INARM Message - What it takes to be a CRO
Ingram, Dave
Great stuff Mark.
To the entire group...
What are the qualities that are needed to be a good CRO?
Can/Should the acturarial profession work to help actuaries gain those qualities? As a basic requirement or as a post fellowship course of study?
Dave
David Ingram, CERA, FRM, PRM
Willis Re
+1 212 915 8039
From: Mark Baxter <baxt...@bigpond.net.au>
To: 'Nick Albicelli' <njalb...@yahoo.com>; 'Hopewell, David' <dhop...@Aegonusa.com>; in...@list.soa.org <in...@list.soa.org>
Sent: Tue Feb 09 02:51:52 2010
Subject: RE: INARM Message - Building on our Strengths in the ERM Arena
Colleagues,
I have read this debate with much interest and I am not hopeful for the profession’s move into enterprise risk management. As the Chief Risk Officer of a division of a major bank in Australia I feel as if the profession is not creating the skill set needed for general risk management roles. The main skills that I am seeking as an employer are superior negotiating skills, communication skills and an ability to make quick decisions without having to retreat to one’s desk to see what the model predicts. Risk Management by its nature is very diverse and requires a diversity of approach and can accommodate a wide variety of professions, we do not need to own it but we need to be of a collaborative mind set. All too often actuaries like to try to adopt the intellectual high ground which comes across as arrogant and patronising and are often unwilling to defer to other professionals. This does not help when risk management is already dominated by other professions that we need to convince of our worth.
So really as an employer the soft skills are the ones that I seek the technical skills are often a given and can be provided by a wide range of professions.
For those of you who are interested you may want to read my article “A cycle through the risk management countryside” in the December issue of Actuary Australia.
http://www.actuaries.asn.au/IAA/upload/public/AA_DEC09_web.pdf
All the best
Mark Baxter
Chief Risk Officer
Wealth Management
Executive General Manager
Commonwealth Bank of Australia
From: Nick Albicelli
[mailto:njalb...@yahoo.com]
Sent: Tuesday, 9 February 2010 8:26 AM
To: Hopewell, David; in...@list.soa.org
Subject: Re: INARM Message - Building on our Strengths in the ERM Arena
David's
point about what is the actuarial franchise is correct (well, you can add
pension liabilities and the regulations regarding pension liability valuation
too). So even if the current shift away from building markets for risks
(e.g. securitization) to holding such risks in a financial institution's
portfolio (balance sheet) is secular instead of merely cyclical, it will not
help actuaries. To the extent that actuaries are the insurance/pension
mathematicians, why would a non-insurance financial institution choose an
actuary versus someone with similar mathematical and statistical skills (such
as someone with a Master's in Financial Engineering from a top University) but
without the additional investment in learning about these other areas?
Further, Max's point comparing actuaries to value investors is correct, but I
don't see that as a good thing for the profession. If you want to select
a portfolio of insurance risks, use an actuary. But if you need to select
a portfolio of US equity, CRE, FX, etc., there are specialists in each of those
fields whose skills are better suited to selecting that portfolio than the
general math/finance of an actuary. And although the math techniques used
by actuaries *are* useful for risk management, it is in some ways a step back
from "front office" to "middle office" that I'm not sure
the profession is ready or willing to make.
I fear that the opportunity for the profession to transfer to non-insurance
firms through technical skills alone has already been lost to the MFE
degree. But the actuarial field can and should redouble its efforts to
promote non-technical communication skills and business judgment such that
actuaries are seen as the best candidates for management within insurance
companies, who can understand the complex math that underlies almost all of
finance today. From there, maybe branching out into other types of firms,
relying on the combined technical and non-technical skills, might be an easier
sell. Otherwise the profession will be entirely on the defensive and
seriously outnumbered when the MFE granting institutions begin to see
opportunities for their graduates at insurance companies.
From: "Hopewell, David"
<dhop...@Aegonusa.com>
To: "in...@list.soa.org" <in...@list.soa.org>
Sent: Mon, February 8, 2010 1:10:39 PM
Subject: RE: INARM Message - Building on our Strengths in the ERM Arena
Actuaries seem to be very well if not uniquely positioned to intermediate between the business of insurance and the statutory financial requirements that need to be met in order to run an insurance company in the US. That seems to be our franchise.
As major contributors to the current state of the math and practice of funding long dated liabilities, we also run a risk that some of the methods developed are found wanting and are replaced by others based on frameworks developed outside the actuarial profession. That seems to be a difficulty being a profession that is inherently conservative because of appropriately low acceptance of the risk of failure from new approaches.
David Hopewell, FSA CFA
Chief Financial Officer
Transamerica Capital Management
From: Max Rudolph
[mailto:max.r...@rudolphfinancialconsulting.com]
Sent: Monday, February 08, 2010 11:04 AM
To: in...@list.soa.org
Subject: [Spam] RE: (SPAM-LOW) [Spam] RE: INARM Message - Building on
our Strengths in the ERM Arena
Let’s take the other side of this argument. What do other professions bring to the table that we don’t? I hate to see others extrapolate these arguments to say that we should not have a seat at the ERM table. I would argue that our training in valuing illiquid securities (such as insurance or pensions) is a huge advantage over those who always assume that the price in the market is correct and fudge their model parameters so they are equivalent. We see and understand multiple valuation tools which has to be considered an advantage. I would argue that we use the same tools as a value investor.
The last 3 years have been a great example. Let’s not sell ourselves short.
Max
Max J. Rudolph, FSA CFA CERA MAAA
Rudolph Financial Consulting, LLC
From: Isakina, Valentina
[mailto:Valentin...@Bain.com]
Sent: Monday, February 08, 2010 10:26 AM
To: in...@list.soa.org
Subject: (SPAM-LOW) [Spam] RE: INARM Message - Building on our Strengths
in the ERM Arena
I agree with Dave. Seemingly, the only unique skills actuaries can bring to the table are the in-depth knowledge of insurance, pensions, and healthcare economics, regulations, and related trends. All the other skills can also be found in other professions.
