vancouver - the future of our profession: critical skills
TRANSCRIPT
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Critical Skills Needed For
Future Success Perspectives from the Marketplace
June 23, 2003
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Critical Skills Needed For Future Success
nResults of marketplace research nHighlights of member research regarding
this subjectn Implicationsn Initiatives underway at the SOA to address
these implications
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The SOA sponsored research among employers in the marketplace
Primary objectives of the research were to:
n Identify most important skill set requirements by the marketplace
n Identify any gaps and needed changes to existing education and qualifications
n Recommend new markets to targetn Determine potential opportunities and demand
for actuaries by market as identified in the strategic plan
n Determine high-level perceptions in marketplace of the actuarial profession
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Why is this research important? Why now?
nConvergence and consolidation within the broader financial services industryn Perception that actuaries are losing
positions of power and influence within the organizationn The Chief Risk Officer is a growing role
financial service organizations –employers must find value in actuaries assuming the role
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Markets focused upon for the researchn Traditional Actuarial Employers
• Practice Areas— Health Benefit Systems— Finance— Life Insurance— Retirement Systems
• Consulting/Insurance/Government
n Broader Financial Services• Banking: Commercial and Regional• Investment Banking• Mutual Fund Management• Financial Advisors• Brokerages
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Level of skill desired by traditional actuarial employers
Economics
Accounting
Financial Institutions/Markets
Risk Management
Quantitative
Business Savvy
Skill Area
Forecasts short-term economic trends, can explain monetary policy and global trade dynamics
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Analyzes details of financial statements, prepares pro forma projections, performs asset valuations and liability analysis
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Creates pricing models for new securities issues; analyzes assets/liabilities and recommends management strategy and tactics
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Designs enterprise financial and other kinds of risk management strategy and tactics; analyzes and manages mitigation of enterprise risk
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Performs calculus- based statistical modeling; adept with calculus, finite and infinite series, differential equations, performs calculus-based statistical modeling
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Business CommunicationsBusiness Acumen
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Level of skill requiredRanking of Relative
Importance
Source: 2002 SOA Market Opportunity Research, Leading Solutions Group
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Level of skill desired by employers in the broader financial service market
Economics
Accounting
Financial Institutions/Markets
Quantitative
Risk Management
Business Savvy
Skill Area
Forecasts short-term economic trends, can explain monetary policy and global trade dynamics
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Analyzes details of financial statements, prepares pro forma projections, performs asset valuations and liability analysis
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Models and analyzes financial risk for enterprises, analyzes market sectors or funds, creates pricing models for new securities issues
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Adept with calculus, finite and infinite series, differential equations; applies multivariate statistical analysis of variance; knows thegeneral linear model
2*
Designs enterprise financial and other kinds of risk management strategy and tactics; analyzes and manages mitigation of enterprise risk
2*
Business Acumen Business Communications
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Level of skill requiredRanking of Relative
Importance
Source: 2002 SOA Market Opportunity Research, Leading Solutions Group* Both Quantitative and Risk Management skills averaged to an equal relatives importance
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0.00
0.50
1.00
1.50
2.00
2.50
3.00
Quantitative Accounting FinancialInstitutions/
Markets
Economics RiskManagement
Business Savvy
Life Insurance Retirement Systems Health Benefits Systems Finance
Relative Importance of Skill Sets by Traditional Practice Areas
Relative importance of skills sought by employers varies by practices area….
