Professional Associations in Risk Management

Greg Brown

As the use of derivatives has expanded in the last decade, professional organizations catering to derivative users have sprung up to provide a forum for exchanging ideas, educating practitioners, and networking. Below we provide a basic description of three of these organizations (IAFE, GARP, and PRMIA) and links to their internet sites.

The public policy issues raised by the collapse and bankruptcy of the Enron Corporation will be a major focus for legislators and regulators in 2002. The issues involve accounting practices and standards, pension plan investments, and derivatives trading—the daily responsibilities of many AFP members.

Although the Financial Accounting Standards Board (FASB) issued Financial Accounting Statement 133 (FAS 133) in June 1998 with a June 15, 2000 effective date, most companies had to comply with thse new rules pertaining to accounting for hedging transactions and derivative instruments for the first time, beginning with the first quarter of 2001. Prior to implementation, AFP and other parties provided written comments and testified publicly concerning initial problems associated with this standard. These problems included its complexity, its potential impact on earnings volatility, and concerns that the rule would discourage the use of legitimate risk management tools.