Risk management (commonly referred to as RM in the business) is another area actuarial professionals can get their teeth into.
RM…What’s risk management all about?
“If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties.” You have to admit, Francis Bacon got it spot on when you consider risk management in business!
Risk management is an integral part of formulating strategy and making decisions, big or small, in modern business. It involves assessing risk across all areas of an organisation. What types of risks is the company facing and where? What risks could it face in the future? How are risks linked? What are the possible consequences of the company’s strategies and processes?
Actuarial expertise is necessary here; after all, risk is the name of their game! Actuaries can look at a whole manner of different types of risk facing a company, from operational risk (to do with internal processes and procedures) and financial risk, to brand new areas of risk now posing potential threats to a company that may not have been relevant a matter of a few years, even days or months ago. The research and guidance actuaries can provide to boards and other decision makers in a company can help them to develop frameworks and strategies to manage these various risks and uncertainties and give them some direction on how to tackle them when they hit.
As with all actuarial areas, risk management calls on the actuaries to harness their mathematical and statistical abilities and come up with statistical models and tests to analyse various risk types, spot trends and patterns in complex data and, where possible, predict future risk levels.
They have to be able to communicate their findings to a company’s board members and provide appropriate guidance to managers and clients too – so it’s not just about being great at the numbers and statistical side of things. Top communication skills are paramount too. Remember, not all managers, directors and clients will have expertise in risk management, and so things will need to be explained in a clear, effective way.
The types of risk an actuary in this field will focus on will depend on the type of company they’re providing their services to. The challenges and uncertainties facing an insurance company for example, could differ quite a bit from other industries.
Actuaries can choose to specialise in this area once they have qualified. The Institute and Faculty of Actuaries (IoFA) alongside other actuarial institutions and professional bodies provide the opportunity for its members to study for the Chartered Enterprise Risk Actuary (CERA) qualification, which allows actuaries to acquire the necessary knowledge and specialist technical skills to excel in this particular actuarial area.
As always when it comes to actuarial roles, you’ll usually need to have a finance related degree or a degree with a quantitative element to get into it – and preferably at least a 2:1 result, as most employers will be looking for this when you look for a graduate actuarial trainee role!