Valentina
From: Dave Ingram [mailto:davei...@optonline.net]
Sent: Saturday, February 06, 2010 8:06 AM
To: Rioux, Jean-Yves (CA - Toronto)
Cc: in...@list.soa.org
Subject: Re: INARM Message - Building on our Strengths in the ERM ArenaThanks, Jean-Yves.
I have to admit that I have struggled with finding the words to effectively describe what actuaries bring to the table for ERM that is truly unique.
Here is a link to a collections of 25 short statements that members of this listserv made about a year ago.
Dave
On Feb 5, 2010, at 5:19 PM, Rioux, Jean-Yves (CA - Toronto) wrote:
Hi,
I wanted to share with you an article I wrote as a Member of the CIA Committee on ERM Applications. The article which appeared in the January CIA e-Bulletin may be of interest to actuaries practicing in or interested in ERM.
Building on our Strengths in the ERM Arena
By Jean-Yves Rioux, FCIA
In the summer of 2009, the Enterprise Risk Management (ERM) Applications Committee of the Canadian Institute of Actuaries (CIA) asked members, who listed ERM as their primary or secondary area of practice, to participate in a Strengths, Weakness, Opportunities and Threats (SWOT) survey about actuaries and ERM. The results of the survey were compiled to form a consensus view related to the following:
- As actuaries, how can we promote ourselves in the ERM arena (Our Strengths)?
- What are the potential areas of improvement for actuaries related to ERM (Our Weaknesses)?
- What are the foreseeable forces and trends that will impact actuaries wanting to compete as ERM specialists?
Twenty-three percent of the 103 members who were solicited to participate responded to our survey. The members of the ERM Applications Committee reviewed the results and are confident that the responses can be used to develop promotional material for the profession, and to make recommendations on potential areas of development for actuaries.
The following four, open-ended questions were asked of those surveyed:
- What are the strengths/skills that actuaries possess that give them an advantage in competing for leadership roles in ERM functions?
- What are the weaknesses/knowledge gaps that put actuaries at a disadvantage in competing with other risk practitioners for leadership roles in ERM functions?
- What are the key forces or events that will likely have a positive impact/influence on actuaries practising in the ERM services arena?
- What are the key forces or events that will likely have a negative impact/influence on actuaries practising in the ERM services arena?
THE CONSENSUS VIEW
Our Strengths
It is well-known that actuaries have excellent technical and mathematical skills. They have the ability to model and forecast financial risks and to identify, assess and quantify risks. With their exceptional analytical skills, actuaries are well-positioned to develop risk management solutions to complex problems. Not only do actuaries have broad and detailed knowledge of insurance, they also have broad cross-disciplinary education that spans economics, financial markets and risks. Actuaries understand the inter-relationships between assets and liabilities. In addition to understanding risk transfer, actuaries also have a good understanding of various risks and their dependencies. Actuaries are able to delve into details and understand the overall financial impact.Our Weaknesses
Actuaries have been too focused on insurance. As a result, they sometimes have less knowledge of non-insurance-related risks and business. Due to their focus on insurance risks, actuaries more often than not, have a narrow view of risks. Actuaries should broaden their knowledge to allow them to use a holistic approach to risk (as opposed to a narrow, silo approach). Actuaries sometimes have difficulty raising their sights from the details to see the "Big Picture." They are perceived as being too technical and detail-oriented. Actuaries need to improve both their communication and negotiation/influencing skills, which should help them better market themselves and the profession. Actuaries are generally not well-recognized as risk management and ERM experts.Positive Forces
ERM has become a hot topic these days. The recent problems revealed by the economic crisis highlight the importance and the need for risk management and ERM capabilities. Many corporate players now place increased emphasis on risk management: rating agencies assess ERM capabilities, and professionals and regulators are following the trend in developing and improving risk-related requirements and guidelines. Actuarial organizations are busy promoting ERM. A single, globally-recognized ERM designation has been approved and this should increase the recognition of actuaries as risk professionals.Negative Forces
There is a limited, if not negative, perception regarding actuaries' skills as they relate to risk management. Past actuarial mishaps in the areas of variable annuities valuation and pension funding and valuation have reinforced this view. Furthermore, there is currently strong competition from other risk management organizations such as the Global Association of Risk Professionals (GARP) and the Professional Risk Managers' International Association (PRMIA).Linking the Consensus with the Institute's Strategic Plan
In addition to compiling the results, the ERM Applications Committee compared the essence of the responses to the 2010-2015 CIA Strategic Plan and the CIA's Operating Environment in 2009. The results revealed that many issues that surfaced in the survey were addressed under the Strategic Plan's objectives. Some of these were directly related to ERM while others were broader.The pertinent CIA objectives and goals are related to the following:
- Support relevant research (2.2): Conduct public policy research: retirement, Enterprise Risk Management (ERM), health care financing, automobile insurance, and other emerging issues.
- Promote the profession (3.2): Further develop and promote the expertise of actuaries in ERM.
- Influence international matters (5.3): Maintain and develop collaborative relationships with other relevant international bodies. (5.4): Participate in the development and implementation of the global ERM designation.
- Operating environment – Weaknesses: Insufficient emphasis on business education. Lack of visibility of the profession.
- Operating environment – Opportunities: Highlight the contribution of the role of the profession in risk management given the current economic situation. Establish the profession as leaders in ERM. Promote the actuarial profession so that it is seen as the "go to" profession for financial and risk management issues.
- Operating environment – Threats: Actuarial field/role is being eroded by other professionals or associations (e.g., financial engineering, risk management). Loss of credibility for the profession if major pension plans or financial institutions fail. Perception among relevant stakeholders that actuaries have a narrow technical focus.
The ERM Applications Committee welcomes your comments on possible initiatives to address any weaknesses or to build on our strengths in the ERM arena. Please send your comments to jer...@deloitte.ca.
