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Mike McLaughlin
07-06-2005, 10:34 PM
The SOA is looking at a new credential for enterprise risk management. And it's on a fast track. What do you think of the idea?

As background, the Board has been following the developments in this rapidly emerging field. The SOA formed the new Risk Management section and introduced the new Part 8 -- Finance and Enterprise Risk Management -- quite rapidly. The Board appointed an ERM Strategy task force to look further into ERM and to make recommendations. Among the many recommendations made in their report the task force recommended consideration of a new credential. This was in February. The Board appointed an ERM Credential task force under the KM SAT and asked it to explore this issue and report back in May.

At the May meeting the task force recommended moving forward and the board agreed. They asked the Knowledge Management SAT to develop a proposed credential for consideration at the November 2005 meeting.

I'm on the task force that's looking at this. I support a credential in this key new area. There are different ways this could be done, but I suggest 3 to 4 exams, part of the FSA syllabus, such that this new credential is clearly part of the actuarial discipline. This should enhance the profession and the SOA. A person with the new credential could (but wouldn't necessarily) continue to ASA or FSA. Seems like it could have broad appeal to candidates and employers, both traditional insurers and the broader financial services area.

I know that some people feel that a new credential would undermine the FSA and ASA, but on the other hand competing professions could undermine the actuarial profession if we don't move into this area quickly.

I'd like to hear what everyone thinks about this.

Emily
07-07-2005, 01:51 PM
I'm not sure what the point of the new credential is. If you want risk management to be an actuarial discipline, then make a new Course 8, and let people who pass it call themselves risk management actuaries. The SOA didn't bother to come up with a new credential for pension actuaries or finance actuaries. For example, I'm a pension actuary and when I tell someone I'm an actuary, they assume I work for an insurance company. It doesn't matter though, because people who sponsor pension plans know they need to hire a pension actuary.

All these risk management actuaries need to do is get their SOA credentials and communicate the fact that they specialize in ERM. The SOA, meanwhile, needs to communicate the fact that some actuaries specialize in ERM.

Gal Friday
07-07-2005, 02:43 PM
Here's a link to some more info on this from the SoA site...

http://www.soa.org/ccm/content/about-soa-member-directory/board-bulletin/soa-erm-credential-prototype-fact-sheet/


Who is expected to take ERM credential exams?
The ERM credential will attract candidates who want to demonstrate their expertise in enterprise risk management but are not sure that they want to pursue the FSA/ASA credential. This could include quantitatively-oriented college graduates and current financial services employees looking for advancement. It is possible that some of these candidates will continue on to FSA/ASA. But it will provide a “stopping point” with a 2-3 year travel time and valuable, focused training in ERM.

Chuck
07-07-2005, 04:31 PM
Here's a link to some more info on this from the SoA site...

http://www.soa.org/ccm/content/about-soa-member-directory/board-bulletin/soa-erm-credential-prototype-fact-sheet/

Does this mean ERM < ASA or FSA, or just ERM <> ASA or FSA?

Samir
07-07-2005, 04:38 PM
Does this mean ERM < ASA or FSA, or just ERM <> ASA or FSA?

Or ERM = QRA?

Malik Shabazz
07-07-2005, 04:43 PM
Does this mean ERM < ASA or FSA, or just ERM <> ASA or FSA?It's not 100% clear from the description, but it sounds like ERM ≠ ASA/FSA.

If the relationship between the proposed ERM credential and the ASA and FSA credential concerns you, you should submit comments. (That is "you" in a broad sense, meaning anybody who browses the Outpost.) I have nothing to do with this ERM proposal, but I've served on a couple of professional committees in the past, and I can assure you that every comment that is submitted receives careful consideration.

(If you're skeptical, take a look at this memo (http://www.soa.org/ccm/cms-service/stream/asset/?asset_id=8256048), which is typical of the process.)

Gal Friday
07-07-2005, 05:24 PM
Does this mean ERM < ASA or FSA, or just ERM <> ASA or FSA?
I interpret it as ERM < ASA / FSA, since Mike said :
A person with the new credential could (but wouldn't necessarily) continue to ASA or FSA.
This occurred to me too:
Or ERM = QRA?
But I was thinking it was called QRP?
Anyway, is this the rebirth of the QR-something designation? Or totally unrelated?

WIactuary27
07-07-2005, 05:33 PM
What about the FSA or ASA that wants to do ERM work? Adding another 2-3 years onto travel time seems excessive. If the skill set of ERM is akin to that of an FSA, but not as rigarous, why not just make it one to two exams along with the preliminary actuarial exams. I am currently an actuarial student (pursuing FSA) working in an ERM area and do not see why 4 exams outside of the traditional preliminary SOA or CAS exams is necessary. At most two exams would do the trick on top of basic actuarial knowledge tested on exams 1-4.

Samir
07-07-2005, 05:40 PM
This occurred to me too:

But I was thinking it was called QRP?
Anyway, is this the rebirth of the QR-something designation? Or totally unrelated?

I thought it was Qualified Risk Analyst.

