ERM: A Life-Changing Experience For Companies and Practitioners

Gilbert Lacoste has been working in enterprise risk management (ERM) for more than 10 years, but still discovers fresh and enjoyable challenges and opportunities every day.

He first encountered risk management while at Sun Life, where he dealt with asset liability management (ALM), moved to the corporate office, and then to a business unit where he was responsible for all actuarial aspects including pricing, valuation, and risk management. In 2008 he was appointed as the vice-president, risk and capital management, where he acted as the chief risk officer for Sun Life’s Canadian operation. A year ago he became vice-president of Nexus Risk Management, and he is now responsible for developing and supporting the company’s global ERM practice.

He said: "I worked in the more traditional actuarial areas, but I wanted to have a change and take on different challenges. ALM was evolving, and I was getting excited about that area and risk management in general, which was giving me the opportunity to work with more derivative products. This was an innovative field and I believed in the value that it can bring to an organization.

"At Nexus, I’m very focused on ERM, and I see first-hand the tremendous value ERM adds for companies. Rating agencies and regulators worldwide are placing greater importance on the role of ERM within organizations, which is creating interesting challenges and opportunities for companies right now. Actuaries can be key players in the way that companies and financial institutions develop by helping them make better business strategies and decisions for their own financial health and the benefit of all of their stakeholders."

Nexus has five divisions, all focused on risk management. Mr. Lacoste said: "Worldwide, Nexus works with companies to implement and execute ALM, ERM, and dynamic hedging at the leading edge of industry best practice. We license software to insurance companies in the U.S., Canada, and Asia that enables them to execute sophisticated ALM and dynamic hedging strategies and perform risk optimization. In Canada, we work with one of the leading asset management firms to outsource asset management and ALM for insurance companies, reinsurance companies and pension plans. Through our Chicago office, we provide hedge execution including outsourcing of dynamic hedging for variable annuities and segregated fund products. Nexus is also well known for its risk management training programs, which have been delivered around the world over the past decade. In addition to our public courses, Nexus has trained regulators, rating agencies, central banks, and many large multi-nationals on risk management techniques and practices.

"My role involves a lot of thought leadership, advising clients and business. I’m also part of the faculty for our risk management courses. The best part of the job is the fact that ERM is always evolving, and it seems that I learn something new every day. I really enjoy the interaction with people and getting to see first-hand the practices of not just one company but of all the companies we work with and talk to."

Mr. Lacoste, who has been a Fellow of the CIA and Society of Actuaries since 1995, would not hesitate to recommend ERM to Institute members working in more traditional areas. He said: "It’s a developing field and it is perfect for actuaries; our whole training has been about identifying and managing risks throughout all functions of a business such as strategy, operations, mergers and acquisitions, and product development. We look at both the quantitative and qualitative sides.

"This is what we do: we identify risk and opportunity, assess it, and respond to it so value for our shareholders and other stakeholders is increased by capturing opportunities and limiting inefficient risk-taking. Our education and fields of practice make us a natural fit."

Opportunities for actuaries in ERM will only continue to increase, he added. "The Office of the Superintendent of Financial Institutions has issued new guidelines on corporate governance, and really put strong focus on risk governance, risk appetite, and the role of the board, among other things. Independent parties are now encouraged to review and assess the framework and performance of an organization’s ERM. Risk is also now much more intertwined; events that happen in, say, Australia may have an incredibly fast and profound effect on us. By looking at issues like that from both internal and external perspectives, actuaries will bring tremendous value to their company."