SP9 Study Guide 2024

SP9: Study Guide Page 1
Subject SP9
2024 Study Guide
Introduction
This Study Guide has been created to help you navigate your way through Subject SP9. It contains
all the information you will need before starting to study Subject SP9 for the 2024 exams and you
may also find it useful to refer to throughout your studies.
The guide is split into two parts:

· Part 1 contains specific information about Subject SP9
· Part 2 contains general information about the Specialist Principles (SP) subjects.
Please read this Study Guide carefully before reading the Course Notes, even if you have studied
for some actuarial exams before. While you may have already read (the majority of) the Part 2
material in previous subjects, the information in Part 1 is specific to this course.
Contents
Part 1 Section 1 Subject SP9 – background and contents Page 2
Section 2 Subject SP9 – Syllabus and Core Reading Page 4
Section 3 Subject SP9 – summary of ActEd products Page 12
Section 4 Subject SP9 – skills and assessment Page 13
Section 5 Subject SP9 – frequently asked questions Page 14
Part 2 Section 1 General information and support Page 16
Section 2 Core study material Page 18
Section 3 ActEd study support Page 20
Section 4 Study skills and assessment Page 27
Section 5 Queries and feedback Page 33
The Actuarial Education Company © IFE: 2024 Examinations

Page 2 SP9: Study Guide
1.1 Subject SP9 – background and contents
History
The Specialist Principles subjects were introduced in the Institute and Faculty of Actuaries’ 2019
Curriculum. Subject SP9 is Enterprise Risk Management.
Predecessors
The Specialist Principles subjects cover content that was previously in the equivalent Specialist
Technical subjects. So, Subject SP9 replaces Subject ST9.
Exemptions
· In order to be eligible for a pass in Subject SP9, you will need to have met the Institute
and Faculty of Actuaries’ requirements based on the current curriculum.
See the Institute and Faculty of Actuaries’ website for further details:
actuaries.org.uk/qualify/exam-exemptions
Links to other subjects

Associate Qualification
Enterprise Risk Management (ERM) draws from across Associate Qualification subjects, in
particular:
· foundational statistical modelling techniques developed in Risk Modelling and Survival
Analysis (Subject CS2)
· the principles of actuarial modelling as used in the quantitative measures of risk in
Economic Modelling (Subject CM2).
Understanding the nature of risks and how to manage these risks is vital for business entities and
other organisations. Actuarial Practice (Subject CP1) provides a fundamental background to
different types of risk from an actuarial perspective and how these risks can be managed.
Chartered Enterprise Risk Actuary (CERA)
Chartered Enterprise Risk Actuary (CERA) is a global credential for risk management professionals.
It is awarded by the IFoA on behalf of the CERA Global Association (CGA).
Contents
There are six parts to the Subject SP9 course. The parts cover related topics and are broken down
into modules. At the end of each part there is an assignment testing the material from that part.
The following table shows how the parts and modules relate to each other. The final column
shows how the modules relate to the days of the regular tutorials. This table should help you plan
your progress across the study session.
© IFE: 2024 Examinations The Actuarial Education Company

No of X Tutorial –
Part Module Title
pages Assignment 3 days
1 What is ERM? 17
2 Why (E)RM? 15
3 Risk taxonomy 37
1 4 How to do ERM – internal risk frameworks 30 X1
5 Risk frameworks (mandatory) 29
6 Risk frameworks (advisory) 15
7 Risk frameworks (proprietary) 28
1
8 ERM processes and structures 19
9 Risk policy 27
10 Monitoring and communication of risk 21
2 11 Stakeholders 25 X2
12 Governance functions and the role of the CRO 32
13 Business analysis, risk id and initial assessment 40
14 Introduction to risk measurement 38
15 Introduction to risk modelling 39
16 Statistical distributions 49
3 17 Time series analysis 36 X3
18 Copulas 50
19 Fitting models 37
20 Extreme value theory 31 2
21 Use of models in ERM 22
22 Assessment of market risks 28
4 X4
23 Assessment of credit risks 35
24 Assessment of operational risks 26
25 Assessment of other risks 29
26 Risk optimisation and risk responses 37
27 Management of market risk 42
5 X5
28 Management of credit risk 33
29 Management of operational and other risks 33
30 Capital management 63 3
31 ERM implementation 23
X6
6 32 Case studies 50
33 Principal terms 22
34 References and Further reading 6 N/A

1.2 Subject SP9 – Syllabus and Core Reading
Syllabus
The Syllabus for Subject SP9 is given here. To the right of each objective are the module numbers
in which the objective is covered in the ActEd course.
Aim
The aim of Subject SP9 is to gain a detailed understanding of the main principles of Enterprise Risk
Management (ERM) within an organisation, including governance and process, as well as
quantitative methods of risk measurement and modelling. This subject is a requirement to attain
the Chartered Enterprise Risk Actuary (CERA), credential.
Topics and topic weightings
This subject covers the following topics:

1. ERM concept and framework (15%)
2. ERM process (10%)
3. Risk categories and identification (10%)
4. Risk modelling and aggregation of risks (15%)
5. Risk measurement and assessment (15%)
6. Risk management tools and techniques (20%)
7. Capital management (15%)
The topic weighting percentage noted alongside the topics is indicative of the volume of content
of a topic within the subject and therefore broadly aligned to the volume of marks allocated to
this topic in the examination. For example, if a topic is 20% of the subject then you can expect
that approximately 20% of the total marks available in the examination paper will be available on
that topic.
Students should ensure that they are well prepared across the entire syllabus and have an
understanding of the principal terms used within the course.
Students will be expected to be able to apply knowledge and skills from across the syllabus topics
to scenarios and questions proposed by the examiners and produce coherent solutions and
actions, including:
· analysing complex problems in terms of actuarial, economic and financial factors to a level
where appropriate analytical techniques may be used
· assessing the implications and relevance of such factors, integrating the results into a
coherent whole
· evaluating the results critically in a wider context, drawing appropriate conclusions
· proposing solutions and actions, or a range of possible solutions and actions, based on
this evaluation.

Objectives
1. Enterprise Risk Management (ERM) concept and framework (15%)
An introduction of the key principles and concepts of ERM, how it is applied in an

organisation, and how external and regulatory risk frameworks can influence an
organisation’s approach to ERM.
1.1 Explain the principal terms in Enterprise Risk Management (ERM).