A person who is Qualified to Analyze and Manage the Risk of an Enterprise....QRA/ERM... all the letters are there.

What's the diffy?

Gal Friday
07-07-2005, 06:09 PM
I thought it was Qualified Risk Analyst.

A person who is Qualified to Analyze and Manage the Risk of an Enterprise....QRA/ERM... all the letters are there.

What's the diffy?

I thought it was "P" for "Professional". Same definition. Either way, doesn't matter to the current discussion, which is why I tagged it as an "aside".

oxyfan
07-07-2005, 06:44 PM
I highly doubt the SOA will be successful introducing this new certification to the broader financial community. The main reason to my point is there are enough Quantitative Analyst working for major banks, funds, and insurance companies with PH.Ds who will fill the risk management positions. Also, professionals with financial engineering, CFA, and top MBA backgrounds have difficulty securing positions as risk managers. The only for ERMs to work as actual risk managers is to sleep with CEO of the bank.

joeorez
07-08-2005, 11:32 AM
The term "risk management" has many meanings.

A risk manager may be a firm's buyer of insurance and manager of insurable risks; if you phoned a Fortune 500 company and asked to speak to the risk manager, that is who you would get. Those risk managers have had a designation (Associate in Risk Management) and a trade organization (RIMS) for many years.

This is probably not the population that the Society is targeting.

Other organizations may also have a risk manager - banks for example - that may be closer but not identical to the audience we are targeting.

I hope we will choose a well-defined name that helps make it clear that thousands of existing risk management people are doing something different than what the Society intends as risk management.

Mike McLaughlin
07-11-2005, 09:28 AM
The credential as proposed would be at a level of difficulty somewhat less than ASA. Nothing is final yet, of course, but the thinking is it would contain all or parts of P, FM and Part 8 (F&ERM); probably content on actuarial modeling. And also a professionalism course. It would be made up entirely of material that is also available to an ASA or FSA, so it would progress to those more advanced credentials, but it would be focused on ERM and it would not contain much if any insurance specific content.

So this definitely does not add travel time. In fact, candidates would have the option to stop taking exams after this credential, and be considered actuarial risk managers (the name is not final yet, of course!).

That level of credential is needed--look for example at GARP and PRMIA credentials. Seems that there are plenty of employers looking for that level of training, rather than FSA.

DW Simpson
09-07-2005, 09:00 AM
That level of credential is needed--look for example at GARP and PRMIA credentials. Seems that there are plenty of employers looking for that level of training, rather than FSA.

The more investigation I do, the more I think the SOA is on the right track with this. Where does it stand?

WQN
09-07-2005, 09:35 AM
Isn't there already a course 8 that specializes in ERM?

WWSituation
09-08-2005, 09:47 AM
Sounds like it would be an "EA" type designation. Not sure what the problem is.

Mike McLaughlin
09-09-2005, 05:21 PM
The ERM credential task force, led by Kathy Wong, has been quite active, with regular meetings. Here are the main developments.

There continues to be discussion around the exact content of the credential. The topics that need to be included are probability, financial mathematics, construction of actuarial models, ERM-specific content of course, and a professionalism course. Additionally there may be topics such as corporate finance and applied statistics which we may want to validate by educational experience. This volume of content corresponds to somewhat more than 4 exams. It's starting to look like the credential is more comparable to an ASA than the original idea, which would be a 2 or 3 exam level of difficulty. This is the area of discussion. Some of us on the task force, including me, prefer to see a faster travel time, given the needs of the market and the fact that those needs are being filled quickly by other "lesser" credentials such as PRM and FRM. Others on the task force lean toward the more robust version of the credential, and in fact can identify additional desirable content. The prior task force recommended shorter travel time (2 to 3 years) rather than longer.

A complicating factor is that the current exams, P, FM, and C are not a perfect match for the content needed for the ERM credential. But we don't want to create new exams, because (a) it's more difficult to administer and (b) we would lose the advantage of keeping this credential on the track toward ASA/FSA. So in order to have the content we need, there is likely to be some material that is extraneous.

One way to resolve exactly where these lines should be drawn would be to hear more from our members and from employers. This forum is one way for members to express opinions, and an Email is being prepared to solicit feedback. Cheryl Krueger and I have mailed a questionnaire to potential employers and we are hoping to get good information on what they see the needs are and how the SOA's proposed new credential will meet those needs.

Other topics being discussed by the task force are (i) a certificate suitable for existing FSAs and (ii) how to partner with other organizations. Specifically with respect to the CIA and CAS, both are very interested in ERM and very supportive of the efforts of the SOA on this. The Institute and Faculty in the UK are also monitoring our discussions closely--Chris Daykin participates in most of the phone calls.

The task force will have a face to face meeting later this month in anticipation of issuing a report to the full Board of Governors at the November 2005 meeting. The report will make a recommendation, have a financial analysis and present an implementation plan for action by the Board.

The next few weeks will be critical to this key decision for the global actuarial profession. If you've ever heard the phrase "defining moment," this would be it. Let's hear your views.

DW Simpson
09-09-2005, 08:38 PM
Thank you, Mike.