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Risk and value management

Making the most of risk

Today’s businesses want to be able to measure and manage risk effectively across their organisation. Companies that can extract maximum value from the risks they undertake – and utilise the full risk capacity of their business to create value – hold the key to gaining competitive edge.

However, effective enterprise risk management (ERM) depends on having an integrated infrastructure that leverages the measurements of risk and value carried out. Insurers are continuing to evolve their risk management practices and processes so that they achieve this.

Watson Wyatt is at the forefront of risk and value modelling and management. We combine the most recent advances in theory and technology with extensive practical experience to deliver integrated risk and value frameworks that support our clients in their corporate decision-making.

Our services are always tailored to the particular needs of the individual client. We provide help in such areas as:

• deriving bottom-up and top-down risk appetite statements that help provide a framework in which organisations can operate and which cascade the risk appetite into more granular risk limits
• developing and implementing market consistent embedded value (MCEV) models, including giving advice on methodology, model building, producing and validating stochastic scenario files, reasonableness testing and detailed result checking
• implementing internal risk based capital models and alternative or additional measures of risk (such as earnings at risk and appraisal value at risk)
• training Boards, senior management and implementation teams on new metrics and adapting board level risk reports
• upgrading actuarial software and IT infrastructures
• developing techniques to accelerate and consolidate the reporting of risk and value metrics (for example, replicating portfolio tools)
• developing economic capital frameworks and models, including giving advice on methodology (for example, on complicated areas such as operational risk, aggregation and non-linearity) as well as calibration and validating results
• using output from the risk and value quantification processes and embedding them within the decision-making processes of the organisation (for example, decisions relating to new business pricing and risk transfer through hedging and/or reinsurance programmes).

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To find out how Watson Wyatt can help your organisation make the most of risk, please contact your usual Watson Wyatt consultant, or alternatively:

Martin Muir at martin.muir@watsonwyatt.com
Mark Chaplin at mark.chaplin@watsonwyatt.com

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Business issues MCEV  Economic Capital  Solvency II  ICAS  Asset-liability modelling  Hedging  Replicating portfolios  Variance reduction  Financial modelling

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