(Modules 1 to 5)
1.2 Describe the concept of ERM. (Modules 1 and 2)
1.2.1 Define what is meant by ERM.
1.2.2 Describe the role of the following concepts in ERM:

• the holistic approach
• downside and upside risks
• measurement of risk
• unquantifiable risks
• responses to risk, and risk management.
1.2.3 Describe the benefits of ERM.
1.3 Discuss the framework for risk management and control within a company.
(Modules 4, 10, 12, 13 and 31)
1.3.1 Recommend an appropriate framework for an organisation’s ERM.
1.3.2 Propose best practice ERM approaches in compliance and corporate governance.
1.3.3 Discuss governance issues including market conduct, audit, and legal risk.
1.3.4 Evaluate an organisation’s risk management culture, including risk awareness,

accountabilities, collaboration, incentive compensation, communication and the
problem of bias.

1.4 Demonstrate an understanding of risk frameworks in regulatory environments.

(Modules 5 and 6)
1.4.1 Explain the role of regulators in ERM and effective management of the supervisor
relationship.
1.4.2 Describe the Basel Accord and Solvency II frameworks, including their underlying
principles and approaches to risk measurement.
1.4.3 Outline the requirements of Sarbanes-Oxley and other regulatory risk frameworks
and their underlying principles.
1.4.4 Demonstrate an awareness of how different parts of an organisation and different

parts of a portfolio may be subject to different capital adequacy standards.
1.5 Demonstrate an understanding of the perspectives of credit rating agencies.

(Module 7)
1.5.1 Describe the role of credit rating agencies in the evaluation of risk management
functions, including the risk management grading criteria used.
1.5.2 Assess the relevance of these criteria.
2. ERM process (10%)
Implementation of an ERM framework across an organisation with consideration of key

stakeholders, and both operational and strategic issues, and reviews past real-life
examples.
2.1 Demonstrate an understanding of the relevance of ERM to all stakeholders.

(Modules 3 and 11)
2.1.1 Compare the relevance of risk measurement and management to various

stakeholders.
2.1.2 Explain contagion and how it affects different stakeholders.
2.1.3 Explain the risks arising from any misalignment of interests between different
groups of stakeholders.
2.2 Demonstrate how to determine and articulate risk appetite, risk capacity, risk
tolerances, desired risk profile and risk objectives. (Modules 9 and 10)
2.3 Evaluate the elements and structure of a successful risk management function.
(Modules, 8, 11 and 12)
2.3.1 Describe the ERM roles and responsibilities of the people within an organisation
and how the different groups should interact.
2.3.2 Recommend a structure for an organisation’s risk management function.

2.4 Assess the implications of financial and other risks and opportunities for strategic
planning and the selection of strategy. (Module 8)
2.5 Demonstrate the application of the risk management control cycle, including the
relevance of external influences and emerging risks, such as climate risk and
cyber risk. (Modules 8, 10, 13 and 26)
2.6 Describe methods for the identification of risks and their causes and implications.
(Module 13)
2.7 Discuss important past examples of both good risk management practices and of
risk failures, for financial and non-financial entities, including proposing solutions
for how better risk management might have prevented these failures. (Module 32)
2.8 Propose an ERM process that creates value for an organisation. (Module 32)
3. Risk categories and identification (10%)
How risks can be defined and classified, including any difficulties that may arise.
3.1 Explain what is meant by risk and uncertainty, including different definitions and
concepts of risk. (Module 3)
3.2 Demonstrate an understanding of risk categories. (Module 3)
3.2.1 Identify the risks faced by an entity, including market risk, economic risk, interest
rate risk, foreign exchange risk, basis risk, credit risk, counterparty risk, liquidity
risk, insurance risk, operational risk, environmental risk, legal risk, regulatory risk,
political risk, agency risk, reputational risk, project risk, strategic risk, demographic
risk, moral hazard.
3.2.2 Analyse the financial and non-financial risk exposure arising from an
organisation’s current and emerging risks, including climate risk and cyber risk,
within a given context.
3.2.3 Discuss risk taxonomy, including an awareness of how individual risks might be
categorised in different ways.
3.3 Describe the relationship between systematic risk, non-systematic or specific risk,
and concentration of risk. (Module 3)
4. Risk modelling and aggregation of risks (15%)
How risks can be modelled in practice, and how suitable models can be used as part of the
overall ERM process, including the risks that are introduced by their use.
4.1 Assess the extent to which each of the risks in 3.2.1 can be amenable to
quantitative analysis. (Module 15)
4.2 Demonstrate an understanding of the use of correlation measures. (Module 15)

4.2.1 Demonstrate enterprise-wide risk aggregation techniques incorporating the use

of correlation.
4.2.2 Comment on the relative merits and implications of different correlation

measures.
4.3 Discuss the use of scenario analysis and stress testing in the risk measurement
process, including the advantages and disadvantages of each.
4.4 Demonstrate understanding of the use of copulas as part of the process of

modelling multivariate risks. (Module 18)
4.4.1 Evaluate different types of copula for a given purpose.
4.4.2 Recommend an appropriate copula for a given situation.
4.5 Explain the importance of the tails of distributions, tail correlations and low
frequency / high severity events. (Module 20)
4.6 Demonstrate how extreme value theory can be used to help model risks that have
a low probability. (Module 20)
4.7 Demonstrate an understanding of model and parameter risk. (Module 21)
4.8 Discuss the use of models in the overall ERM decision-making process.
(Module 21)
4.8.1 Describe the development and use of models for decision-making purposes
in ERM.
4.8.2 Explain how the decision-making process takes account of the organisation’s risk
appetite and corporate governance, and builds on the results of stochastic
modelling, scenario analysis, stress testing and analysis of model and
parameter risk.
4.8.3 Evaluate different types of model for a given purpose.
5. Risk measurement and assessment (15%)
The different types of assessing risk, building on concepts from earlier topics, and
considering the different risk types.
5.1 Understand common risk measures. (Module 14)
5.1.1 Describe the properties and limitations of the following risk measures:
• Value at Risk (VaR)
• Tail Value at Risk (TVaR)
• Probability of ruin
• Expected shortfall.

