1. Page 1 Recording of this session via any media type is strictly prohibited. Page 1 Working with your Board to Improve Risk Management and Board Risk Oversight Paul Walker – Schiro/Zurich Chair of ERM at St. John’s University Arya Yarpezeshkan – CRO at the Navigator’s Group Joe Pugh – Sr. Advisor, ERM at AARP

2. Page 2 Recording of this session via any media type is strictly prohibited. Paul Walker, Ph.D., CPA Schiro/Zurich Chair in ERM, St. John’s University Arya Yarpezeshkan Chief Risk Officer, The Navigator’s Group Joe Pugh Senior Advisor, ERM, AARP Presenters

3. Page 3 Recording of this session via any media type is strictly prohibited. Top Issues for Boards Board top issues: Risk oversight Strategic risks Investors want more information on strategy and risk oversight (what the board is thinking)

4. Page 4 Recording of this session via any media type is strictly prohibited. SEC 2014 National Exam Priorities Designed to: communicate with investors and registrants about areas that the staff perceives to have heightened risk and to support the Securities and Exchange Commission (“SEC”) mission to protect investors;

5. Page 5 Recording of this session via any media type is strictly prohibited. SEC 2014 National Exam Priorities Corporate Governance, Conflicts of Interest, and Enterprise Risk Management. The NEP will continue to meet with senior management and boards of entities registered with the SEC, including their affiliates where appropriate, to discuss how each firm identifies and mitigates conflicts of interest and legal, compliance, financial, and operational risks. This initiative is designed to: (i) evaluate firms’ control environment and “tone at the top,” (ii) understand firms’ approach to conflict and risk management, and (iii) initiate a dialogue on key risks and regulatory requirements.

6. Page 6 Recording of this session via any media type is strictly prohibited. What to Expect Strategies for working with your board Ways to present and report an integrated, transparent view of your organization’s risks Ideas on improving and benchmarking risk management and board risk oversight

7. Page 7 Recording of this session via any media type is strictly prohibited. 1. INTERNATIONAL SPECIALTY INSURANCE UNDERWRITER 3. ONE OF THE “100 MOST TRUSTWORTHY COMPANIES” BY FORBES.COM 2. FOCUSED ON MARINE, ENERGY, SPECIALTY CASUALTY, AND D&O / PROFESSIONAL LIABILITY

8. Page 8 Recording of this session via any media type is strictly prohibited. Recommendation: Have a governance framework that is appropriate and effective for your organization 8 Group ERM Management Committee Board of Directors – Risk Reporting Governance & Compliance Risk Sub-Committee Governance & Compliance Risk Sub-Committee UW & Claims Risk Sub-Committee UW & Claims Risk Sub-Committee Finance Risk Sub-Committee Finance Risk Sub-Committee Operations Risk Sub-Committee Operations Risk Sub-Committee

9. Page 9 Recording of this session via any media type is strictly prohibited. Recommendation: Clarify roles and responsibilities Roles and Responsibilities Oversight Escalation Coordination Ownership Assurance

10. Page 10 Recording of this session via any media type is strictly prohibited. Recommendation: Provide the Appropriate Information For the Board to Execute its Oversight Duties Is the board receiving the information it needs to foster effective risk oversight, or is it drowning in data providing little knowledge or insight? Are we providing the appropriate information for the board to determine if management is effectively managing risk? Is there sufficient agenda time for discussing the enterprise’s risks?

11. Page 11 Recording of this session via any media type is strictly prohibited. Recommendation: Know Your Audience Broad or narrow skill sets? Big picture or detail oriented? Unsure of the appropriate level of detail? Then ask them.

12. Page 12 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting 1. Emerging risks and opportunities 2. Risk tolerances vs. actual 3. Key risks 4. Risk events 5. Appendix Agenda

13. Page 13 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Emerging Risk Summary

14. Page 14 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Risk Tolerance Summary Sample Risk Tolerances

15. Page 15 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Capital Adequacy / Key Risks Summary

16. Page 16 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Key Risk Example: Investment Risk Summary Investment risk increased by xx% as a result of heightened volatility in the Treasury Markets; however, the risk is still within our tolerances. Risk Drivers Changes in the macro-economic environment, etc. Quantification Key Risk Indicators … Action Items …

17. Page 17 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Key Risk Indicators– Detail in Appendix Investment Key Risk Indicators Volatility of Expected Return by Risk Factor Volatility at 99% VaR Global Financial Stress Scenarios

18. Page 18 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Emerging Risk – Detail in Appendix Prolonged Power Blackout

19. Page 19 Recording of this session via any media type is strictly prohibited. Takeaways Have a governance framework that is appropriate and effective for your organization Clarify responsibilities Know your audience Use the Report Appendix to your advantage The information presented herein is for informational purposes only and is not intended to be legal, accounting or other professional advice or opinions on specific facts or matters, used for trading or investment purposes or a complete description of certain aspects of the business of Navigators and its operating subsidiaries.

20. Page 20 Recording of this session via any media type is strictly prohibited. 1. SOCIAL MISSION ORGANIZATION 2. NON-PROFIT & NON-PARTISAN 3. FIGHTS FOR PEOPLE 50+ 4. A TRUSTED SOURCE OF INFORMATION 5. OFFERS ACCESS TO PROGRAMS, SERVICES & DISCOUNTS 6. CONNECTS PEOPLE TO VOLUNTEER OPPORTUNITIES

21. Page 21 Recording of this session via any media type is strictly prohibited. ERM at AARP Program maturity Modeling the message

22. Page 22 Recording of this session via any media type is strictly prohibited. Recommendation: Assign ERM to the full board and keep them focused Does the full board have primary governance oversight? Is the full board focused on the top strategic risks? Is the full board dealing with the details of how management is managing the risks? Is the board’s role one of “risk” management or “list” management?

