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Varied Visions of Actuaries' Roles

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By Simon Curtis, FCIA
CIA President

Recently I have been involved in a number of conversations in Canada, and in meetings with other actuarial associations, about how to expand the opportunities for actuaries to work in new and emerging practice areas. A common theme in virtually all of them was how to increase the actuarial presence in the risk management field. It is fair to say that a number of actuaries feel that risk management is the future of the profession, and that the actuarial profession needs to re-brand itself to focus on this area.

However, in listening to these discussions it strikes me that we, as a profession, have not answered one key question—or at least have not answered it with one voice: what are the key competencies/skill sets that we as a profession bring to the risk management space, and how does this impact where we want to be in this very broad space?

Broadly speaking, I have heard it said that actuaries should focus on the enterprise risk management (ERM) space and/or become the recognized leaders in the management of risk, with the vision that we would ultimately be the professionals of choice for chief risk officer roles. But is this a realistic vision, or does it ultimately ensure failure because it is over-reaching and unrealistic?

Or should the actuarial profession focus instead on developing a niche as recognized leaders in a narrower specialist or professional role that is best aligned with our competencies and training (i.e., as risk measurement specialists)? This role would then serve as a base for individuals with broader competencies to take on wider responsibilities as risk managers. My personal bias is towards this latter path, although I have been in enough conversations to know that there are wide-ranging views on this subject.

The primary issue I see is confusion between the roles of risk management and risk measurement. Risk measurement—for which the actuarial skill set is well suited for most (but not all) risks—is a subset of risk management. Risk management involves not only measuring risk and establishing risk tolerances, but using professionals of many backgrounds to manage the risks, establishing organizational cultures around risk and its management, and calling upon strong communication skills to ensure relentless and consistent dialogue on risk with organizations and their stakeholders.

An actuary with extensive training and skills in risk measurement may be well placed to take on broader roles, but will always be competing for these positions with professionals with other backgrounds, skill sets, and personal attributes.

My view is that the goal of the actuarial profession should therefore be more focused: to be the leaders in the use of quantitative analysis to measure and facilitate management of risk.

I believe actuaries, with our training and quantitative analysis skills, as well as a professional society infrastructure which reassures users on the quality and consistency of work (something that virtually no competing professionals possess), are well positioned. If we can own this space, then the broader risk management roles will come naturally to those with the aptitude for them.

As a small practical example of how we could advance our presence in the risk management field, I would use the example of stress testing of financial institutions. For years, actuaries in Canada and elsewhere have conducted financial stress tests of insurance organizations. In Canada we have developed, through dynamic capital adequacy testing, robust approaches to do this with support from well-crafted professional guidance material and standards. As a result of the 2008 financial crisis, stress testing is now a huge area of focus for all financial institutions, including banks and their regulators. Who is better placed than the actuarial profession, with our experience and professional infrastructure, to step into this space?

At the end of the day, there are huge opportunities, but as a profession we need to determine how to seize them and then move forward with vigour.

Simon Curtis, FCIA, is President of the CIA.


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