By Andrew Chan
I have been helping actuaries develop financial models for more than 25 years. Actuaries are very smart and they have to do a lot of heavy data crunching. However, not all of them are equipped with the right knowledge and tools. There are three major challenges that actuaries face in increasing process efficiency:
- Maximize return from existing IT investment;
- Use the right tool to do the right job; and
- Data, data and data.
Maximize return from existing IT investment
Using Excel 2010 as an example, most of us have recently upgraded our Excel from 2003 to 2010, a major upgrade I would say. However, how many of us were provided necessary training? Yes, we are smart; so sooner or later we will master the new features, but why later? There are many great features in Excel 2010 that can make our jobs easier, e.g., PowerPivot, Sparklines, Slicers or even Solver. Time diverted to training is the issue—we are all too busy. To that objection I offer two remedies. First, Abe Lincoln, when asked about his rail-splitting technique, said he devoted nine units of time to sharpening his ax for every one unit of time splitting rails. Second, Excel 2010 for Dummies gives you control of your time; just dip in when you can. Momentum builds quickly. Given our longstanding familiarity with what Excel does, it is a simple matter to absorb the new features and recognize how the familiar old features are laid out in the Ribbon format of Excel 2007/2010. A few new techniques absorbed at each session will amply and quickly recoup the time you invest in training.
Another example is Visual Basic for Applications (VBA). We all know VBA, but there is a huge difference between a coder and a VBA master in terms of producing system robustness, future enhancement and scalability, e.g., the class module in VBA can provide a much better structural approach. We can significantly improve productivity if we are familiar with our existing tools and have a best practices framework to follow.
The SOA Actuary of the Future Section and the Technology Section co-hosted a webinar “Best Practices for Excel Design and Controls” on June 28. This webinar was the first of a series. If you missed it, webinar content for this first installment can be purchased.
Use the right tool to do the right job
Excel is flexible, powerful and easy to use; however, Excel has limits. There are circumstances where actuaries should go beyond Excel, e.g., data management, sophisticated financial models and sensitive information distribution. There are better tools that are also flexible, powerful and easy to use, e.g., MATLAB, SAS, SQL Server and SharePoint Server. Actuaries are elite analysts! Why should we limit ourselves to a Swiss army knife? Excel works but these tools allow us to deliver better and faster results.
Apart from tools, there are other advanced platforms such as Graphic Processing Units (GPU) and Cloud computing. Bloomberg CTO Shawn Edwards decided to move their bond pricing platform to GPU, and achieved an 800 percent performance increase. Cloud computing allows us to dynamically add thousands more cores to run our Stochastic models in minutes and we need to pay only for the usage!
Data, data and data
Being the biggest data consumer in our organization, data is always the biggest challenge for actuaries. Having the right data flowing freely within the organization will solve half of the problem. So getting the appropriate data strategy is our #1 priority. How can actuaries perform data analytics more easily, spend less time to gather, consolidate and clean data, and provide better data visualization? To achieve these goals, senior management must recognize that data is a key asset of the company. It is a not a single project but an ongoing process that requires constant management and a well-thought out plan. We must change our culture to be data centric!
What are your challenges? CompAct wants to hear your stories, so we can identify industry leaders to share their solutions. Please feel free to email your pains to either myself or Rich.
Andrew Chan, ASA, is a financial model engineer with ALG Consulting. He can be contacted at firstname.lastname@example.org.
Rich Junker, FSA, CLU, MAAA, is an actuarial consultant at Junker consulting in Tampa Bay, and can be contacted at email@example.com.