Source: 2002 SOA Market Opportunity Research, Leading Solutions Group
2.4
2.7
2.4
2.0
1.3
1.9
1.3
1.0
2.0
1.7
1.4
1.8
1.41.4 1.5
1.8
2.7
1.7
2.42.3
2.6 2.5
2.93.0
5
9
0
1
2
3
4
5
6
7
8
9
10
Quantitative Accounting FinancialInstitutions/
Markets
Economics Risk Management
Life Insurance Retirement Systems Health Benefits Systems Finance
Skill Set Gradient Mean Response by Traditional Practice Area
…as does the level of proficiency
Note – Measured on a competency scale where 1 is least competent and 10 is most competent. Source: 2002 SOA Market Opportunity Research, Leading Solutions Group
6.65.9
6.3
4.9
5.95.2
6.0
5.0
5.66.4
5.4 5.3
6.0
4.95.4 5.4
8.0
6.2
7.6
4.3
10
0.00
0.50
1.00
1.50
2.00
2.50
3.00
BusinessCommunications
Self-Development Leading People Relating to Others Business Acumen Personal Courage
Overall Traditional Practice Areas Broader Financial Services
Relative Importance of Business Savvy Skills
Overall, business acumen and communications were very important for all segments
Source: 2002 SOA Market Opportunity Research, Leading Solutions Group
2.52.6
2.4
2.22.2 2.1
1.31.4
1.5
1.8 1.92.0
2.62.4
2.6
1.8 1.9 1.8
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Employer’s image of actuarial ability
Source: 2002 SOA Market Opportunity Research, Leading Solutions Group
Negative Themes
n Narrown Poor
communication/interpersonal skills
n No imaginationn Lack in solutionsn Poor managersn Too linearn Lost in detailn Not able to see big picturen In technical boxn Cannot multi-task
Positive Themes
n Hard workersn Motivatedn Brightn Potentialn Quantitatively skilledn Expertisen Communicatorsn Solve complex problemsn Understand productsn Thinking abilityn Business advisorn Manage risk
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The SOA is also utilizing members’ experience to define critical skills
Percentage of member respondents who rated profession as the one profession posing the greatest competitive
challenge
0%
10%
20%
30%
MBAs Accountants FinancialEngineers
Risk Analyst Economist Statistician Other
% o
f Res
pond
ents
29%
24%23%
12%
4%3%
7%
Source: 2002 SOA Member and Candidate Survey
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This SOA is also utilizing members experience to define critical skills (cont.)
Other skills and credentials/degrees obtained by Members(Number of Members with other Degrees or Credentials -- 2002)
0
100
200
300
400
500
600
MBAs PhD CFAs FLMI CLU/ChFC JDs CPAs
Source: 2002 SOA Membership Database
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Other important facts we learned from members
n Members feel the most important services provided by the SOA is to maintain and enhance the value of the actuarial credentials and to promote the profession to employers
n Members measure the SOA’s effectiveness in maintaining the value of the credential through: • Compensation levels for actuaries relative to other
professions
• Number of opportunities available for actuaries
• Number of actuaries in positions of power
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Implications of the data
n In order to achieve the desires of members, actuaries will need to enhance their skills (according to those who would hire and promote them)
n A gap exists between our members and employers in the perception of actuarial skills and abilities• Members believe improving image first will stimulate the
demand for actuaries
• Employers believe actuaries need improved skills before they will be more utilized in broader markets and promoted to senior positions
n Actuaries and employers of actuaries must dedicate time for training of “business savvy skills”
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Initiatives underway to address the implications
The SOA’s Strategic Planning Committee is conducting additional research to address the following questions of employers:
• Who do employers hire if not actuaries to identify, manage, and mitigate risk and why
• How do employers perceive these competitors vs. actuaries among a number of dimensions
• What skills do employers seek for a professional to manage enterprise risk
• Why are (or are not) members obtaining additional skills/credentials/degrees
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Outputs of research will help to
n Create a branding and awareness building campaign for the profession
n Determine market opportunities that are most viable and changes the SOA might want consider, if any, to the current education and qualification process in the long-term
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Initiatives underway to address the implications
n Basic Education
• Investigating a risk management actuarial track • Reconstructing the ASA course to integrate business
communications
n Continuing education • Management and Personal Development and the Actuary of the
Future Sections will be hosting a webcasts and other events devoted to “business savvy” skills
• Increasing partnerships with non-actuarial organizations to enrich actuarial thinking with external perspectives
• The SOA is considering a relationship with Kenan-Flagler Business School of Executive Education at University of North Carolina, Chapel Hill to offer opportunities for development of general business skills
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Initiatives underway to address the implications
n Attracting the best and brightest
• Push to look beyond the traditional candidate with strong math focus in order to attract an array of skill sets
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Business Savvy Skills(what I’m going to discuss)
• Yada, yada, yada.• I think I can, I think I can, I think I can.• Don’t follow me; I’m lost too.• I did it my way.• But that’s the way we’ve always done it.• The only thing we have to fear is fear itself.
