ERM Work Offers Intellectual and Professional Benefits

For many actuaries, swapping one of the more common practice areas for something non-traditional can be a challenge. However, Kathryn Hyland, pictured above, never faced that problem, as she has always followed a path outside the norm.

Now senior vice-president at Swiss Re, she began her career with the typical set of early actuarial tasks, moving from practice area to practice area. But she explained: "I quickly fell out of the rotation program and I worked in IT for nine years. I then did a lot of different things, and I’ve only been working full-time in enterprise risk management (ERM) for six years."

The rapidly expanding field of ERM offers a lot of challenges and opportunities for the right kind of actuary, she said: "One of the unique things about it is that you have a holistic view of the entire enterprise. Usually an actuary’s focus is narrow but quite deep, but I am much more of a ‘woods’ than ‘trees’ kind of person.

"It is intellectually interesting, as you can deal with things that have not happened before. We are trained to think about new and emerging risks, or, as I was taught, ‘think the unthinkable’. We are constantly wondering, ‘What if?’ For instance, we are in a highly active sunspot cycle, and so there could be strong solar flare activity that could damage the power grid. What would that mean? What about nanoparticles: what is the endgame with those, and will they have an impact on human health? Those sorts of questions don’t come up in more traditional practice areas, so this is the perfect job for an intellectually curious person. That is the number one attribute I look for when I am seeking somebody to join my team."

ERM offers scope for a great deal of variety from day to day, she added. "A major ingredient of it is risk identification: trying to spot risks and working within the business to find somebody to own that risk. We also assist the business owner to find a mitigation plan. Another example is that we review and approve transactions. Before we will take on a new risk we need a certain amount of discipline and signatures from people in different functions. That process is getting smoother, although the risk manager may still have to ask difficult questions of the deal team. We must make sure that all the risks inherent in a transaction are priced fairly and make sense. Options must be priced correctly, for example, and it can be irritating for people under the gun, but our working relationship is very good.

"Swiss Re may be more mature in its ERM practice than some other companies, and it has a good risk culture. In the early days it was the job of the people in ERM to establish that culture—but that aspect of the job is becoming easier."

The change in attitudes in the industry and by regulators to be more concerned about effective ERM was partly due to the 2008–2009 financial crisis, Ms. Hyland added.

"That was a wake-up call. A lot of models failed and liquidity classes dried up—for example, some municipal bonds in the U.S. became completely illiquid. Companies were saying, ‘We should have been thinking about this.’ With the benefit of hindsight, you can see all the interconnectedness. There has been a big impact among regulators, who are pushing businesses to step up their game. They are creating high expectations of what will be done.

"So ERM is a growing field, and actuaries have the ability to play a major part in it. It is incumbent on the profession to make inroads and make actuaries the first choice [when it comes to risk management]. A lot of work in this area can be done by non-actuaries, but we really deserve a seat at the table. We have the intellectual horsepower and the ability, and our course of study is becoming much richer.

"We are quite well equipped compared to other professions, and in certain areas we are much better equipped."

Canadian Institute of Actuaries/Institut canadien des actuaires
http://www.cia-ica.ca/