5.1.2 Determine risk exposures and tolerances using these measures.
5.2 Describe how to choose a suitable time horizon and risk discount rate.
(Module 14)
5.3 Analyse univariate and multivariate financial and insurance data (including asset
prices, credit spreads and defaults, interest rates and insurance losses) using
appropriate statistical methods. (Modules 16 and 17)
5.4 Recommend a specific choice of model based on the results of both quantitative
and qualitative analysis of financial or insurance data. (Modules 16, 17 and 19)
5.5 Assess different types of market risk. (Module 22)
5.6 Assess credit risk. (Module 23)
5.6.1 Describe what is meant by a credit spread and its components.
5.6.2 Discuss different approaches to modelling credit risk.
5.7 Assess operational, liquidity and insurance risks. (Modules 24 and 25)
6. Risk management tools and techniques (20%)
Understand how assessed risks can be managed and optimised and considers risk
management approaches specific to different types of risk.
6.1 Demonstrate risk optimisation and responses to risk. (Module 26)
6.1.1 Explain how to optimise an objective, possibly subject to constraints.
6.1.2 Demonstrate risk optimisation and responses to risk using illustrative examples.
6.1.3 Analyse the risk and return trade-offs that result from changes in the
organisation’s risk profile.
6.2 Recommend approaches, which balance benefits against inherent costs, that can
be used to manage an organisation’s overall risk profile. (Module 26)
6.2.1 Describe how to reduce risk by transferring it.
6.2.2 Describe how to reduce risk without transferring it.
6.2.3 Analyse the residual risks and new risks arising following risk mitigation actions.
6.2.4 Explain how an organisation’s ability to manage risk is affected by regulatory,

capacity and cost constraints.
6.2.5 Explain how an organisation will choose to accept certain risks, and the controls it
might adopt for these retained and residual risks.
6.3 Demonstrate strategies for the management of market risk. (Module 27)
6.3.1 Recommend strategies for the reduction of market risk using financial derivatives.

6.3.2 Demonstrate an awareness of the practical issues related to market risk hedging,
including dynamic hedging.
6.4 Demonstrate the use of tools and techniques for identifying and managing credit
and counterparty risk. (Module 28)
6.5 Demonstrate possible strategies for the management of operational, liquidity,

insurance and other key risks. (Module 29)
7. Capital management (15%)
Understand how risk models can be used to allocate capital across an organisation.
7.1 Demonstrate an understanding of and perform capital calculations. (Module 30)
7.1.1 Describe the concept of economic measures of value and capital, and their uses in
corporate decision-making processes.
7.1.2 Evaluate different risk measures and capital assessment approaches.
7.1.3 Demonstrate the ability to develop a capital model for a representative

financial firm.
7.2 Propose techniques for allocating capital across an organisation. (Module 30)
Core Reading
The Subject SP9 Course Notes include the Core Reading in full, integrated throughout the course.
Accreditation
The Core Reading makes extensive reference to the following:

· Enterprise Risk Management From Incentives to Controls – Second edition – James Lam.
Wiley, 2014. ISBN-10: 111841361X, ISBN-13: 978-1118413616
· Financial Enterprise Risk Management – Second edition – Paul Sweeting.
Cambridge University Press, 2017. ISBN-10: 1107184614, ISBN-13: 978-1107184619
· Note on Enterprise Risk Management for Capital and Solvency Purposes in the Insurance
Industry – International Actuarial Association
Published 31 March 2009
· Insurance Criteria: Evaluating the Enterprise Risk Management Practices of Insurance
Companies – Standard & Poor’s.
The latter two papers are reproduced in full in the CMP and can also be found on the Institute and
Faculty of Actuaries website.
The referenced material is cited, where relevant, throughout the Course Notes, and forms part of
the Core Reading.

Further reading
The exam will be based on the relevant Syllabus and Core Reading and the ActEd course material
will be the main source of tuition for candidates.
A list of additional resources to support candidate learning and development for this subject can
be found on the IFoA website:
actuaries.org.uk/curriculum/
If a candidate is using the online version of the core reading, the resources are also available in
the same area as the core reading on the IFoA Virtual Learning Environment (VLE):
vle.actuaries.org.uk
The resources listed on the IFoA website and VLE are hyperlinked to their source publication or
the IFoA Library. Where a resource is available through the IFoA Library, members, students and
affiliates can ‘request’ from the IFoA Library Service, subject to availability.
Occasional references to other reading and websites that you may find interesting or useful are
also given in the Course Notes.

1.3 Subject SP9 – summary of ActEd products

The following products are available for Subject SP9:
· Course Notes
· X Assignments – six assignments:
– X1-X3: 80-mark tests (you are allowed 2¾ hours to complete these)
– X4-X6: 100-mark tests (you are allowed 3¼ hours to complete these)
· Series X Marking
· Flashcards
· Revision Notes – seven A5 booklets
· ASET (2020-23 papers) – four years of exam papers, ie eight sittings, covering the period
April 2020 to September 2023
· Mini ASET – covering the April 2024 exam paper
· Mock Exam – one 100-mark test
· Additional Mock Pack (AMP) – two additional 100-mark tests
· Mock Exam Marking
· Marking Vouchers.
Products are generally available in both paper and eBook format. Visit ActEd.co.uk for full details
about available eBooks, software requirements and restrictions. ActEd is unable to provide eBook
versions of the textbooks, however these may be available from other bookstores.
The following tutorials are typically available for Subject SP9:

· Regular Tutorials (three full days / six half days)
· Block Tutorials (three days).
Tutorials are typically available both face-to-face and live online.
Full details are set out in our Tuition Bulletin, which is available on our website at ActEd.co.uk.

1.4 Subject SP9 – skills and assessment
Exam skills
In Subject SP9, the approximate split of assessment across the three skill types is:
· Knowledge – 15%
· Application – 55%
· Higher Order skills – 30%.
These skill types are described in Section 2.4.
Assessment
Assessment is in the form of a 3 hour 20 minute timed, online examination. This includes reading
time, as well as the time taken for students to download and/or print the question paper.
Answers must be constructed and typed in Microsoft Word.

1.5 Subject SP9 – frequently asked questions

Q: What is covered by the SP9 syllabus?
A: The full Syllabus for Subject SP9 is included earlier in this guide.
Q: How technical is the SP9 course?
A: Although largely a discursive course, SP9 does contain some highly technical material
relating to quantitative risk measurement. SP9 builds on some material introduced in
earlier subjects (CS1, CS2, CM2 and CP1). Whilst it is unlikely that you will be asked to
prove / derive results, it is likely that you will be asked to perform calculations and
interpret / comment on results.
There are a number of other less technical areas that offer some scope for numerical
questions, eg analysis of a set of accounts.
Q: Where do I start studying for SP9?
A: The introduction to each module lists the relevant reading for that module and this
approach will take you through the course step-by-step.
If you prefer to get a rapid introduction to ERM and see the big picture from the start, we
suggest you read Lam first in its entirety without worrying about learning it or taking extensive
notes. You can then review the relevant sections of Lam as you meet them in the course.
Q: Do I need to study all of the recommended texts and additional readings?
A: The Core Reading References section states: ‘For many syllabus objectives more than one
of the above source texts is recommended. As part of the analysis of the subject,
candidates are expected to be able to compare and contrast the views of different
authors.
Additional reading recommended within the source texts (eg ‘Further reading’ references
in Sweeting) does not form part of the required reading for SP9 and is not examinable
(unless it is explicitly listed elsewhere within this Core Reading, eg Lam).
The questions at the end of each Chapter of Sweeting are also not part of the required
reading and are not intended to represent possible SP9 examination questions.’
Q: Do I need to study the end of chapter questions in Sweeting?
A: Only if you want to. As mentioned above, the Core Reading References section states
that ‘questions at the end of each Chapter of Sweeting are also not part of the required
reading and are not intended to represent possible SP9 examination questions.’