Business Savvy Skills(what I’m really going to discuss)• Business Communications• Self-Development• Leading People• Relating to Others• Business Acumen• Personal Courage
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Business Communications
• Verbal communicator• Persuasive• Logical/engaging presenter• Has fluent business writing skills• Listens well• Shares information
Self-Development
• Learns quickly• Makes connections• Accountable• Possesses a range of interests• Ambitious
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Leading People
• Assesses people accurately• Deals fairly with subordinates• Candid and compassionate• Engenders respect of others• Motivates others to excel
Relating to Others
• Flexible• Creates network• Builds collaborative trust• Handles conflict positively• Appreciates and fosters teamwork
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Business Acumen
• Perceptive• Creative• Devises solutions• Balance• Builds processes• Exhibits broad knowledge
Personal Courage
• Composed despite fear• Consistent• Ethical• Truthful• Shows self-knowledge• Balances work, life and good health
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What next?
• Actuary the Future • Management and Personal Development• Dale Carnegie/Toastmasters• Stop Managing, Start Coaching (Boughton)• Myers-Briggs et al• The Actuary’s Career Planner
Business Savvy Skills(what we discussed)
• Communication• Development• Leadership• Interpersonal skills• Know-how• Courage
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Special Thanks
• Seinfeld• The Little Engine That Could• Bumper Stickers• Frank Sinatra• My first boss• Franklin D. Roosevelt• Mike Kaster
Page 1
Role of a Chief Risk Officer
Society of Actuaries
June 23, 2003
Zafar Rashid, FSA, MAAA
Role of a Chief Risk Officer
l Risk Policy
l Governance Issues
l Organization and implementation
l Risk analytics and modeling
l Data development and management
l Risk monitoring
l Control and management
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Risk Management Policy
l Define objectives
l Risk definition
l Risk standards
l Establishing risk appetite
Risk Governance
l Management/Board approval of policy
l Approval of risk standards and appetite
l Establish and manage reporting structure
l Management of risk committees
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Categories of Risk
l Market Risk
l Credit Risk
l Pricing Risk
l Legal/Regulatory Risk
l Operations Risk
l Strategic Risk
Risk Choices
1. Reject
2. Transfer
3. Accept Measure
Monitor
Manage/Control
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Measurement
• Varies by nature of risk
• VaR
• RAROC
• Present Value of Distributable Earnings
• Sharpe ratios
• Traditional measures of exposure
• Economic value at risk
Monitoring
• Quarterly updates of exposures
• Periodic reporting on maximum limits
• Judgmental self-assessment at least quarterly
• Regular meetings of divisional RMC’s
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Manage/Control
• Divisional RMC’s reviews of new ventures, new lines of business and new products
• Modification of asset and liability options
• Preventive activities
• Reinsurance
• Other risk transfer options
• Maximization of shareholder value
The Corporate Risk Management Department
l Centralized analysis where necessary
l Facilitate BU risk/reward choices
l Enterprise wide consistency
l Careful selection of global parameters
l Recognition of contagion/diversification impacts
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Creating Transparency
l Local management of risk
l Enterprise view of risk profiles
l Improving capital and tax efficiency
l Monitoring concentration
l Managing counterparty exposure
l Macro-hedging
Organizational and Governance Skills
l A strong grasp of company strategy and tactics
l Strategic thinking
l Organizational advocacy
l Communication skills
l Business and market savvy
l Effectiveness with executive management
l Effectiveness with the Board of Directors
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Modeling and Analytic Skills
l Technical background
l Pricing or valuation experience
l Conceptual skills
l Financial engineering expertise
l An economist’s mindset
Risk management
l Reinsurance experience
l Capital markets knowledge
l Analytical skills
l Creativity
l Sense of urgency
l Crisis response and management
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Lessons learned from experience
l Implementing Enterprise-wide Risk Management
l Creating a risk management culture
l Overcoming fear and suspicion
l Broad organizational buy-in
l Empowerment and control
l Trigger events
Role of a Chief Risk Officer
Use caution to enhance, not impede, progress.
- Chinese Fortune Cookie