Jean-Yves Rioux, FCIA, FSA, CERA, is a member of the ERM Applications Committee.
Sincerely,
Jean-Yves Rioux, FCIA, FSA, CERA
Senior Manager | Assurance & Advisory
Deloitte & Touche LLP
181 Bay Street, Brookfield Place, Suite 1400, Toronto, ON, M5J 2V1
Tel/Direct 416-874-4478 | Fax 416-601-6590
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Ingram, Dave
From: Hopewell, David [mailto:dhop...@Aegonusa.com]
Sent: Tuesday, February 09, 2010 3:48 PM
To: in...@list.soa.org
Subject: RE: INARM Message - What it takes to be a CRO
Having made the transition to C suite in the last 12 months, I look at three areas, perhaps because that’s all I can think of at once these days:
1. What to know
2. How to think
3. How to act
I think actuaries can easily achieve the threshold of what to know, although adding behavioral models to financial models would really improve the value prop there. However, there is lots of competition along this dimension.
How to think could be something much like how the article Mark submitted – learn how people who run company’s think and what they consider useful. The article rang true, but there is real development in psychometrics and psychographics so there are certainly other models that could be useful for those who desire guidance or want external validation for their interpretations.
How to act is tricky, because it may at first seem like the bluff confidence of the salesman is the key. However, studies I have seen of successful executives suggests that the real secret of success is high levels of engagement. Read that as: lots of (focused and effective) attention paid to lots of things over lots of hours. No magic there, but it does require a high tolerance for engaging with the unfamiliar and committing to a path before knowledge is complete. These traits seem to be the opposite of the “hyperrational” dominant actuary of Mark’s submission.
David Hopewell, FSA CFA
Chief Financial Officer
Transamerica Capital Management
From: Stephen Britt
[mailto:Stephe...@iag.com.au]
Sent: Tuesday, February 09, 2010
2:22 PM
To: Ingram, Dave; baxt...@bigpond.net.au;
in...@list.soa.org
Subject: [Spam] RE: INARM Message - What it takes
to be a CRO
Note: This e-mail is subject to the disclaimer contained at the bottom of this message.
Mark gave a pretty good summary.
Should actuary’s pursue the ‘soft skills’ like active listening, influencing others, coaching, resolving conflict and public speaking? (BTW these don’t look soft to me!) Any actuary with aspirations to the “C” suite should have them. As for providing courses, this is a pretty crowded field and the skills are not specific to the actuarial profession. Let someone provide do them.
Perhaps allowing up to 50% of CPD hours to be generated from attending appropriate management courses??
Steve.
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Ingram, Dave
I have read this string with interest. I agree with what has been stated. Success on actuarial exams reflect a correlation between the way that the examinations are designed and delivered and the type of individual sitting for the exam. As a result, members of our community have similar traits resulting from education strengths, daily training environment and personality traits. We enjoy our professional activities because most of our daily routines are highly reflective of our personality traits and comfort levels. As a group, we are actuarial androids (sorry, copied from “Anderson Androids” of Anderson Consulting fame) with similar personalities and training – and constantly confirmed by our “reputation” among non-actuaries. Along with our growth in membership, I always hope that such expansion will also mean that our memberships will experience a wider variety of skills and interest and greater heterogeneity in personality traits. We must diversify or we will overpopulate our supply for traditional actuarial employment demands.
However, from discussion with both life, health and general insurance actuaries, I find that most of our current members are not comfortable with expanding membership skills. Current qualified actuaries have already found individual success attributed to our examinations and training. Expansion only introduces more heterogeneous characteristics to a fairly tight homogeneous club. In my participation on syllabus committees, we generally begin by indicating that we already have too much on the exams, but we cannot agree to the removal of any established topics on traditional insurance risks, much less add new topics in ERM. After all, the established topics define actuarial skills.
As actuarial membership grows, individual actuaries are developing new skills. I am impressed over recent years with the number of individual actuaries obtaining MBAs, CFA charters, and other designations in risk management: CERA, PRM, FRM. Some of these actuaries are interested in moving into the actuarial executive positions. Some are interested in moving into CRO positions. The majority of actuaries are not interest in either – they want options to pursue ERM positions, but still perform quantitative analysis. Leadership of our actuarial organizations, such as those on this email, can help guide this trend for others. Our purpose is to encourage such directional changes for those who have an interest. Our objective is to provide ERM job platforms. I think that this goes beyond Dave’s original question “ What are the qualities that are need to be a good CRO?”. I think we need to pursue the qualities actuaries need to be a risk manager. The two are similar in that one must be a good risk manager to become a good CRO. We do have a start with the global CERA designation. Not all risk managers will be actuaries; not all CRO will be actuaries. I don’t think that we need to kick ourselves because not all actuaries have the necessary skills or interest. But I think that interested actuaries can have valuable and productive career paths in risk management. We want to continue to lay that path for future actuaries.
Thanks
Jim
Contact Information:
James E. Rech, ACAS, ASA, FCA, MAAA
Consultant
AmeRisk Consulting LLC
9002 North Cobre Drive
Phoenix, Arizona 85028
(602) 468-9047 (Direct)
(602) 224-9357 (Fax)
(602) 363-0096 (Mobile)
email: jr...@cox.net
From: Loreley
[mailto:ma...@crazybearnewfs.com]
Sent: Thursday, February 11, 2010
10:45 AM
To: in...@list.soa.org
Subject: [Spam] RE: [Spam] RE: INARM Message - What it takes to be a CRO
I joined this group just a few days ago with the objective of becoming more familiar with the ERM discipline. I’ve been reading many very interesting e-mails and I was especially “touched” by this thread given my uncommon perception of the role of the actuaries and their education. It was very interesting to read Mark’s e-mail as I concur with most of what he wrote. Given my extensive experience in different countries and at different managerial levels, I definite agree that soft skills are very uncommon in the actuarial profession.
