
properties and limitations of such measures
b) Analyze quantitative financial and non-financial data using appropriate statistical methods to assist
in quantifying risk
c) Analyze risks that are not easily quantifiable, such as liquidity, operational, and environmental risks
Resources

o Ch. 9: Some Useful Statistics (background only)
o Ch. 9: Forecasting Risk and Correlations
o Ch. 12: Monte Carlo Methods
• ERM-106-12: Economic Capital – Practical Considerations, Milliman
4)
• ERM-142-20: Data Quality is the Biggest Challenge
• ERM-150-22: Exchange Rate Risk Measurement and Management
7
Business
background only)
• A New Approach for Managing Operational Risk, Ch. 8
8
5. Topic: Risk Management Tools and Techniques
Learning Objectives
The candidate will understand the approaches for managing risks and how an entity makes decisions about
appropriate techniques.
Learning Outcomes

a) Demonstrate risk optimization and analyze the risk and return trade-offs that result from changes in
the organization’s risk profile
b) Demonstrate application of the following responses to risk, including consideration of their costs and
benefits: avoidance, acceptance, reduction without transfer, and transfer to a third party
c) Demonstrate the use of controls for retained and residual risks
d) Demonstrate how derivatives, synthetic securities, and financial contracting may be used to reduce
risk within a static or dynamic hedging program
e) Determine an appropriate choice of mitigation strategy for a given situation, which balances
benefits with inherent costs (including exposure to moral hazard, credit, basis and other risks)
f) Demonstrate the use of tools and techniques for identifying and managing credit and counterparty risk
g) Analyze how ALM and other risk management principles can be used to establish investment policy and
strategy, including asset allocation
h) Demonstrate possible risk management strategies for non-financial risks
i) Choose appropriate techniques to measure, model and manage various financial and non-financial
risks faced by an organization
Resources

o Ch. 16: Responses to Risk
Analyses
• ERM-120-14: IAA Note on Stress Testing and Scenario Analysis (pp. 1-6, 14-17 & 19-25)
• ERM-124-15: Counterparty Credit Risk: The New Challenge for Global Financial Markets, Ch.2: Defining
Counterparty Credit Risk
• ERM-128-17: The Breadth and Scope of the Global Reinsurance Market and the Critical Role Such
Market Plays in Supporting Insurance in the United States (III, IV & VI)
• ERM-131-18: Leveraging COSO Across the Three Lines of Defenses
9
4)
• ERM-143-20: Internal Controls Toolkit, Doxey, Ch. 1, pp. 11-17 & 27-35
• ERM-144-20: Ch. 13: Asset Liability Management Techniques and Practices for Insurance Companies,
IAA Risk Book
• ERM-146-21: Covid-19: Implications for Insurer Risk Management and the Insurability of Pandemic
Risk
• ERM-147-21: Working with Inherent and Residual Risk
• ERM-150-22: Exchange Rate Risk Measurement and Management
Business
10
6. Topic: Capital Management
Learning Objectives
The candidate will understand the concept of economic capital, risk measures in capital assessment and
techniques to allocate the cost of risks within business units.
Learning Outcomes

a) Demonstrate a conceptual understanding of economic measures of value and capital requirements
(e.g., EVA, embedded value, economic capital, regulatory measures, and accounting measures) and
their uses in decision-making processes
b) Apply risk measures and demonstrate how to use them in value and capital assessment
c) Propose techniques of attributing the “cost” of risk/capital/hedge strategies to business units in
order to gauge performance (e.g., returns on marginal capital)
d) Demonstrate the ability to develop a capital model for a hypothetical organization
Resources
• ERM-101-12: Measurement and Modelling of Dependencies in Economic Capital, Ch. 3

• ERM-106-12: Economic Capital – Practical Considerations, Milliman
background only)
• Corporate Pension Risk Management and Corporate Finance: Bridging the Gap between Theory and
Practice in Pension Risk Management, Aug 2015
11

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ERM – Enterprise Risk Management Exam

Fall 2023 and Spring 2024

Important Exam Information:

Exam Registration Candidates may register online or with an application.

Copyright © Society of Actuaries

1. Topic: Enterprise Risk Management Framework and Process

The Candidate will be able to:

• Financial Enterprise Risk Management, Sweeting, Paul, 2nd Edition, 2017

• ERM-142-20: Data Quality is the Biggest Challenge

2. Topic: Risk Categories and Identification

The Candidate will be able to:

• Financial Enterprise Risk Management, Sweeting, Paul, 2nd Edition, 2017

3. Topic: Risk Modeling and Aggregation of Risks

The Candidate will be able to:

• Financial Enterprise Risk Management, Sweeting, Paul, 2nd Edition, 2017

4. Topic: Risk Measures

The Candidate will be able to:

• Financial Enterprise Risk Management, Sweeting, Paul, 2nd Edition, 2017

5. Topic: Risk Management Tools and Techniques

The Candidate will be able to:

• Financial Enterprise Risk Management, Sweeting, Paul, 2nd Edition, 2017

6. Topic: Capital Management

The Candidate will be able to:

• ERM-101-12: Measurement and Modelling of Dependencies in Economic Capital, Ch. 3

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