Articles		Click on a title to visualize the content or the abstract. To get any article listed above, see Management in the menu. INTRODUCTION by Rémi Moreau ARTICLES ÉVALUÉS
			CREATING VALUE THROUGH MANAGING CORPORATE RISK: INSURANCE, FINANCIAL PRODUCTS AND FINANCIAL STRATEGIES by Neil A. Doherty
			GESTION INTÉGRÉE DES RISQUES DANS LES ENTREPRISES NON FINANCIÈRES : L’IMPACT DES RÉGLEMENTATIONS INTERNATIONALES par André Rolland
			L’ESTIMATION DU FLUX MONÉTAIRE À RISQUE SELON LA MÉTHODE DES VALEURS EXTRÊMES par Pierre Laroche et Emmanuel Phaneuf
			ARTICLES GÉNÉRAUX
			GÉRER LES RISQUES DE CATASTROPHE : AVANTAGES ET INCONVÉNIENTS DES OUTILS TRADITIONNELS ET MODERNES par Mathieu Sirois
			ADVANCED RISK FINANCE by James P. Greenhill
	Chroniques		FAITS D'ACTUALITÉ par Rémi Moreau
			COMPTE-RENDU par Rémi Moreau
			CHRONIQUE ACTUARIELLE par divers collaborateurs du Groupe-conseil AON
			CHRONIQUE JURIDIQUE par Rémi Moreau
			ÉTUDES TECHNIQUES par Rémi Moreau
			THE INTERNET SURFER PAGE P & C Insurance Compensation Corporation

CREATING VALUE THROUGH MANAGING CORPORATE RISK: INSURANCE, FINANCIAL PRODUCTS AND FINANCIAL STRATEGIES
by Neil A. Doherty

Corporate risk management has evolved in several ways over the past two decades. It has evolved from addressing insurance risk to financial and other business risks, it has expanded to embrace a wide variety of hedging products and integrated strategies are now often adopted. Another less conspicuous, though probably more important, development has been the recognition that risk management and corporate finance strategies can address the same problems. The choice of leverage, contingent leverage, postloss financing, contingent equity, limited liability and similar approaches can substitute or complement more traditional risk management strategies. Here the author will present results of recent literature on why risk is costly to firms and outline both the hedging and corporate finance strategies for addressing these various costs.

Keywords: Risk management, financial risks, integrated strategies, leverage of coverage, contingent leverage, results of recent literature.

La gestion des risques dans les entreprises s’est développée de diverses façons au cours des deux dernières décennies. D’abord orientée vers les risques d’assurances jusqu’aux risques financiers et aux autres risques d’entreprise, elle s’est ensuite tournée vers un large éventail de produits financiers lui permettant aujourd’hui d’adopter des stratégies intégrées. Autre aspect moins évident, quoique probablement plus important, son développement a permis de reconnaître que la gestion des risques et les stratégies de financement corporatif convergent vers les mêmes problèmes. Le choix du levier de couverture, du levier contingent, du financement des sinistres après leur réalisation, de l’équité contingente, de la responsabilité limitée et des approches similaires peuvent constituer des substituts ou des compléments dans plusieurs stratégies de gestion des risques traditionnels. Dans cet article, l’auteur présente les résultats de la littérature récente, notamment sur l’explication du coût des risques encouru par les entreprises et il expose à grands traits les stratégies de couverture et de financement corporatif concernant ces divers coûts.

Mots clés: Gestion des risques, risques financiers, stratégies intégrées, levier de couverture, levier contingent, résultats de la littérature récente.
 
 
 
 
 
 
 

GESTION INTÉGRÉE DES RISQUES DANS LES ENTREPRISES NON FINANCIÈRES : L’IMPACT DES RÉGLEMENTATIONS INTERNATIONALES
par André Rolland

Des pressions réglementaires et des besoins croissants de contrôle et d’information se conjuguent pour pousser les entreprises non financières (ENF) à gérer leurs différentes sources de risques de manière plus intégrée. La mission principale du Trésorier devient dans ce contexte celle d’un gestionnaire des risques. Les réglementations internationales s’appliquant aux ENF sont moins nombreuses et moins contraignantes que pour les banques. Mais elles s’en rapprochent. En outre, certaines réglementations bancaires ont un impact indirect sur les ENF. Actuellement, la mise en place de nouvelles normes comptables américaines (FAS 133) et internationales (IAS 39) constituent des événements majeurs pour la gestion intégrée des risques, y compris ceux sur les matières premières ou l’énergie.

Mots clés : Entreprises non financières, gestion des risques, réglementations, FAS 133, IAS 39.

