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Actuaries Offer Risk Insight on Lessons Learned for Businesses in
Navigating the Financial Crisis
Schaumburg, Ill. (March 16, 2009)–With the financial crisis affecting organizations throughout the world, businesses need help in navigating through the current challenges. Actuaries have identified five lessons learned for businesses to strengthen risk management processes, as noted in a recent call for essays. The Society of Actuaries, Casualty Actuarial Society and Canadian Institute of Actuaries published a collection of 35 essays, "Risk Management: The Current Financial Crises, Lessons Learned and Future Implications," which addresses the causes, effects and solutions in moving forward in the risk-averse economic climate.
With their rigorous training in identifying, managing and mitigating risk, actuaries are well-equipped to discuss the crisis and its implications. The collection of essays identifies five critical lessons, which place an emphasis on enterprise risk management (ERM).
- Incentive compensation must stop paying for excessive risk taking.
- Those with authority to make decisions must have accountability for all the bets they take, not just for the winning bets.
- Businesses must realize that risk history is not destiny.
- Modeling is only an analytic tool; people make decisions.
- To prevent the next crisis risk managers must question the answers.
"Risk culture is paramount, and too few businesses spend time thinking about it and how to integrate enterprise-wide risk management into businesses' corporate culture," said Prakash Shimpi, FSA, CERA, CFA, MAAA and ERM global practice leader for professional services firm Towers Perrin. Prakash noted that businesses need to reinforce the role of the chief risk officer; the single most important action that a company can take.
"Too many businesses were convinced that their actions had little risk to them, and ultimately the conclusions were not questioned," said David Ingram, FSA, CERA, MAAA, FRM, PRM, senior vice president, Willis Re. "Every entity that handles risks should be assessing what would happen if it ended up owning the risk that it thought it would only have temporarily." Ingram added that, "Businesses need to continue to turn to actuaries, whose training provides a deep understanding of risk to both develop and challenge the models."
For the full financial essay collection of "Risk Management: The Current Financial Crises, Lessons Learned and Future Implications," visit Essays.
About Actuaries
Actuaries bring a complex future into focus by applying unique insight to risk and opportunity. Known for their comprehensive approach, actuaries enable smart, more confident decisions.
The Casualty Actuarial Society (CAS) fulfills its mission to advance actuarial science through a focus on research and education. Among its 4,900 members are experts in property-casualty insurance, reinsurance, finance, risk management and enterprise risk management.
The Canadian Institute of Actuaries is the national organization of the actuarial profession. The Institute holds the duty of the profession to the public above the needs of the profession and its members.
The Society of Actuaries (SOA) is an educational, research and professional organization dedicated to serving the public and its 19,000 members. The SOA's vision is for actuaries to be recognized as the leading professionals in the modeling and management of financial risk and contingent events.
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