Q: What should I do if I discover an error in the course?
A: If you find an error in the course, please check our website at:
ActEd.co.uk/paper_corrections.html
to see if the correction has already been dealt with. Otherwise please send details via
email to SP9@bpp.com.
Q: Who should I send feedback to?
A: We are always happy to receive feedback from candidates, particularly details concerning
any errors, contradictions or unclear statements in the courses.
If you have any comments on this course in general, please email them to SP9@bpp.com.
If you have any comments or concerns about the Syllabus or Core Reading, these can be
passed on to the Institute and Faculty of Actuaries via ActEd. Alternatively, you can send
them directly to the Institute and Faculty of Actuaries’ Examination Team by email to
memberservices@actuaries.org.uk.

2.1 General information and support
Before you start

When studying for the Institute and Faculty of Actuaries’ exams, you will need:
· a copy of the Formulae and Tables for Examinations of the Faculty of Actuaries and the
Institute of Actuaries, 2nd Edition (2002) – these are referred to simply as the Tables
· a scientific calculator and/or software package to help with calculations.
The Tables are available from the Institute and Faculty of Actuaries’ eShop. Please visit
actuaries.org.uk.
Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries has produced a Qualification Handbook containing
important information and guidance on:
· requirements for qualifying as an Associate or Fellow
· preparing for the exams, including how to book them
· the regulations, policies and procedures to be aware of while studying
· the range of support and resources available to students when they join the Institute and
Faculty of Actuaries.
The Institute and Faculty of Actuaries advises students to ensure they read through the
Qualification Handbook.
The Qualification Handbook can be found at:
actuaries.org.uk/qualify/student-and-associate-exam-news/qualification-handbook
BPP learning support

BPP’s Learning Support team offers a wide range of support for all students who disclose a
learning difficulty or disability, including sensory difficulties, mobility difficulty, ADHD, Asperger
Syndrome, mental health difficulties, dyslexia, dyspraxia and general health problems. This
support is accessible to all ActEd students free of charge.
This support includes:

· accessible and inclusive learning facilities
· a dedicated team that provides information, advice, guidance and support.
Please contact the Learning Support team at LearningSupport@bpp.com for more information.
Safeguarding
Safeguarding means protecting people’s health, wellbeing and human rights, and enabling them
to live free from harm, abuse and neglect.

For ActEd, safeguarding is recognising when someone needs support to help them achieve their
learning goals while maintaining their safety, both face-to-face and online.
We want you to feel comfortable within our learning environment and safe in the knowledge that
if you ever needed support, you would know where to go.
If you need support, please contact BPP’s Safeguarding team at safeguarding@bpp.com or for
urgent concerns call 07464 542 636.

2.2 Core study material

This section explains the role of the Syllabus, Core Reading and supplementary ActEd text. It also
gives guidance on how to use these materials most effectively in order to pass the exam.
Some of the information below is also contained in the introduction to the Core Reading
produced by the Institute and Faculty of Actuaries.
Syllabus
The Syllabus for Subject SP9 has been produced by the Institute and Faculty of Actuaries. The
relevant individual syllabus objectives are included at the start of each course module and a
complete copy of the Syllabus is included in Section 1.2 of this Study Guide. We recommend that
you use the Syllabus as an important part of your study.
Core Reading
The Core Reading has been produced by the Institute and Faculty of Actuaries. The purpose of
the Core Reading is to ensure that tutors, candidates and examiners understand the requirements
of the Syllabus for the qualification examinations for Fellowship of the Institute and Faculty of
Actuaries.
The Core Reading supports coverage of the Syllabus in helping to ensure that both depth and
breadth are re-enforced. It is therefore important that candidates have a good understanding of
the concepts covered by the Core Reading.
The examinations require candidates to demonstrate their understanding of the concepts given in
the Syllabus and described in the Core Reading; this will be based on the legislation, professional
guidance, etc that are in force when the Core Reading is published, ie on 31 May in the year
preceding the examinations.
Therefore, the exams in April and September 2024 will be based on the Syllabus and Core Reading
as at 31 May 2023. We recommend that you always use the up-to-date Core Reading to prepare
for the exams.
Examiners will have this Core Reading when setting the examinations. In preparing for
examinations, candidates are advised to work through past examination questions and may find
additional tuition helpful. The Core Reading will be updated each year to reflect changes in the
Syllabus and current practice, and in the interest of clarity.
Accreditation
The Institute and Faculty of Actuaries would like to thank the numerous people who have helped
in the development of the material contained in this Core Reading.

ActEd text
Core Reading deals with each syllabus objective and covers what is needed to pass the exam.
However, the tuition material that has been written by ActEd enhances it by giving examples and
further explanation of key points. Here is an excerpt from some ActEd Course Notes to show you
how to identify Core Reading and the ActEd material. Core Reading is shown in this bold font.
In the example given above, the index will fall if the actual share price goes below the theoretical
ex-rights share price. Again, this is consistent with what would happen to an underlying portfolio.
After allowing for chain-linking, the formula for the investment index then becomes:This is
ActEd
å Ni,t Pi ,t text
I (t ) = i
B(t ) This is Core
Reading
where Ni ,t is the number of shares issued for the ith constituent at time t;
B (t ) is the base value, or divisor, at time t.
Copyright
All study material produced by ActEd is copyright and is sold for the exclusive use of the
purchaser. The copyright is owned by Institute and Faculty Education Limited, a subsidiary of the
Institute and Faculty of Actuaries. Unless prior authority is granted by ActEd, you may not hire
out, lend, give out, sell, store or transmit electronically or photocopy any part of the study
material. You must take care of your study material to ensure that it is not used or copied by
anybody else.
Legal action will be taken if these terms are infringed. In addition, we may seek to take
disciplinary action through the Institute and Faculty of Actuaries or through your employer.
These conditions remain in force after you have finished using the course.

