Actuaries & ERM

The following 9 statements were preferred to tell people about why actuaries are good candidates for risk management responsibility:

1. bright enough to understand the models, curious enough to do so, and
skeptical enough to understand their limitations.

4. understand the key assumptions, benefits and limitations of financial
models, know the difference between the map and the territory.

20. balance of technical numerical expertise with “real-life” business
experience and judgment

19. trained in making reasonable, justifiable, practical, and useful
decisions based on data known to be less-than-fully credible

15. deep understanding of the financial products and financial
organizations

5. trained to adopt a long term perspective both in terms of drawing
from past experience as well as building long term financial projections

16. familiar with risk Pricing, Markets and marketing and Operational
risks, their inter-relationships, their measurement/management paradigms
and their links to the financial statements

13. capable of anticipating trends and risks – known unknonwns and the
unknown unknowns risks/trends

11. organized as an international profession with continuous training,
standards of practice, integrity

And some additional suggestions were made:

>well-versed in financial economics, but is trained to look for breakdowns of the numerous assumptions (frictions, liquidity problems, etc.) that must be satisfied for financial economics to “work”
>have both a profound understanding of the technical and operational side of the business as well as of the economical, competitor and legal/regulatory environment which the firm is operating
>financial engineers, with a strategic perspective and aware of uncertainties.
>trained for, and often hold, roles which require them to take a holistic view of a financial organisation to understand and forecast its
financial dynamics; thereby recognising that financial model’s structure
and assumptions must be coherent and adaptive, as firm and market behaviour will impact future financial dynamics.

>more precise about the systemic risk around the OTC markets and the links between moral hazard and credit derivatives

My suggestion is that each of us needs to have a crisp answer to the question of why actuaries make good risk managers. And as you are forming YOUR list, you can look at this set of possibile statements are then frame what you think is the key message in your terms.

Several people made very good comments about the considerations for constructing an elevator speech which we should all consider as well. These are posted to a separate page.

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