Whether a CRO or any other upper management executive position it is not about the degree of technical expertise in one discipline. Successful executives are individuals who make good decisions in “not so ideal” environments with limited amount of information; using common sense as main drivers....posses the ability to influence others, have extraordinary negotiation skills, manage well internal politics and are able to market themselves extremely well among peer, reports and their managers.
Unfortunately, the Actuarial profession and education system in many countries is not providing even the basic training needed to start developing those soft skills. I do not want to focus too much on education but just give an overview of current top MBA vs. FSA programs:
MBA (top business schools such as Kellogg, Chicago, etc)
· Focus, developing leadership skill
· Class participation is must and key to obtain good grades
· Team assignments are key to pass a course
· Case studies are often used for soft skill courses to set up the discussion
· Answers to questions are not right or wrong, they need to be justified
FSA (USA; Canada)
· Focus, developing technical expertise
· Self study, you pass an exam and you pass the course
· Individual courses assignments by internet
· Case studies are mainly used as source of data for a question
· Answers to questions are right or wrong in 95% of the cases.
· Memorization (list, formulae, etc.) is key to passing an exam
We could write for hours and hours regarding what is the best system but; I guess results are just a good starting point. The reality is a top business MBA graduate will probably be sought after by many industries and will be able to assume very different roles in any organization including that of a CRO. He/she might not be as technically sound as an FSA but he/she has the ability to utilize those soft skills learnt to his/her advantage and hire the technical expertise needed. On the other hand, and FSA who is ERM specialist will probably have a far superior technical knowledge, might be able to built extremely sophisticated models to analyze risk from as many dimensions as anyone can imagine; yet, he/she might not be able to communicate the complexity of his/her findings in a language most executives will not understand or “sell” his/her ideas to the CEO or negotiate risk appetite with all stakeholders.
Act. Loreley Pena Banchik ASA, MAAA
Great stuff Mark.
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Ingram, Dave
From: Loreley
[mailto:ma...@crazybearnewfs.com]
Sent: Thursday, February 11, 2010
10:45 AM
To: in...@list.soa.org
Great stuff Mark.
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Nick Albicelli
Until actuaries are seen by outsiders as being more than merely pension and insurance liabilities, the actuarial profession is not doing its job in expanding opportunities for those who seek them. To the extent that time/energy/exam syllabus are zero sum games, where to add somewhere, you have to subtract somewhere else, I think that continued strength of the profession in insurance/pensions has carried a great opportunity cost.
I am sure that I am not the only one on this list who has talked to young, potential actuaries who ten or fifteen years ago would have been a perfect fit for the profession (high technical aptitude, interest in business/finance) but now choose to go into financial engineering/quant work. So I think that we need to clarify who are we trying to make opportunities for: are we a big tent that seeks to bring value to actuarial students who work outside of insurance firms (e.g. in risk management)? Trying to push for transitioning of experienced actuaries into senior management? Redefine "risk management" in such a way that it encompasses many of the things that actuaries do? Obviously we would like to say yes to all of those questions, but again thinking of the zero sum aspect of things, I'm not sure that is possible.
So where I end up is that the real opening for the actuarial profession is to fit in with a combination of high technical and non-technical ("soft") skills with the standards of a profession. I believe that this is the perfect combination for risk management: you need good technical skills as so much of risk management relies on models, but you need to be well rounded because relying solely on models or not seeing models in their proper context is no good, and (most importantly) as a profession we can create standards that force the individual to think beyond the firm's quarterly P/L.
While I have lukewarm support for the idea that good risk management can bring value to a firm by identifying missed opportunities, I think that finding cheap risks is the job of the front office. Rather, a good risk manager should be a check on the agency problem inherent in so many financial institutions, standing in for directors, investors, and shareholders when an agency problem is present. And while any risk manager can say that they look out for those outside interests, in game theory, this known as "cheap talk" because it costs nothing to say that, but since there is no strong enforcement mechanism, it is ineffective. However, a profession can serve as an effective enforcement mechanism, threatening expulsion of the individual if standards are violated. There is a need for a well-rounded, technically grounded, risk management profession. I think that there is none yet, but that the actuarial profession has a good shot at being it, if it chooses to make the shift in to new areas, even though that will likely mean moving out of old ones.
From: James Rech <jr...@cox.net>
To: in...@list.soa.org
Sent: Thu, February 11, 2010 4:00:01 PM
Subject: RE: [Spam] RE: [Spam] RE: INARM Message - What it takes to be a CRO
I have read this string with interest. I agree with what has been stated. Success on actuarial exams reflect a correlation between the way that the examinations are designed and delivered and the type of individual sitting for the exam. As a result, members of our community have similar traits resulting from education strengths, daily training environment and personality traits. We enjoy our professional activities because most of our daily routines are highly reflective of our personality traits and comfort levels. As a group, we are actuarial androids (sorry, copied from “Anderson Androids” of Anderson Consulting fame) with similar personalities and training – and constantly confirmed by our “reputation” among non-actuaries. Along with our growth in membership, I always hope that such expansion will also mean that our memberships will experience a wider variety of skills and interest and greater heterogeneity in personality traits. We must diversify or we will overpopulate our supply for traditional actuarial employment demands.
However, from discussion with both life, health and general insurance actuaries, I find that most of our current members are not comfortable with expanding membership skills. Current qualified actuaries have already found individual success attributed to our examinations and training. Expansion only introduces more heterogeneous characteristics to a fairly tight homogeneous club. In my participation on syllabus committees, we generally begin by indicating that we already have too much on the exams, but we cannot agree to the removal of any established topics on traditional insurance risks, much less add new topics in ERM. After all, the established topics define actuarial skills.
