Editorial: Another Year Comes To An End...With A New Beginning
Editorial: Another Year Comes To An End...With A New Beginning
It's hard to believe that the year has come and is almost gone. It seems like only yesterday that we were still in the hot days of summer and were surviving through the dog days of August. We've passed through a relatively orderly fall and as we come to December, it's always a good opportunity to take stock of the past year.
After surviving the vagaries of the stock market, the spiking in the price of oil, and the real and destructive effect of hurricanes Katrina, Rita and Wilma, it's clear that we live in a world loaded with risk. As actuaries, it continues to be a challenge to accurately calculate the financial impact of natural or catastrophic events on society at large. What is becoming more difficult is to predict the frequency of the occurrence of these events and the impact that they bring on our lives. It is in this vein that we examine the upcoming initiatives of the SOA with respect to Enterprise Risk Management.
The SOA has taken a bold step in the adoption of the motto, Turn Risk Into Opportunity, as the new spirit to guide our profession in the 21st century. It's clear from our experience and our skill sets that actuaries are well placed to address these issues. The challenge for the profession is that we are not viewed as top of mind by society at large when it comes to assessing risk. Clearly, mortality, morbidity and certain other related contingent risks are what society considers as our strong suit. It is not so clear if actuaries have supplanted economists, meteorologists, financial forecasters or statisticians in the broader arena of assessing and evaluating risk in general.
Admittedly, until recently, we as a profession have not sought out opportunities outside of the normal life insurance and pension consulting mindsets in which many of our profession have become accustomed to being so comfortable. Elbowing our way to a commanding spot at the overall risk management table is another new challenge. By the nature of our education and accreditation, we have become accustomed to viewing the future by reviewing the events of the past, the so-called rear-view mirror approach. Although creating accreditation standards is important to maintaining consistency in the application of risk management practice, it is another issue whether actuaries today merit being considered as the preeminent risk managers of society.
Frankly, what is necessary is for each individual actuary, coupled with the support of our professional bodies, to take a proactive approach to these new opportunities. To do so means becoming more adept in circumstances which have not traditionally been the strength of the actuary: getting involved with third parties such as the media and in the political arena. No amount of promotion will change the specter of the actuary in society unless it is enhanced with real life examples of actuaries making a difference in their organizations and in their societies.
For the more experienced actuary, this should come naturally as the experience and the expertise are there in abundance. What is also required is an admission that actuaries have not been the best self- promoters of their risk management acumen. This is not due to a lack of confidence, but rather a lack of appreciation for what society perceives as our weakness. It is not the financial knowledge in abundance which actuaries possess; it is not being able to put that knowledge into the proper perspective and in the proper language so it serves the needs of the general public. As actuaries, we are making strides, but much more needs to be done.
We need to couple our financial acumen with more business acumen and make communicating the actuary's skills and experience a priority at every opportunity. Actuaries need to get in front of the camera and in front of the public when the opportunity presents itself. Many actuaries would readily admit that being in the public eye would be taking on too much risk! Without doing so, we cannot move the profession forward. In being masters of our own destiny, we can genuinely "turn risk into opportunity."
In that spirit, in this edition, we are presenting a panel discussion centered on Enterprise Risk Manage- ment. We are fortunate to have the views of two chief risk officers (CROs) of multi-national organizations, together with two significant individuals in the risk management field–one with a major rating agency and one with a major consulting firm.
It's clear that the role of the CRO is the next wave for our profession. Although both of the CROs interviewed are employed within the realm of insurance companies, one has his employer being among the preeminent mutual fund manufacturers in the United States and a major pioneer in the expansion of life insurance in Asia. The other's employer is directly involved in the international reinsurance business and his insurance organization is owned by one of the largest banks in North America.
Similarly, our other two experts come from the consulting arena, but both have had practical experience inside large organizations and both are using this experience in the counsel of their clients.
It's clear that more insurance organizations will be recruiting and developing CROs as they implement their enterprise risk management paradigms. A breakthrough for our profession will come when an actuary becomes the CRO of a major bank or other non-insurance financial institution. Similarly as other non-insurance industries look to actuaries to fill their CRO roles, then the specter of the actuary as risk manager, crossing multiple industry boundaries will become clear.
As this year draws to a close, we can look back with pride and enumerate the accomplishments of the actuarial profession over this year. We are well poised to make significant strides in the year ahead as the preeminent assessors and managers of risk. A few more actuaries will head up risk management functions in large insurance organizations. Over time, it's hoped that more actuaries and more CROs will move into the broader realm of general management in non-insurance industries.
Again, we are only at the beginning; those with the right skills, the right temperaments and the right opportunities will offer a glimpse of the promise and potential our profession has to offer for many years to come!