Regulatory pressures combine with the needs for tighter control of, and better information on risks to induce corporate entities into managing their various risks in a more integrated way. In that context, the corporate Treasurer becomes a global risk manager. International regulations applying to corporate risk management are fewer and less stringent than those applying to the banking sector. But they get increasingly closer. Moreover, some banking regulations have indirectly an impact on non financial corporations. Currently, new accounting regulations -namely, the U.S. FAS 133 and the international IAS 39- are major turning points for the way non financial corporations manage their integrated risks, including those on commodities and energy.

Keywords : Non financial corporations, risk management, regulations, FAS 133, IAS 39.
 
 
 
 
 
 
 
 

L’ESTIMATION DU FLUX MONÉTAIRE À RISQUE SELON LA MÉTHODE DES VALEURS EXTRÊMES
par Pierre Laroche et Emmanuel Phaneuf

Dans cet article, nous passons en revue les approches classiques de mesure du flux monétaire à risque (FMAR). Nous expliquons ensuite une approche récemment proposée, celle fondée sur la théorie des valeurs extrêmes, qui comble une lacune importante des approches classiques en question. Un exemple compare les résultats de l’estimation du FMAR selon la méthode Monte Carlo (l’une des approches classiques les plus connues) et celle de la méthode des valeurs extrêmes. Cet exemple montre que, dans des circonstances, ne présentant aucune complication particulière, l’estimation du FMAR issue de la méthode Monte Carlo et celle issue de la méthode des valeurs extrêmes diffèrent substantiellement.

Mots clés : Flux monétaire à risque, théorie des valeurs extrêmes, risques financiers, gestion des risques financiers.

This article reviews the classical approaches to measure cashflows at risk (CAR). We then present a new measurement methodology based on Extreme-value theory (EVT). EVT is well established in other sciences for problems requiring the modeling of the distribution of unlikely events (i.e. extreme results). Using an example with no special complications, we show how the EVT methodology yields a CAR estimation that is substantially higher than the one obtained by using the Monte Carlo approach.

Keywords : Cashflows at risk, extreme-value theory, financial risks, financial risk management.
 
 
 
 
 
 
 
 

GÉRER LES RISQUES DE CATASTROPHE : AVANTAGES ET INCONVÉNIENTS DES OUTILS TRADITIONNELS ET MODERNES
par Mathieu Sirois

En ce début de 21e siècle, il est permis de se demander comment les assureurs doivent-ils gérer les risques de catastrophe. Sans apporter de réponse précise à cette question, le présent article a pour but de présenter un portrait global de la situation des risques de catastrophe et d’analyser les différentes techniques qui sont à la disposition des assureurs pour gérer ces risques, à l’aide des principales études effectuées sur le sujet. Un examen approfondi des techniques traditionnelles et modernes de gestion des risques de catastrophe permettra de faire ressortir les avantages et les inconvénients reliés à l’utilisation de chacune d’elles.

Mots clés : Réassurance, assurance, risques de catastrophe, gestion des risques, risque de prise ferme, risque de base, risque moral ex-ante, risque moral ex-post, contrats à terme, futures, options, produits dérivés, obligations, CAT bonds, réserves, règlements, titrisation, indice de pertes.

At the start of this new millenium, one might ask how insurance companies handle catastrophe risks. Without bringing a specific answer to this somewhat controversial topic, this paper, with the support of several recent studies, focuses on presenting the basic features of catastrophe risk management, as well as analyzing the different methods used by the insurers to manage these risks. A close look at the traditional and modern techniques used in catastrophe risks management should show evidence of the advantages and disadvantages associated with each risk management strategy.

Keywords : Reinsurance, insurance, catastrophe risks, risk management, underwriting risk, basis risk, ex-ante moral hazard, ex-post moral hazard, futures, forwards, options, derivatives, bonds, CAT bonds, reserves, settlements, securitization, loss index.
 
 
 
 
 
 
 

ADVANCED RISK FINANCE
by James P. Greenhill

In this paper we will look at a number of typical cases in order to introduce some Advanced Risk Financing (ARF) concepts. This includes a review of the evolution of ARF products from early techniques, where ARF practitioners are interested in alternative ways of funding traditional risk exposures, to the latest more sophisticated products, where corporations seek to achieve efficiencies through holistic risk financing approaches. We will discuss how, within the past few years, insurance and other financial techniques have converged, allowing insurance markets to assume risks that are normally laid off in the derivative or capital markets. Finally, we will discuss when and where these advanced applications make sense.

Cet article fait un tour d’horizon des derniers développements dans le domaine de Financement Avancé du Risque (FAR). Il examine l’évolution des produits FAR en partant des premières techniques, où le but était de trouver de nouvelles manières pour subventionner des expositions à des risques traditionnels, et en allant jusqu’aux derniers produits plus sophistiqués, où le but est de rendre le financement plus complet tout en diminuant les coûts (quelques exemples illustrant des concepts principaux sont inclus). Des lignes directrices sur l’application de ces nouvelles techniques de FAR sont présentées à la fin.
 