23. Page 23 Recording of this session via any media type is strictly prohibited. Recommendation: Include ERM on board self-assessment “Critical risks facing the organization are proactively identified by management and fully vetted with the board” “An appropriate process is in place to effectively manage each of the critical risk areas” “The board holds management accountable for effective ERM stewardship”

24. Page 24 Recording of this session via any media type is strictly prohibited. Recommendation: Benchmark your program Board’s like to know how your program stacks up Is the board comfortable that you have an effective program in place for managing risks? – If not, share statistics Are we “right-sizing” the benchmarking data?

25. Page 25 Recording of this session via any media type is strictly prohibited. Recommendation: Keep risk reporting simple Does the board have the right information for effective risk oversight? Content over quantity Are we providing transparency and insight in our risk reporting?

26. Page 26 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Agenda 1.Residual risk heat map 2.Summary risk profile scorecard 3.Individual risk mitigation scorecards

27. Page 27 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Sample Illustration Only

28. Page 28 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Sample Illustration Only

29. Page 29 Recording of this session via any media type is strictly prohibited. Example: Board Risk Reporting Sample Illustration Only

30. Page 30 Recording of this session via any media type is strictly prohibited. Takeaways Assign ERM to the full board and keep them focused Include ERM on board self-assessment Benchmark your program Keep risk reporting simple

31. Page 31 Recording of this session via any media type is strictly prohibited. Board Risk Oversight Improvement ERM: required and also increases value, lowers earnings volatility, leads to better decisions, improves reputation… Governance metrics are used by analysts, viewed by the market, bad/good news, impact the ability to attract board members We have governance metrics and board assessment but not BRO metrics or assessment

32. Page 32 Recording of this session via any media type is strictly prohibited. Board Risk Oversight Improvement Benchmark, review, improve ERM and BRO BRO Methods BRO assessment and self-assessment BRO metrics and questions

33. Page 33 Recording of this session via any media type is strictly prohibited. Board Risk Oversight Improvement NACD 10 Deloitte 20/21 BRO 30 (Walker et al. 2012) RCC 27 (Walker et al. 2014)

34. Page 34 Recording of this session via any media type is strictly prohibited. Board Risk Oversight Tool In recent work the authors found that the number one tool used by companies to manage risk is not some sophisticated modeling tool or even a risk assessment exercise. Instead, the number one tool preferred by many companies is to have a conversation about risks with management, and with and among the board. The tool presented here is not meant to replace that conversation, but should be used to ignite that conversation. For each question for which the board believes there is a lack of consensus, the board should have a discussion about why they are not following this practice. In some cases, the questions are rooted in mandated regulations. In other cases, they are considered a best practice by many companies and by the research team. 34 Confidential; not for distribution

35. Page 35 Recording of this session via any media type is strictly prohibited. Tool The board and the organization have a rigorous strategic plan which incorporates all major and emerging risks. The board is comfortable that management has identified all enterprise level risks. The board has a clearly defined risk oversight process and has clearly established risk responsibility. The organization has a CRO or ERM leader with direct line reporting to the board or a respective board committee. The board quarterly reviews risk maps, risk dashboards, or related risk reporting. The board and organization go beyond risk maps and generate risk action plans as well as related risk metrics. Corporate decision making includes a discussion of the potential risks embedded in those decisions. The organization is prepared for a S&P or Moody’s assessment of their ERM process. The board is informed of emerging risks on a timely basis. The board has received ERM training. 35 Confidential; not for distribution

36. Page 36 Recording of this session via any media type is strictly prohibited. Tool Executives openly share all risk information with board committees. The organization has had no major risk debacles in the past fiscal period. Executives and management level risk committees have adequate resources and training to identify and manage risks. Important risk information is streamlined and reported to the appropriate executives and board level committees promptly. ERM is viewed as a critical way to create value and grow the organization, while taking the appropriate risks. The organization identifies the risks related to compensation plans. Performance is evaluated in relation to the risks taken in achieving that performance. The organization views and assesses risk by business unit. 36 Confidential; not for distribution

37. Page 37 Recording of this session via any media type is strictly prohibited. Tool The board is engaged in the discussion of strategy and the related risks. The board includes some members who are experts in the organization’s relevant risks or risk oversight. The board feels confident in the risk oversight process. The board examines its own talent for diversity of views and for the ability to oversee risk. The board examines risks that management missed to determine if the risk was not identified or if it was not assessed properly. The feedback is used to manage future risks better. The board has good communication with the CEO on the risks facing the enterprise (both current and emerging). The board and management regularly assess their ERM process. 37 Confidential; not for distribution

38. Page 38 Recording of this session via any media type is strictly prohibited. St John’s Univ/Tobin College of Business MS Risk MS Enterprise Risk Management MBA/MS Acct with a conc. in Risk and ERM Center for Excellence in ERM Executive Education – Certificate in ERM Booth _____

39. Page 39 Recording of this session via any media type is strictly prohibited. Questions, Final Comments and Contact Information Paul Walker Schiro/Zurich Chair of ERM, St. John’s University walkerp@stjohns.edu (212) 284-7011 Arya Yarpezeshkan Chief Risk Officer, The Navigator’s Group AYarpezeshkan@navg.com (203) 905-6372 Joe Pugh Senior Advisor, ERM, AARP jpugh@aarp.org (202) 434-3647