Enterprise risk management (ERM) is still evolving and poses a strategic challenge to insurers, according to Milliman Australia Principal Josh Corrigan.

“[ERM] is extremely dynamic and there is still a lot of work to do,” he told the Actuaries Institute summit in Sydney last week.

“There is an increasingly huge challenge – how to take individual risks and how to rate [them] in an ERM strategy.”

Risk management has existed since the 1970s, but it changes as it captures more information on organisations.

“During the 1990s it captured balance sheet interactions, combined with the acceleration of financial risk techniques,” he said. “In the past 10 years the concept of risk appetite has developed and there is a focus on management and governance.”

ERM is now moving towards embedding and understanding how risk fits into an organisation’s culture, Mr Corrigan says.

It is also concerned with risk dynamics and the way various components relate to one another.

“Risk governance is largely focusing on the regulatory framework in which insurers work.

“But organisations need to think about the social structure around ERM and how to deliver risk insight and value to executives and boards.”

Actuaries will play a significant role developing ERM strategies and must engage with people outside the profession as part of that process, Mr Corrigan says.

“We still have a way to go to develop ERM in insurers, and operational risk still needs a lot of work.”