In December 2020, the Actuaries Institute’s Risk Management Practice Committee (RMPC) hosted a Virtual Insights session titled ‘The evolving field of risk management – A space for young actuaries?’. Stephen Goh, who co-chaired the session, provides a summary of the event and details his key takeaways.
Since I started my actuarial career, risk management practices have undergone several evolutions. Coming out of the Global Financial Crisis, I learnt how to quantify tail-risk and studied capital management techniques designed to prevent failure during future ‘black swan’ events. More recently, with the findings of the Royal Commission fresh in mind, industry focus has turned to non-financial risks; exploring conduct risk and how we can better meet customer expectations in addition to ensuring legal compliance.
What cannot be denied is that risk management is a highly adaptive field, reflecting and evolving to meet the challenges that face our industry and broader society. Many of these challenges are still on the horizon, with issues around climate change, automation, artificial intelligence and intergenerational equality to name a few. As these emerge and develop (perhaps in ways no one expects), the risk management field will need young actuaries who can think broadly, collaborate with other experts and provide sound advice to help their employers and clients navigate this environment.
To understand a bit more about the field and where it’s heading, Meera Sardana and I hosted a panel of senior actuaries with experience in risk management: Elizabeth Baker, Tim Gorst and Nick Kulikov, who reflected on their careers to date and provided their advice on what young actuaries should do to break into, and be successful in, the growing field of risk management.
The following are my key takeaways from the session:
Perceptions of risk management within business is changing – risk management is being thought of less as ‘policing/compliance’ and more about how to help the business identify and respond to future problems and make necessary changes.
- Many upcoming risks are non-financial – and the risk management toolkit of actuaries works well in this new application too.
- Good risk managers work collaboratively to challenge perceptions and identify problems before they occur – risk managers bring people from different areas of the business together to understand the broader implications of a risk. Risk management professionals can’t know everything; we need to leverage knowledge of experts and the perspectives of others.
- Line 1 risk roles are the most accessible for younger actuaries – ‘line 1’ roles are associated with directly managing risk within the business and are great for technical specialists. There is lots of opportunity for analysis and new analytic tools to be applied here.
- Line 2 risk roles were generally more senior roles, but that is changing – line 2 risk is generally a smaller team (than line 1), so tend to be more senior. However, these teams are upskilling in financial risk management, which actuaries excel at, so there may be future opportunities in this space!
- Risk skills are highly transferrable – the ‘ERM framework’ is a key part of an actuary’s toolkit and an understanding of risk helps build trust with senior management. These risk skills can even be transferrable internationally (although you might have some work to do to get familiar with the relevant legislation)!
- No risk experience? Try this – there are lots of pathways to a risk management role. A strong network and mentor will help, but there is plenty that you can do now to build up a base of risk management knowledge/experience to help the transition: consider, for example, getting involved in institute activities or in writing the risk sections of regular reporting (e.g. FCR, ILVR or other formal actuarial advice).
- The RMPC is looking for volunteers – participating in the RMPC is a great way to build your network, stay on top of risk management developments and get experience in the space before you make the jump. To find out more about the RMPC and to get involved, visit the RMPC microsite.
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