As actuarial membership grows, individual actuaries are developing new skills. I am impressed over recent years with the number of individual actuaries obtaining MBAs, CFA charters, and other designations in risk management: CERA, PRM, FRM. Some of these actuaries are interested in moving into the actuarial executive positions. Some are interested in moving into CRO positions. The majority of actuaries are not interest in either – they want options to pursue ERM positions, but still perform quantitative analysis. Leadership of our actuarial organizations, such as those on this email, can help guide this trend for others. Our purpose is to encourage such directional changes for those who have an interest. Our objective is to provide ERM job platforms. I think that this goes beyond Dave’s original question “ What are the qualities that are need to be a good CRO?”. I think we need to pursue the qualities actuaries need to be a risk manager. The two are similar in that one must be a good risk manager to become a good CRO. We do have a start with the global CERA designation. Not all risk managers will be actuaries; not all CRO will be actuaries. I don’t think that we need to kick ourselves because not all actuaries have the necessary skills or interest. But I think that interested actuaries can have valuable and productive career paths in risk management. We want to continue to lay that path for future actuaries.
Thanks
Jim
Contact Information:
James E. Rech, ACAS, ASA, FCA, MAAA
Consultant
AmeRisk Consulting LLC
9002 North Cobre Drive
Phoenix, Arizona 85028
(602) 468-9047 (Direct)
(602) 224-9357 (Fax)
(602) 363-0096 (Mobile)
email: jr...@cox.net
From: Loreley
[mailto:ma...@crazybearnewfs.com]
Sent: Thursday, February 11, 2010 10:45 AM
To: in...@list.soa.org
Great stuff Mark.
James Lynch
| Just to point out that estimation is a standard part of grade-school and junior high math curriculum. Very different from when I was a kid. James Lynch, FCAS MAAA Upper Montclair, NJ jimlyn...@yahoo.com --- On Tue, 2/9/10, Ingram, Dave <Dave....@willis.com> wrote: |
xiangaun
think I could add something about MFE degrees vs. actuary exams since
I recently left a graduate program at NYU to concentrate on finishing
the actuary exams.
While it is true that the MFE programs cover more financial math they
typically do so with less rigor. In order to get an "A" in many
classes you need to complete a few take-home problems, and you are
allowed to work with others (sometimes you are allowed to hand in one
assignment with multiple names). Many classes have no exams, or just a
single quiz. The actuary exams obviously make people delve into the
subject with greater detail. Programming is important in MFE programs
but not at a high level. In an MFE program there is little in terms of
probability distributions (beyond normal, binomial and lognormal), and
constructing such general functions from data is absent. I found many
classes covered the same material as actuary exams or the SOA
educational requirements.
The wages after MFE, judging by surveys, were the same for someone who
has an associateship (they do get a sign on bonus because they are
less reliant on recruiters). The job prospects for MFEs is a lot
better than a starting actuary, at least in NY. The recent Actuarial
Career fair had people who have been trying to get a job for a number
of years with multiple passed exams. In contrast, MFEs enjoy greater
than 90% employment after the first year. Most go to work on the
supply-side.
The people I know from when I was a physics graduate student who went
into finance worked on the buy-side and were expected to do
fundamental research at a PhD level. Neither an MFE or actuary exams
can prepare someone for that type of career.
Regards
On Feb 9, 4:07 pm, "Ingram, Dave" <Dave.Ing...@willis.com> wrote:
> David,
>
> Your point on "committing to a path before knowledge is complete" is well taken. Years ago, I went to a management workshop at an annual meeting. The poor business school prof was completely frustrated by the class who refused to play his game and make any decisions with the very partial information that he provided for any of his examples. In all of the "case studies" the groups of actuaries concluded that they needed to study the matter further.
>
> One of my kids once had a math enrichment class where one of the topics he was taught was estimation. It seems to me that actuaries are taught whatever the polar opposite of estimation is. Estimation is the bridge between the quantitative realm where actuaries operate and the management world of decisions with partial information. Some actuaries master estimation on their own but it could be a subject that we take seriously as a part of our educational process.
>
> Perhaps we need to have at least one exam with 10,000 problems and answers that are orders of magnitude apart. Instead of our usual 100 problems with answers that are only different in the least significant digit. How quickly and on how little information are you able to form a reasonable conclusion?
>
> Dave
>
> ________________________________
>
> From: Hopewell, David [mailto:dhopew...@Aegonusa.com]
> Sent: Tuesday, February 09, 2010 3:48 PM
> To: in...@list.soa.org
> Subject: RE: INARM Message - What it takes to be a CRO
>
> Having made the transition to C suite in the last 12 months, I look at three areas, perhaps because that's all I can think of at once these days:
>
> 1. What to know
>
> 2. How to think
>
> 3. How to act
>
> I think actuaries can easily achieve the threshold of what to know, although adding behavioral models to financial models would really improve the value prop there. However, there is lots of competition along this dimension.
>
> How to think could be something much like how the article Mark submitted - learn how people who run company's think and what they consider useful. The article rang true, but there is real development in psychometrics and psychographics so there are certainly other models that could be useful for those who desire guidance or want external validation for their interpretations.
>
> How to act is tricky, because it may at first seem like the bluff confidence of the salesman is the key. However, studies I have seen of successful executives suggests that the real secret of success is high levels of engagement. Read that as: lots of (focused and effective) attention paid to lots of things over lots of hours. No magic there, but it does require a high tolerance for engaging with the unfamiliar and committing to a path before knowledge is complete. These traits seem to be the opposite of the "hyperrational" dominant actuary of Mark's submission.
>
> David Hopewell, FSA CFA
>
> Chief Financial Officer
>
> Transamerica Capital Management
>
> dhopew...@aegonusa.com
>
> 319.355.4135
>
> From: Stephen Britt [mailto:Stephen.Br...@iag.com.au]
> Sent: Tuesday, February 09, 2010 2:22 PM
> To: Ingram, Dave; baxte...@bigpond.net.au; in...@list.soa.org
> Subject: [Spam] RE: INARM Message - What it takes to be a CRO
>
> Note: This e-mail is subject to the disclaimer contained at the bottom of this message.
>
> ________________________________
>
> Mark gave a pretty good summary.
