What is the actuarial industry?
The main focus for professionals in the actuarial industry is to use their mathematical prowess to analyse the potential financial risks in every aspect of business. Their clients can use actuarial predictions, derived from the use of statistical models and complex mathematics to adopt a strategy that minimises the possibility of financial losses.
There’s a lot more to consider than you may think! Aside from economic factors and the state of the markets a client is involved in, an actuary will take a look at the possibility of other events that can have a financial impact, for example natural disasters or accidents. They use their calculations and statistical models to consider the potential costs involved for a company. Political and social factors are also analysed. You could see them as the oracles of the financial world!
Of course there are things that can occur that cannot be predicted, however there is an advantage to be gained by minimising the financial risk as much as possible when these events do happen. Professionals in this industry have exceptional mathematical minds. To develop a career in this field, you will have to be able to grapple with statistics on a daily basis, think out of the box to develop and apply statistical models to different cases, and possess top commercial awareness and understanding of economics. The name of the game is uncertainty, so actuaries also need to be able to explain the complex data they produce to senior management to help them understand how to adapt their strategies and take plans forward.
Actuaries can specialise in a number of areas within business and finance. Particularly large sectors are investment banking, insurance and pensions, in which the information and predictions they are able to drum up provide guidance for trading and the pricing of future premiums. They can work for banks, insurance companies, governmental organisations, consultancies as well as professional services firms, or even work for themselves if they have an impressive amount of experience. This industry offer the opportunity for a wide-ranging portfolio of clients from different industries.
Why is the actuarial industry important?
An element of risk-taking is part of the business world; it can be exciting and if it pays off if it can pay dividends… quite literally! However, first and foremost in any company’s business strategy should be security. An awareness of potential risks and their financial impact will help to protect a assets and integrity if and when problems do hit, enabling a company to have longevity in their plans and avoid financial catastrophe.
Areas of the actuarial industry…
Consultancy – Actuaries in this area tend to work for professional services firms. They provide expert advice for things ranging from mergers and acquisitions to investments and pricing based on their statistical analysis and the predictions they can decipher from this.
Risk Management – From operational risks to financial risks and strategic risks, actuaries who specialise in enterprise risk management are concerned with risks in businesses. Their calculations help companies to avoid and or minimise risk wherever they can!
Insurance – Insurance companies need to know what they could be letting themselves in for when they offer insurance policies and premiums (prices of insurance policies) to potential new customers or existing customers. The actuaries calculate premiums according to their risk calculation findings. This information will also provide guidance on whether the insurance company can take on the financial risk of certain potential insurance payouts!
Investment – Making investments is a rather risky business! It’s the role of actuaries here to suss out where the risks and possible dangers lie using their financial models and statistical analysis techniques to help bankers decide whether an asset would be worth the investment.
Pensions – The actuaries play a really important part of the pensions puzzle. They work out a whole manner of things such as the potential financial risks facing pension schemes and the financial impact it could have for a company.
Using statistical and mathematical modelling to give companies a 'crystal ball' insight into their plans and projects.
Using statistical modelling to calculate probability and risk for insurance agreeents.
Statistical rationale for the investment strategy and big decisions.
Helping companies predict the risk of different pension schemes.
Analysing types and levels of risk across the whole of a business.