2.3 ActEd study support

This section gives a description of the products offered by ActEd.
Successful candidates tend to undertake three main study activities:

1. Learning – initial study and understanding of subject material
2. Revision – learning subject material and preparing to tackle exam-style questions
3. Rehearsal – answering exam-style questions, culminating in answering questions at exam
speed.
Different approaches suit different people. For example, you may like to revise material gradually
over the months running up to the exams or you may do your revision in a shorter period just
before the exams. Also, these three activities will almost certainly overlap.
We offer a flexible range of products to suit you and let you control your own learning and exam
preparation. The following table shows the products that we produce. Not all products are
available for all subjects.
LEARNING LEARNING & REVISION REVISION & REHEARSAL

REVISION REHEARSAL
Course Notes X Assignments Flashcards Revision Notes Mock Exam
Combined Sound Revision ASET Additional Mock

Materials Pack Pack (AMP)
(CMP)
Mock Marking
X Assignment
Marking
Tutorials
Online
Classroom
The products and services are described in more detail below.

‘Learning’ products
Course Notes
The Course Notes will help you develop the basic knowledge and understanding of principles
needed to pass the exam. They incorporate the complete Core Reading and include full
explanation of all the syllabus objectives, with worked examples and questions (including some
past exam questions) to test your understanding.
Each module includes:

· the relevant syllabus objectives
· a module summary
· practice questions with full solutions.
‘Learning & revision’ products

X Assignments
The Series X Assignments are assessments that cover the material in each part of the course in
turn. They can be used to develop and test your understanding of the material.
The X Assignments come with full marking schedules. We are happy to mark your scripts, but
marking must be purchased separately.
Combined Materials Pack (CMP)
The Combined Materials Pack (CMP) comprises the Course Notes, the Series X Assignments and a
Mock Exam.
CMP Upgrade
The purpose of the CMP Upgrade is to enable you to amend last year’s study material to make it
suitable for study for this year.
Wherever possible, it lists the changes to the syllabus objectives, Core Reading and the ActEd
material since last year that might realistically affect your chance of success in the exam. It is
produced so that you can manually amend your notes. The upgrade includes replacement pages
and additional pages where appropriate.
However, if a large number of changes have been made to the Course Notes and X Assignments, it
is not practical to produce a full upgrade, and the upgrade will only outline the most significant
changes. In this case, we recommend that you purchase a replacement CMP (printed copy or
eBook) or Course Notes at a significantly reduced price.
The CMP Upgrade can be downloaded free of charge from our website at ActEd.co.uk.
A separate upgrade for eBooks is not produced but a significant discount is available for retakers
wishing to re-purchase the latest eBook.

X Assignment Marking
We are happy to mark your attempts at the X assignments. Marking is not included with the
Assignments or the CMP and you need to order it separately
IMPORTANT NOTE: You must submit your script on our virtual learning environment, ‘The Hub',
in the format detailed in your assignment instructions. You will also be able to download your
marked script, including marker feedback, from The Hub, as well as being given the opportunity
to provide comments on the quality of the marking.
Don’t underestimate the benefits of attempting and submitting assignments for marking:
· Question practice during this phase of your study gives an early focus on the end goal of
answering exam-style questions.
· You’re incentivised to keep up with your study plan and get a regular, realistic assessment
of your progress.
· Objective, personalised feedback from a high quality marker will highlight areas on which
to work and help with exam technique.
In a recent study, we found that candidates who attempt all the assignments and mock exams
and get them marked have significantly higher pass rates.
There are two different types of marking product: Series Marking and Marking Vouchers.
Series Marking
Series Marking applies to a specified subject, session and candidate. If you purchase Series
Marking, you will not be able to defer the marking to a future exam sitting or transfer it to a
different subject or candidate.
We typically provide full solutions with the Series X Assignments. However, if you order Series
Marking at the same time as you order the Series X Assignments, you can choose whether or not
to receive a copy of the solutions in advance. If you choose not to receive them with the study
material, you will be able to download the solutions from the Hub when your marked script is
returned (or following the final deadline date if you do not submit a script).
If you are having your attempts at the assignments marked by ActEd, you should submit your scripts
regularly throughout the session, in accordance with the schedule of recommended dates set out
on our website at ActEd.co.uk. This will help you to pace your study throughout the session and
leave an adequate amount of time for revision and question practice.
The recommended submission dates are realistic targets for the majority of candidates. Your
scripts will be returned more quickly if you submit them well before the final deadline dates.
Any script submitted after the relevant final deadline date will not be marked. It is your
responsibility to ensure that we receive scripts in good time.

Marking Vouchers
Marking Vouchers give the holder the right to submit a script for marking at any time, irrespective of
the individual assignment deadlines, study session, subject or student.
Marking Vouchers can be used for any assignment. They are valid for four years from the date of
purchase and can be refunded at any time up to the expiry date.
Although you may submit your script with a Marking Voucher at any time, you will need to adhere
to the explicit Marking Voucher deadline dates to ensure that your script is returned before the date
of the exam. The deadline dates are provided on our website at ActEd.co.uk.
Tutorials
Our tutorials are specifically designed to develop the knowledge that you will acquire from the
course material into the higher-level understanding that is needed to pass the exam.
We run a range of different tutorials including face-to-face tutorials at various locations, and Live
Online tutorials. Full details are set out in our Tuition Bulletin, which is available on our website at
ActEd.co.uk.
Regular and Block Tutorials
In preparation for these tutorials, we expect you to have read the relevant part(s) of the Course
Notes before attending the tutorial so that the group can spend time on exam-style questions and
discussion to develop understanding rather than basic bookwork.
You can choose one of the following types of tutorial:

· Regular Tutorials spread over the session
· A Block Tutorial held two to eight weeks before the exam.
‘Revision’ products
Flashcards
Flashcards are a set of A6-sized cards that cover the key points of the subject that most
candidates want to commit to memory and/or have handy for reference during the examination.
Each flashcard has questions on one side and the answers on the reverse. We recommend that
you use the cards actively and test yourself as you go.
Sound Revision
It is reported that only 30% of information that is read is retained but this rises to 50% if the
information is also heard. Sound Revision is a set of audio files, designed to help you absorb the
most important aspects of the Core Reading.
The files cover the majority of the course, split into a number of manageable topics based on the
chapters in the Course Notes. Each section lasts no longer than a few minutes.

Choice of revision product
Different candidates will have preferences for different revision products.
So, what might influence your choice between these study aids? The following questions and
comments might help you to choose the revision products that are most suitable for you:
· Do you have a regular train or bus journey?

Flashcards are ideal for regular bursts of revision on the move.
· Do you want to fit more study into your routine?