>
> Should actuary's pursue the 'soft skills' like active listening, influencing others, coaching, resolving conflict and public speaking? (BTW these don't look soft to me!) Any actuary with aspirations to the "C" suite should have them. As for providing courses, this is a pretty crowded field and the skills are not specific to the actuarial profession. Let someone provide do them.
>
> Perhaps allowing up to 50% of CPD hours to be generated from attending appropriate management courses??
>
> Steve.
>
> ---------------------------------------------
> STEPHEN BRITT
> SENIOR MANAGER
>
> INTERNAL CAPITAL MODELS
> INSURANCE AUSTRALIA GROUP (IAG)
>
> T +61 (0)2 9292 2311
>
> F +61 (0)2 9292 3159
> M +61 (0)411 014 571
> E stephen.br...@iag.com.au <mailto:stephen.br...@iag.com.au>
>
> www.iag.com.au
>
> PLEASE CONSIDER THE ENVIRONMENT
> BEFORE PRINTING THIS EMAIL.
> ---------------------------------------------
>
> From: Ingram, Dave [mailto:Dave.Ing...@willis.com]
> Sent: Wednesday, 10 February 2010 12:02 AM
> To: baxte...@bigpond.net.au; in...@list.soa.org
> Subject: INARM Message - What it takes to be a CRO
>
> Great stuff Mark.
>
> To the entire group...
>
> What are the qualities that are needed to be a good CRO?
>
> Can/Should the acturarial profession work to help actuaries gain those qualities? As a basic requirement or as a post fellowship course of study?
>
> Dave
> David Ingram, CERA, FRM, PRM
> Willis Re
> +1 212 915 8039
>
> ________________________________
>
> From: Mark Baxter <baxte...@bigpond.net.au>
> To: 'Nick Albicelli' <njalbice...@yahoo.com>; 'Hopewell, David' <dhopew...@Aegonusa.com>; in...@list.soa.org <in...@list.soa.org>
> Sent: Tue Feb 09 02:51:52 2010
> Subject: RE: INARM Message - Building on our Strengths in the ERM Arena
>
> Colleagues,
>
> I have read this debate with much interest and I am not hopeful for the profession's move into enterprise risk management. As the Chief Risk Officer of a division of a major bank in Australia I feel as if the profession is not creating the skill set needed for general risk management roles. The main skills that I am seeking as an employer are superior negotiating skills, communication skills and an ability to make quick decisions without having to retreat to one's desk to see what the model predicts. Risk Management by its nature is very diverse and requires a diversity of approach and can accommodate a wide variety of professions, we do not need to own it but we need to be of a collaborative mind set. All too often actuaries like to try to adopt the intellectual high ground which comes across as arrogant and patronising and are often unwilling to defer to other professionals. This does not help when risk management is already dominated by other professions that we need to convince of our worth.
>
> So really as an employer the soft skills are the ones that I seek the technical skills are often a given and can be provided by a wide range of professions.
>
> For those of you who are interested you may want to read my article "A cycle through the risk management countryside" in the December issue of Actuary Australia.
>
> http://www.actuaries.asn.au/IAA/upload/public/AA_DEC09_web.pdf
>
> All the best
>
> Mark Baxter
>
> Chief Risk Officer
>
> Wealth Management
>
> Executive General Manager
>
> Commonwealth Bank of Australia
>
> From: Nick Albicelli [mailto:njalbice...@yahoo.com]
> Sent: Tuesday, 9 February 2010 8:26 AM
> To: Hopewell, David; in...@list.soa.org
> Subject: Re: INARM Message - Building on our Strengths in the ERM Arena
>
> David's point about what is the actuarial franchise is correct (well, you can add pension liabilities and the regulations regarding pension liability valuation too). So even if the current shift away from building markets for risks (e.g. securitization) to holding such risks in a financial institution's portfolio (balance sheet) is secular instead of merely cyclical, it will not help actuaries. To the extent that actuaries are the insurance/pension mathematicians, why would a non-insurance financial institution choose an actuary versus someone with similar mathematical and statistical skills (such as someone with a Master's in Financial Engineering from a top University) but without the additional investment in learning about these other areas?
>
> Further, Max's point comparing actuaries to value investors is correct, but I don't see that as a good thing for the profession. If you want to select a portfolio of insurance risks, use an actuary. But if you need to select a portfolio of US equity, CRE, FX, etc., there are specialists in each of those fields whose skills are better suited to selecting that portfolio than the general math/finance of an actuary. And although the math techniques used by actuaries *are* useful for risk management, it is in some ways a step back from "front office" to "middle office" that I'm not sure the profession is ready or willing to make.
>
> I fear that the opportunity for the profession to transfer to non-insurance firms through technical skills alone has already been lost to the MFE degree. But the actuarial field can and should redouble its efforts to promote non-technical communication skills and business judgment such that actuaries are seen as the best candidates for management within insurance companies, who can understand the complex math that underlies almost all of finance today. From there, maybe branching out into other types of firms, relying on the combined technical and non-technical skills, might be an easier sell. Otherwise the profession will be entirely on the defensive and seriously outnumbered when the MFE granting institutions begin to see opportunities for their graduates at insurance companies.
>
> ________________________________
>
> From: "Hopewell, David" <dhopew...@Aegonusa.com>
> To: "in...@list.soa.org" <in...@list.soa.org>
> Sent: Mon, February 8, 2010 1:10:39 PM
> Subject: RE: INARM Message - Building on our Strengths in the ERM Arena
>
> Actuaries seem to be very well if not uniquely positioned to intermediate between the business of insurance and the statutory financial requirements that need to be met in order to run an insurance company in the US. That seems to be our franchise.
>
> As major contributors to the current state of the math and practice of funding long dated liabilities, we also run a risk that some of the methods developed are found wanting and are replaced by others based on frameworks developed outside the actuarial profession. That seems to be a difficulty being a profession that is inherently conservative because of appropriately low acceptance of the risk of failure from new
> ...
>
> read more »
Gary Venter
It might go beyond the training differences. People with different skills and interests might be attracted to each process.
