Actuaries’ Broad Perspective Can Pay Off

Gaetano Geretto

A background in reinsurance helped Gaetano Geretto prepare for work in enterprise risk management (ERM), but the evolving nature of this practice area continues to bring fresh challenges.

Now president of Pelecanus Strategic Advisory Services, Mr. Geretto previously served in numerous senior positions for organizations including Sun Life, Gerling Global Life, and Revios Reinsurance, and his career has often involved a strong risk management component.

He said: "I was in a business where I did some risk management as part of our normal business activities and worked with companies to spread risk. At the time companies had disparate processes, but nothing unified. Then our German parent company launched the Kontrag project as requested by its regulator BaFin, which involved putting in an ERM module. We thought it was more of a compliance exercise, but did it anyway, and it soon became the basis behind the way we managed the company. We came to say, ‘Everybody here is a risk manager.’ That helped me decide to concentrate on risk management."

Moving from reinsurance to ERM was an evolutionary process, he said. "I was already identifying risks and managing and mitigating them, but ERM had a steep learning curve, at least initially. However, as actuaries we need intellectual stimulation. We always try to see multiple variables that might not always be moving in the same direction. It’s the ultimate problem-solving conundrum. We can follow general principles,but we have to recognize that there are so many variables at play. In addition, more work has been done in a governance context involving the risk appetite frameworks and risk culture.

"In ERM you need an ability to see at 30,000 feet; if you get too far into the weeds,you can be focused on certain risks and miss the big picture. As actuaries and risk experts, we must always be inquisitive and always ask, ‘Why?’ It is a matter of being reflective and spending time listening. You cannot work in isolation, and must think more broadly."

A period spent at the Office of the Superintendent of Financial Institutions during the financial crisis proved invaluable in developing that broad perspective, Mr. Geretto added. "I learnt that all the skills in my toolkit would help me there. It was interesting work applying governance techniques, overseeing the actuarial function, and working on the development of the Own Risk and Solvency Assessmentguideline. Now, at Pelecanus Advisory, more of my time involves working with my clients and giving advice, and I am bringing together my work in industry and as a regulator."

Today, more and more organizations are capitalizing on the expertise of ERM-focused actuaries, but that was not always the case. "Ten years ago, there was a lot of resistance to ERM," said Mr. Geretto. "Everybody was comfortable in their own sandbox, and they didn’t see its value. That attitude has changed, and it has become a discipline on its own, attracting people to pursue a career in ERM. Banks and insurers are increasingly becoming places where people who have worked in line businesses and understand the risks in those businesses are ideal candidates to work in ERM.

"This is a growth area for actuaries. We can be somewhat risk averse in how we look at career development, and in that respect we can be slow to adapt. But actuarial bodies around the world are recognizing that actuaries have a place at the [ERM] table and are promoting it through the Chartered Risk Enterprise Analyst (CERA) designation. We are risk experts and bring a holistic approach to managing risk, which creates value for the company.

"However, we can do more to promote those who have stepped out of traditional sectors and into ERM. Our message should be, ‘Look at the numbers of people in chief risk officer capacities who have an actuarial background, and the people who have crossed over to become ERM experts.’ We do more than insurance risk, but we sometimes get slotted into a narrow band. There is a magnet that pulls people into our profession, and consequently head-hunters and ERM professionals who are hiring need to look at actuaries as being risk experts."

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