Flashcards are a good option for ‘dead time’, eg using flashcards on your phone or sticking
them on the wall in your study.
· Do you find yourself cramming for exams (even if that’s not your original plan)?
Flashcards are an extremely efficient way to do your pre-exam preparation.
· Do you have some regular time where carrying other materials isn’t practical,
eg commuting, at the gym, walking the dog?
Sound Revision is an ideal ‘hands-free’ revision tool.
· Do you have a preference for auditory learning, eg do you remember conversations more
easily than emails?
Sound Revision will suit your preferred style and be especially effective for you.
Choosing more than one revision product
As there is some degree of overlap between revision products, we do not necessarily recommend
using them simultaneously. However, if you are retaking a subject, then you might consider using
a different product than on a previous attempt to keep your revision fresh and effective.
‘Revision & rehearsal’ products

Revision Notes
Our Revision Notes have been designed with input from candidates to help you revise efficiently.
They are suitable for first-time sitters who have worked through the ActEd Course Notes or for
retakers (who should find them much more useful and challenging than simply reading through
the course again).
The Revision Notes are a set of A5 booklets – perfect for revising in places where taking large
amounts of study material with you is not practical. Each booklet covers one main theme or a set
of related topics from the course and includes:
· Core Reading with a set of integrated short questions to develop your knowledge
· relevant past exam questions with concise solutions from the last ten years
· other useful revision aids.

ActEd Solutions with Exam Technique (ASET)
The ActEd Solutions with Exam Technique (ASET) contains our solutions to a number of past exam
papers, plus comment and explanation. In particular, it highlights how questions might have been
analysed and interpreted so as to produce a good solution with a wide range of relevant points.
This will be valuable in approaching questions in subsequent examinations.
Choice of revision & rehearsal product
Different students will have preferences for different revision & rehearsal products, and there is
some overlap in that both the Revision Notes and ASET contain past exam paper questions from
recent years. However:
· ASET is designed to be educational. It aims to allow you to fully understand the solution
points, and to assist you in improving your own answers through focussed explanations
and tips on tackling the questions.
It is likely to be most appropriate if you are attempting the questions by producing
answers in full, eg under exam conditions.
· The past exam question and solution sections of the Revision Notes are designed to give
you a greater volume of question practice. They allow you to focus on specific topic areas
one at a time.
They are likely to be most appropriate if you are using the questions to develop and practise your
idea generation techniques, enabling you to work quickly through more questions than if you
were producing full, detailed answers.
‘Rehearsal’ products
Mock Exam
The Mock Exam is a 100-mark mock exam paper that provides a realistic test of your exam
readiness.
It is based on the Mock Exam from last year but it has been updated to reflect any changes to the
Syllabus, Core Reading and examination format.
The Mock Exam comes with a full marking schedule. We are happy to mark your scripts, but
marking must be purchased separately.
Additional Mock Pack (AMP)
The Additional Mock Pack (AMP) consists of two further 100-mark mock exam papers – Mock
Exam 2 and Mock Exam 3. This is ideal if you are retaking and have already sat the Mock Exam, or
if you just want some extra question practice.
Mock Exam 2 and Mock Exam 3 come with full marking schedules. We are happy to mark your
scripts, but marking must be purchased separately.

Mock Marking
We are happy to mark your attempts at the mock exams. The same general principles apply as for
the X Assignment Marking. In particular:
· Mock Exam Marking applies to a specified subject, session and candidate
· Marking Vouchers can be used for each mock exam paper. Marking vouchers have to be
used for marking the AMP exam papers and can be used for marking the Mock Exam.
Recall that:
· marking is not included with the products themselves and you need to order it separately
· you should submit your script via the Hub in the format detailed in the mock exam
instructions
· you will be able to download the feedback on your marked script, the solutions if you
have Mock Exam Marking, and provide comments on the quality of the marking via The
Hub.

2.4 Study skills and the assessment
The Subject SP exams

It is important to recognise that the SP subject exams are very different from the Core Principles
subject exams in both the nature of the material covered and the skills being examined.
Both the Core Reading and the exam papers themselves are generally much less numerical and
more ‘wordy’ than the Core Principles subjects. The exam will primarily require you to explain a
particular point in words and sentences, rather than to manipulate formulae or perform
calculations. Numerical questions typically account for only a small part of each exam paper. If
you haven’t sat this type of exam for some time, you need to start practising again now. Many
candidates find that it takes time to adjust to the different style of the SP subject exam questions.
As ever, practice is the key to success.
The aim of the exams is to test your ability to apply your knowledge and understanding of the key
principles described in the Core Reading to specific situations presented to you in the form of
exam questions. Therefore your aim should be to identify and understand the key principles, and
then to practise applying them. You will also need to be thoroughly familiar with the Core
Reading to score well and quickly on any knowledge-based questions.
Study skills
Overall study plan
We suggest that you develop a realistic study plan, building in time for relaxation and allowing
some time for contingencies. Be aware of busy times at work, when you may not be able to take
as much study leave as you would like. Once you have set your plan, be determined to stick to it.
You don’t have to be too prescriptive at this stage about what precisely you do on each study day.
The main thing is to be clear that you will cover all the important activities in an appropriate
manner and leave plenty of time for revision and question practice.
Aim to manage your study so as to allow plenty of time for the concepts you meet in this course
to ‘bed down’ in your mind. Most successful candidates will probably aim to complete the course
at least six weeks before the exam, thereby leaving a sufficient amount of time for revision. By
finishing the course as quickly as possible, you will have a much clearer view of the big picture. It
will also allow you to structure your revision so that you can concentrate on the important and
difficult areas of the course.
You can also try looking at our discussion forum, which can be accessed at ActEd.co.uk/forums
(or use the link from our home page at ActEd.co.uk). There are some good suggestions from
candidates on how to study.
Study sessions
Only do activities that will increase your chance of passing. Try to avoid including activities for the
sake of it and don’t spend time reviewing material that you already understand. You will only
improve your chances of passing the exam by getting on top of the material that you currently
find difficult.