From: Mark Baxter
[mailto:baxt...@bigpond.net.au]
Sent: Thursday, February 11, 2010 2:32 PM
To: 'Loreley'; in...@list.soa.org
Subject: RE: [Spam] RE: [Spam] RE: INARM Message - What it takes to be a
CRO
Colleagues,
I have found the responses to my e-mails quite fascinating as I (wrongly) assumed that I would be pilloried or at the very least vehemently disagreed with.
I was asked last night to provide a follow up to the Institute of Actuaries of Australia to my article, would anyone object to my taking extracts from this thread?
Thanks in anticipation and regards
Mark Baxter
Chief Risk Officer
Wealth Management
Sent: Friday, 12 February 2010 4:45 AM
To: in...@list.soa.org
Subject: [Spam] RE: [Spam] RE: INARM Message - What it takes to be a CRO
I joined this group just a few days ago with the objective of becoming more familiar with the ERM discipline. I’ve been reading many very interesting e-mails and I was especially “touched” by this thread given my uncommon perception of the role of the actuaries and their education. It was very interesting to read Mark’s e-mail as I concur with most of what he wrote. Given my extensive experience in different countries and at different managerial levels, I definite agree that soft skills are very uncommon in the actuarial profession.
Whether a CRO or any other upper management executive position it is not about the degree of technical expertise in one discipline. Successful executives are individuals who make good decisions in “not so ideal” environments with limited amount of information; using common sense as main drivers....posses the ability to influence others, have extraordinary negotiation skills, manage well internal politics and are able to market themselves extremely well among peer, reports and their managers.
Unfortunately, the Actuarial profession and education system in many countries is not providing even the basic training needed to start developing those soft skills. I do not want to focus too much on education but just give an overview of current top MBA vs. FSA programs:
MBA (top business schools such as Kellogg, Chicago, etc)
· Focus, developing leadership skill
· Class participation is must and key to obtain good grades
· Team assignments are key to pass a course
· Case studies are often used for soft skill courses to set up the discussion
· Answers to questions are not right or wrong, they need to be justified
FSA (USA; Canada)
· Focus, developing technical expertise
· Self study, you pass an exam and you pass the course
· Individual courses assignments by internet
· Case studies are mainly used as source of data for a question
· Answers to questions are right or wrong in 95% of the cases.
· Memorization (list, formulae, etc.) is key to passing an exam
We could write for hours and hours regarding what is the best system but; I guess results are just a good starting point. The reality is a top business MBA graduate will probably be sought after by many industries and will be able to assume very different roles in any organization including that of a CRO. He/she might not be as technically sound as an FSA but he/she has the ability to utilize those soft skills learnt to his/her advantage and hire the technical expertise needed. On the other hand, and FSA who is ERM specialist will probably have a far superior technical knowledge, might be able to built extremely sophisticated models to analyze risk from as many dimensions as anyone can imagine; yet, he/she might not be able to communicate the complexity of his/her findings in a language most executives will not understand or “sell” his/her ideas to the CEO or negotiate risk appetite with all stakeholders.
Act. Loreley Pena Banchik ASA, MAAA
From: Stephen Britt
[mailto:Stephe...@iag.com.au]
Sent: Tuesday, February 09, 2010 2:22 PM
To: Ingram, Dave; baxt...@bigpond.net.au; in...@list.soa.org
Subject: [Spam] RE: INARM Message - What it takes to be a CRO
Note: This e-mail is subject to the disclaimer contained at the bottom of this message.
Mark gave a pretty good summary.
Should actuary’s pursue the ‘soft skills’ like active listening, influencing others, coaching, resolving conflict and public speaking? (BTW these don’t look soft to me!) Any actuary with aspirations to the “C” suite should have them. As for providing courses, this is a pretty crowded field and the skills are not specific to the actuarial profession. Let someone provide do them.
Perhaps allowing up to 50% of CPD hours to be generated from attending appropriate management courses??
Steve.
–––––––––––––––––––––––––––––––––––––––––––––
STEPHEN BRITT
SENIOR MANAGER
INTERNAL CAPITAL MODELS
INSURANCE AUSTRALIA GROUP (IAG)
T +61 (0)2 9292 2311
www.iag.com.au
PLEASE CONSIDER THE ENVIRONMENT
BEFORE PRINTING THIS EMAIL.
–––––––––––––––––––––––––––––––––––––––––––––
From: Ingram, Dave
[mailto:Dave....@willis.com]
Sent: Wednesday, 10 February 2010 12:02 AM
To: baxt...@bigpond.net.au; in...@list.soa.org
Subject: INARM Message - What it takes to be a CRO
Great stuff Mark.
Herr, Dale
Great topic. There’s a concise piece (about 1,000 words, no picture) from Harvard Business Review, November, 2003, titled “Wanted: Chief Ignorance Officer.” One sentence: “Solved problems tend to stay solved, sometimes disastrously so.” One of Gray’s four principles is to abandon the idea that you must have complete information before you act.
http://hbr.org/2003/11/wanted-chief-ignorance-officer/ar/1
Dale Herr
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Note: This e-mail is subject to the disclaimer contained at the bottom of this message.
Mark gave a pretty good summary.
Should actuary’s pursue the ‘soft skills’ like active listening, influencing others, coaching, resolving conflict and public speaking? (BTW these don’t look soft to me!) Any actuary with aspirations to the “C” suite should have them. As for providing courses, this is a pretty crowded field and the skills are not specific to the actuarial profession. Let someone provide do them.
Perhaps allowing up to 50% of CPD hours to be generated from attending appropriate management courses??
Steve.
–––––––––––––––––––––––––––––––––––––––––––––
STEPHEN BRITT
SENIOR MANAGER
INTERNAL CAPITAL MODELS
INSURANCE AUSTRALIA GROUP (IAG)
T +61 (0)2 9292
2311
F +61 (0)2 9292 3159
M +61 (0)411 014 571
E stephe...@iag.com.au
www.iag.com.au
PLEASE CONSIDER THE ENVIRONMENT
BEFORE PRINTING THIS EMAIL.
