Exam 9: An ERM recommendation needs a constraint and a management action
Risk measures support decisions such as capital allocation, investment limits and business strategy. A recommendation should connect the measure to the objective and constraints. Listing risk categories alone does not explain how the organisation will act.
Worked example or practice scenario
A toy insurer can reduce market exposure by selling assets, but a stressed market may reduce sale proceeds or create liquidity pressure. A modelled management action needs timing, authority and feasibility assumptions. An instantaneous cost-free action is a material simplification.
Try this next
Write a scenario recommendation with trigger, action, decision maker and limitation. Compare the expected benefit with the trade-off, such as lower return or higher liquidity cost. Keep regulatory requirements distinct from an internal appetite or target.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.