 
 
 
 
 
 
 
 

INTRODUCTION
by Rémi Moreau

This issue originates from the Integrated Risk Management Conference held on April 13 and 14 at the Ecole des Hautes Études Commerciales under the theme of integrated risk management for non-financial corporations. The Conference was jointly organized by the Risk Management Chair (HEC) and the International Institute of Research (IIR).

We take this opportunity to express our appreciation to the IIR for its professional conduct in planning and organizing the Conference and, in particular, to the following IIR team: Mrs. Nathalie Mercier, Quebec region general director; Mr. Patrick Howe, Conference producer; and Mrs. Mélanie Lefrançois, coordinator. We would also like to thank Mr. Pierre Laroche, director HEC’s Finance Department, for his kind cooperation in chairing the second day of the event.

Here are the Conference themes:

– Discovering new trends in integrated risk management;
– Developing a strategy to establish an integrated risk management program wrapping up all types of risks;
– Optimizing the management of insurable risks by efficacious use of derivative products such as substitutes or complements to insurance and reinsurance;
– Complying with the various international regulations governing the management of financial or insurable risks;
– Establishing performance indicators designed to maximize the benefits of an integrated risk management program: measuring the added value associated with such a program;
– Exploring the possible use of derivative products as part of an integrated risk management program;
– Integrating insurance risks into a holistic approach to the management of risks in non-financial corporations.

The two-days Conference was both practical (on the first day) and academic (on the second day). On Thursday, there were two practical workshops (three hours each). In the morning, Gerard van Der Gaag (Aon Reed Stenhouse) led a discussion on planning an effective strategy to implement integrated risk management; in the afternoon, Pierre Laroche (HEC) spoke on discovering new extensions to the value at risk (VaR).

Friday, the second day of the Conference, offered a mixed panel of international and national experts on integrated risk management, people such as René Stulz (Ohio State University), Neil A. Doherty (Wharton School), André Rolland (Arthur Andersen), Robert Greenhill (Bombardier), Sean Finn (CN), Eckart Russell (Marsh & McLennan), and Georges Dionne, holder of the HEC’s Risk Management Chair and director of the journal Assurances.

This special issue does not constitute the offical proceedings of the Conference, as it does not publish all the speeches. It contains only original contributions on integrated risk management along with some speeches which were edited and submitted to referees, selected for their expertise in integrated risk management. We thank them for their cooperation.

We would first mention the article by Neil A. Doherty, professor of insurance and risk management at the University of Pennsylvania’s Wharton School. Entitled Creating Value Through Managing Corporate Risk : Insurance, Financial Products and Financial Strategies, this article could be of interest to readers wishing to discover why risk is costly and what strategies non-financial corporations use to reduce such costs.

We moved next to an article by André Rolland, a partner with Arthur Andersen, Paris; it is entitled Gestion intégrée des risques dans les entreprises non financières: l’impact des réglementations internationales. Based closely on his conference presentation, this article attempts to measure the impact of international regulations on integrated financial risk management. The author is mindful to compare current differences in approach between banking institutions and non-financial corporations.

Finally, we propose the last article in the refereed section: L’estimation du flux monétaire à risque selon la méthode des valeurs extrêmes. Co-authored by Pierre Laroche, professor at HEC, and Emmanuel Phaneuf, a student in HEC’s masters program in Finance, the article reviews the classical approaches to measuring the monetary fluidity at risk and then describes an approach based on extreme values recently proposed to fill in a serious gap in classical approaches.

In its general section, this special issue also include two non-refereed but carefully reviewed contributions. The first, written by Mathieu Sirois, a masters student in Ecnomomics at HEC, for one of Prof. Dionne’s risk management courses, provides a general picture of disaster related risks and analyses the different methods used by insurers to manage such risks. The other, written by James Greenhill, a partner in the international insurance brokerage firm Marsh & McLennan, is based on Eckart Russell’s speech at the Conference. It reviews the evolution of Advanced Risk Finance (ARF), from the very first alternative techniques used to finance risks up to the latest, highly sophisticated products, allowing corporations to use holistic approaches in the pursuit of higher performance levels.

In conclusion, we observe that setting up an integrated risk management program in a non-financial corporation would require unique expertise as well as tried and true knowledge in a wide array of risk disciplines, all this coupled with a clear vision of the objectives to be achieved. The content of this special issue will certainly be of interest to managers on the look out for strategic advantages, as it is both empirically and pragmatically focused on the avantages to be sought in the new opportunities cropping up in the field of integrated risk management.