In particular, you may already be familiar with the content of some of the modules (from the Core
Principles (CS, CM or CB subjects), Subject CP1 or other SP subjects). Try to cover these modules
quickly to give yourself more time on the material with which you are less comfortable. Where
modules refer back to material from the Core Principles subjects, you don’t have to follow these
links up unless you are feeling curious or clueless.
Ideally, each study session should have a specific purpose and be based on a specific task,
eg ‘Finish reading Module 3 and attempt Practice Questions 3.4, 3.7 and 3.12’, as opposed to a
specific amount of time, eg ‘Three hours studying the material in Module 3’.
Try to study somewhere quiet and free from distractions (eg an area at home dedicated to study).
Find out when you operate at your peak, and endeavour to study at those times of the day. This
might be between 8am and 10am or could be in the evening. Take short breaks during your study
to remain focused – it’s definitely time for a short break if you find that your brain is tired and
that your concentration has started to drift from the information in front of you.
Order of study
We suggest that you work through each of the modules in turn. To get the maximum benefit from
each module you should proceed in the following order:
1. Read the syllabus objectives. These are set out in the box at the start of each module.
2. Read the Module Summary at the end of each module. This will give you a useful overview
of the material that you are about to study and help you to appreciate the context of the
ideas that you meet.
3. Study the Course Notes in detail, annotating them and possibly making your own notes. Try
the self-assessment questions as you come to them. As you study, pay particular attention
to the listing of the syllabus objectives and to the Core Reading.
4. Read the Module Summary again carefully. If there are any ideas that you can’t
remember covering in the Course Notes, read the relevant section of the notes again to
refresh your memory.
5. Attempt (at least some of) the Practice Questions that appear at the end of the module.
6. Think about what specifically you might want to include from that module in the reference
materials that you choose to have to hand during the exam. For example, you might want
to put together some easy-reference lists of key concepts or idea generation prompts that
can be referred to quickly and conveniently.
It’s a fact that people are more likely to absorb something if they review it several times. So, do
look over the modules you have studied so far from time to time. It is useful to re-read the
Module Summaries or to try the Practice Questions again a few days after reading the module
itself. It’s a good idea to annotate the questions with details of when you attempted each one. This
makes it easier to ensure that you try all of the questions as part of your revision without repeating
any that you got right first time.

Once you’ve read the relevant part of the notes and tried a selection of questions from the
Practice Questions (and attended a tutorial, if appropriate) you should attempt the corresponding
assignment. If you submit your assignment for marking, spend some time looking through it
carefully when it is returned. It can seem a bit depressing to analyse the errors you made, but
you will increase your chances of passing the exam by learning from your mistakes. The markers
will try their best to provide practical comments to help you to improve.
To be really prepared for the exam, you should not only be fully familiar with and understand the
Core Reading but also be aware of what the examiners will expect. Your revision programme should
include plenty of question practice so that you are aware of the typical style, content and marking
structure of exam questions. You should attempt as many past exam questions as you can.
Active study
Here are some techniques that may help you to study actively.
1. Don’t believe everything you read. Good candidates tend to question everything that
they read. They will ask ‘why, how, what for, when?’ when confronted with a new
concept, and they will apply their own judgement. This contrasts with those who
unquestioningly believe what they are told, learn it thoroughly, and reproduce it
(unquestioningly?) in response to exam questions.
2. Another useful technique as you read the Course Notes is to think of possible questions
that the examiners could ask. This will help you to understand the examiners’ point of
view and should mean that there are fewer nasty surprises in the exam. Use the Syllabus
to help you make up questions.
3. Annotate your notes with your own ideas and questions. This will make you study more
actively and will help when you come to review and revise the material. These notes may
also be useful to refer to in the exam. Do not simply copy out the notes without thinking
about the issues.
4. As you study each module, condense the key points (not whole chunks of text) on to a
double side of A4 or less. This is essential as otherwise, when you come to revision, you
will end up having to re-read the whole course again, and there won’t be time.
5. Try to use memory aids, such as mind maps and acronyms, to remind you of the material
when you come back to it later and help you to digest it further. Such aids may also be
useful to have in your reference materials.
6. Attempt the questions in the notes as you work through the course. Produce your answer
before you refer to the solution.

7. Attempt other questions and assignments on a similar basis, ie produce your answer
before looking at the solution provided. Attempting the assignments under exam
conditions has some particular benefits:
· It forces you to think and act in a way that is similar to how you will behave in the
exam.
· When you have your assignments marked it is much more useful if the marker’s
comments can show you how to improve your performance under timed
conditions than your performance when you are under no time pressure.
· The knowledge that you are going to do an assignment under timed conditions and
then submit it (however good or bad) for marking can act as a powerful incentive to
make you study each part as well as possible.
· It is also quicker than trying to produce perfect answers.
8. Sit a mock exam four to six weeks before the real exam to identify your weaknesses and
work to improve them. You could use a mock exam written by ActEd or a past exam
paper. Ensure that you have your reference materials handy, as you plan to in the actual
exam, so that you can practise finding what you need in them quickly and efficiently. (You
might even be able to add to / modify your reference materials to increase their
usefulness.)
You can find further information on how to study in the Institute and Faculty of Actuaries’
Qualification Handbook, which you can download from their website at:
actuaries.org.uk/qualify/student-and-associate-exam-news/qualification-handbook
Revision and exam skills

Revision skills
You will have sat many exams before and will have mastered the exam and revision techniques
that suit you. However it is important to note that due to the high volume of work involved in
Subject SP9, it is not possible to leave all your revision to the last minute. Candidates who
prepare well in advance have a better chance of passing the exam on the first sitting.
We recommend that you prepare for the exam by practising a large number of exam-style
questions under timed conditions. This will:
· help you to develop the necessary knowledge and understanding of the key principles
described in the Core Reading
· highlight exactly which are the key principles that crop up time and time again in many
different contexts and questions
· help you to practise the specific skills that you will need to pass the exam.
There are many sources of exam-style questions. You can use past exam papers, the Practice
Questions at the end of each module (which include many past exam questions), assignments,
mock exams, the Revision Notes and ASET.

Exam question skill levels
Exam questions are not designed to be of similar difficulty. The Institute and Faculty of Actuaries
specifies different skill levels at which questions may be set.
In each examination, students will be expected to demonstrate, through their answers, that they
have knowledge of, can apply and use higher order skills in this subject:
· Knowledge will be demonstrated through answering questions that assess understanding
of that knowledge as well as through questions that ask for the application of relevant
knowledge to scenarios.
· Application will be demonstrated through answering questions that assess the ability to
identify and apply relevant concepts and skills to solve problems (both numerical and
non-numerical).
· Higher order skills will be demonstrated through questions that will assess the ability to
use relevant knowledge, concepts and skills to solve problems, draw appropriate
conclusions, and make meaningful and appropriate comments on those conclusions.
Command verbs
The Institute and Faculty of Actuaries use command verbs (such as ‘Define’, ‘Discuss’ and
‘Explain’) to help candidates to identify what the question requires. The examination can be
composed of questions drawing from any part of the syllabus and using any command verb.
The Institute and Faculty of Actuaries also gives the following advice::
· The use of a specific command verb within a syllabus objective does not indicate that this
is the only form of question which can be asked on the topic covered by that objective.
· The examiners may ask a question on any syllabus topic using any of the agreed command
verbs, as are defined in the document.
You can find the relevant document on the Institute and Faculty of Actuaries’ website at:
actuaries.org.uk/qualify/prepare-for-your-exams
Past exam papers

You can download past exam papers and Examiners’ Reports from the Institute and Faculty of
Actuaries’ website at:
actuaries.org.uk/qualify/prepare-for-your-exams

