Risk management is your business, but how well do you understand the many different risks that affect your business itself? Can you readily quantify the impact of certain risks — such as changing interest rates or inflation — on your business lines, as well as your investments? Do you understand how the risks in your portfolio interact with those in your operating business, either adding to or offsetting volatility? How can you ensure that you are protecting your company from undue volatility while taking advantage of attractive business or investment opportunities?
A sound Enterprise Risk Management (ERM) strategy can maximize the economic value of your company by evaluating the risk/reward tradeoff in all areas of the business. To help you manage risk across your entire business, AAM offers dynamic asset/liability management modeling (ALM) as an extension of our investment management service.
Sound Enterprise Risk Management analysis can provide these key benefits:
- Better decisions: ERM helps you model the impact of strategic changes, building in interdependencies for a robust picture of how your business decisions will affect your company.
- Holistic investment management: Scenario-based asset allocation, taking into account liabilities, allows you to calculate the tradeoffs between short-term operating income and long-term present value of cash flows.
- Improved understanding: Sophisticated modeling helps you understand your company’s net sensitivity to interest rate and inflation movements — and helps you identify ways to increase your company’s economic value.
Rating agencies have recognized the benefits of strong ERM analysis, placing special emphasis on insurers’ policies and procedures in this area. While most insurers are able to identify risk across their enterprise, many companies lack the infrastructure to statistically quantify these risks.