The examination
The Institute and Faculty of Actuaries has produced an:
· Examinations Handbook, which contains practical assistance on how to sit an Institute and
Faculty of Actuaries’ examination, including guidance around notation and possible
standard keyboard notation that students could use when typing solutions in Word
· Assessment Regulations document, which includes rules on eligibility, entry and conduct
during an online assessment.
The Institute and Faculty of Actuaries advises students to ensure they read and have understood
the Assessment Regulations ahead of their exam(s).
The Examinations Handbook and Assessment Regulations document, along with additional
information about preparing for, booking and sitting the Institute and Faculty of Actuaries’ exams
can be found at:
actuaries.org.uk/qualify/my-exams/ifoa-exams
IMPORTANT NOTE: These documents may be updated and published in the weeks leading up to
each exam session. It is important that you keep up-to-date with any changes and
developments.
For the exam, ensure you have ready:

· your reference materials, with helpful bookmarks
· rough paper and a pen / pencil
· a calculator / Excel (or equivalent)
· a printer (if you wish to print out the exam paper)
· a copy of the Tables.

2.5 Queries and feedback
Questions and queries

From time to time you may come across something in the study material that is unclear to you.
The easiest way to solve such problems is often through discussion with friends, colleagues and
peers – they will probably have had similar experiences whilst studying. If there’s no-one at work
to talk to then use our discussion forum at ActEd.co.uk/forums (or use the link from our home
page at ActEd.co.uk).
Our online forum is dedicated to actuarial candidates so that you can get help from fellow
candidates on any aspect of your studies from technical issues to study advice. You could also use
it to get ideas for revision or for further reading around the subject that you are studying. ActEd
tutors will visit the site regularly to ensure that you are not being led astray and we also post
other frequently asked questions from candidates on the forum as they arise.
If you are still stuck, then you can send queries by email to the relevant subject email address (see
Section 1.5), but we recommend that you try the forum first. We will endeavour to contact you as
soon as possible after receiving your query but you should be aware that it may take some time to
reply to queries, particularly when tutors are away from the office running tutorials. At the
busiest teaching times of year, it may take us more than a week to get back to you.
If you have many queries on the course material, you should raise them at a tutorial or book a
personal tuition session with an ActEd tutor. Information about personal tuition is set out in our
current brochure. Please email ActEd@bpp.com for more details.
Feedback
If you find an error in the course, please check the corrections page of our website
(ActEd.co.uk/paper_corrections.html) to see if the correction has already been dealt with.
Otherwise please send details via email to the relevant subject email address (see Section 1.5).
Each year our tutors work hard to improve the quality of the study material and to ensure that
the courses are as clear as possible and free from errors. We are always happy to receive
feedback from candidates, particularly details concerning any errors, contradictions or unclear
statements in the courses. If you have any comments on this course, please email them to the
relevant subject email address (see Section 1.5).
Our tutors also work with the Institute and Faculty of Actuaries to suggest developments and
improvements to the Syllabus and Core Reading. If you have any comments or concerns about
the Syllabus or Core Reading, these can be passed on via ActEd. Alternatively, you can send them
directly to the Institute and Faculty of Actuaries’ Examination Team by email to
memberservices@actuaries.org.uk.

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SP9: Study Guide Page 1

The guide is split into two parts:

The Actuarial Education Company © IFE: 2024 Examinations

1.1 Subject SP9 – background and contents

Links to other subjects

Chartered Enterprise Risk Actuary (CERA)

© IFE: 2024 Examinations The Actuarial Education Company

The Actuarial Education Company © IFE: 2024 Examinations

1.2 Subject SP9 – Syllabus and Core Reading

Topics and topic weightings

This subject covers the following topics:

© IFE: 2024 Examinations The Actuarial Education Company

1. Enterprise Risk Management (ERM) concept and framework (15%)

An introduction of the key principles and concepts of ERM, how it is applied in an

1.1 Explain the principal terms in Enterprise Risk Management (ERM).

1.2 Describe the concept of ERM. (Modules 1 and 2)

1.2.1 Define what is meant by ERM.

1.2.2 Describe the role of the following concepts in ERM:

1.2.3 Describe the benefits of ERM.

1.3.1 Recommend an appropriate framework for an organisation’s ERM.

1.3.4 Evaluate an organisation’s risk management culture, including risk awareness,

The Actuarial Education Company © IFE: 2024 Examinations

1.4 Demonstrate an understanding of risk frameworks in regulatory environments.

1.4.4 Demonstrate an awareness of how different parts of an organisation and different

1.5 Demonstrate an understanding of the perspectives of credit rating agencies.

1.5.2 Assess the relevance of these criteria.

2. ERM process (10%)

Implementation of an ERM framework across an organisation with consideration of key

2.1 Demonstrate an understanding of the relevance of ERM to all stakeholders.

2.1.1 Compare the relevance of risk measurement and management to various

2.1.2 Explain contagion and how it affects different stakeholders.

2.3.2 Recommend a structure for an organisation’s risk management function.

© IFE: 2024 Examinations The Actuarial Education Company

3. Risk categories and identification (10%)

3.2 Demonstrate an understanding of risk categories. (Module 3)

4. Risk modelling and aggregation of risks (15%)

4.2 Demonstrate an understanding of the use of correlation measures. (Module 15)

The Actuarial Education Company © IFE: 2024 Examinations

4.2.1 Demonstrate enterprise-wide risk aggregation techniques incorporating the use

4.2.2 Comment on the relative merits and implications of different correlation

4.4 Demonstrate understanding of the use of copulas as part of the process of

4.4.1 Evaluate different types of copula for a given purpose.

4.4.2 Recommend an appropriate copula for a given situation.

4.7 Demonstrate an understanding of model and parameter risk. (Module 21)

4.8.3 Evaluate different types of model for a given purpose.

5. Risk measurement and assessment (15%)

5.1 Understand common risk measures. (Module 14)

© IFE: 2024 Examinations The Actuarial Education Company

5.1.2 Determine risk exposures and tolerances using these measures.

5.5 Assess different types of market risk. (Module 22)

5.6 Assess credit risk. (Module 23)

5.6.1 Describe what is meant by a credit spread and its components.

5.6.2 Discuss different approaches to modelling credit risk.

6. Risk management tools and techniques (20%)

6.1 Demonstrate risk optimisation and responses to risk. (Module 26)

6.1.1 Explain how to optimise an objective, possibly subject to constraints.

6.2.1 Describe how to reduce risk by transferring it.

6.2.2 Describe how to reduce risk without transferring it.

6.2.4 Explain how an organisation’s ability to manage risk is affected by regulatory,

The Actuarial Education Company © IFE: 2024 Examinations