–––––––––––––––––––––––––––––––––––––––––––––
From: Ingram, Dave
[mailto:Dave....@willis.com]
Sent: Wednesday, 10 February 2010 12:02 AM
To: baxt...@bigpond.net.au; in...@list.soa.org
Subject: INARM Message - What it takes to be a CRO
Great
stuff Mark.
Mango, Donald F
There were a number of suggestions on the things that actuaries or the actuarial profession can do to enhance their value including:
· Develop general business skills and a broader business perspective
· Learn to operate under uncertainty and learn how to take business risks
· Generate creative ideas or solutions
· Grow – business people must grow and mature beyond their technical training
· Improve modeling techniques: (1) develop models that do not require large bodies of historical data, and (2) incorporate current information and trends into models
· Provide quicker, more responsive solutions
· Improve teamwork skills with non-actuaries"
Don
Donald F. Mango, FCAS, MAAA, Chief Actuary
Guy Carpenter & Co, LLC |
44 Whippany Road, PO Box 1926
Morristown, NJ 07962-1926
973.285.7941 | Mobile 862.812.4433 | Fax 917.934.9741
Asst: Nancy Kelly 917-937-3255 or 347-882-7289 (cell)
donald....@guycarp.com
Check out http://www.gccapitalideas.com/tag/fit
Jetha, Shiraz (OIC)
I agree with all the points made about “soft skills”; but I wonder if “nerdism” – if that is the correct description of someone who is highly technical - is starting to be sought after in some quarters.
As an example, it seems that it is no longer sufficient to have an undergrad qualification; academic requirements are inching upwards towards Ph. D. As complexity increases – whether in the operating environment or in the technical aspects – we may see more technically oriented “multi-disciplinary” bosses.
However it will never hurt to have strong soft skills. Especially in consulting.
Shiraz
Hopewell, David
I agree that self selection seems to be at work. It certainly was for me - I was a contented “hyperrational” dominant actuary for at least 10 years before I wanted to close the relevance gap between what I was doing and the way business decisions were made.
In my view, for the most part we live in a meritocracy. In business, merit is often judged by timeliness and relevance to the concerns of the “responsive” or other personality types who run the company, much more so than by the standards actuaries often set for themselves. This doesn’t make those standards unnecessary, just incomplete for C suite jobs and communications. Much useful to both sides can be lost in the gap between what the actuary thinks is relevant and what the executive thinks is needed to make a good decision.
This was not a lesson I necessarily sought at the time, but having taken it to heart really improved my job satisfaction as well as opportunity. Material like Mark shared can help actuaries close the relevance gap, and should enable those with motivation and drive to develop a major competency that can underpin justified and successful self promotion.
David Hopewell, FSA CFA
Chief Financial Officer
Transamerica Capital Management
James Rech
I have read this string with interest. I agree with what has been stated. Success on actuarial exams reflect a correlation between the way that the examinations are designed and delivered and the type of individual sitting for the exam. As a result, members of our community have similar traits resulting from education strengths, daily training environment and personality traits. We enjoy our professional activities because most of our daily routines are highly reflective of our personality traits and comfort levels. As a group, we are actuarial androids (sorry, copied from “Anderson Androids” of Anderson Consulting fame) with similar personalities and training – and constantly confirmed by our “reputation” among non-actuaries. Along with our growth in membership, I always hope that such expansion will also mean that our memberships will experience a wider variety of skills and interest and greater heterogeneity in personality traits. We must diversify or we will overpopulate our supply for traditional actuarial employment demands.
However, from discussion with both life, health and general insurance actuaries, I find that most of our current members are not comfortable with expanding membership skills. Current qualified actuaries have already found individual success attributed to our examinations and training. Expansion only introduces more heterogeneous characteristics to a fairly tight homogeneous club. In my participation on syllabus committees, we generally begin by indicating that we already have too much on the exams, but we cannot agree to the removal of any established topics on traditional insurance risks, much less add new topics in ERM. After all, the established topics define actuarial skills.
As actuarial membership grows, individual actuaries are developing new skills. I am impressed over recent years with the number of individual actuaries obtaining MBAs, CFA charters, and other designations in risk management: CERA, PRM, FRM. Some of these actuaries are interested in moving into the actuarial executive positions. Some are interested in moving into CRO positions. The majority of actuaries are not interest in either – they want options to pursue ERM positions, but still perform quantitative analysis. Leadership of our actuarial organizations, such as those on this email, can help guide this trend for others. Our purpose is to encourage such directional changes for those who have an interest. Our objective is to provide ERM job platforms. I think that this goes beyond Dave’s original question “ What are the qualities that are need to be a good CRO?”. I think we need to pursue the qualities actuaries need to be a risk manager. The two are similar in that one must be a good risk manager to become a good CRO. We do have a start with the global CERA designation. Not all risk managers will be actuaries; not all CRO will be actuaries. I don’t think that we need to kick ourselves because not all actuaries have the necessary skills or interest. But I think that interested actuaries can have valuable and productive career paths in risk management. We want to continue to lay that path for future actuaries.
Thanks
Jim
Contact Information:
James E. Rech, ACAS, ASA, FCA, MAAA
Consultant
AmeRisk Consulting LLC
9002 North Cobre Drive
Phoenix, Arizona 85028
(602) 468-9047 (Direct)
(602) 224-9357 (Fax)
(602) 363-0096 (Mobile)
email: jr...@cox.net
From: Loreley
[mailto:ma...@crazybearnewfs.com]
Sent: Thursday, February 11, 2010 10:45 AM
To: in...@list.soa.org
From: Stephen Britt [mailto:Stephe...@iag.com.au]
Hopewell, David
Having made the transition to C suite in the last 12 months, I look at three areas, perhaps because that’s all I can think of at once these days:
1. What to know
2. How to think
3. How to act
I think actuaries can easily achieve the threshold of what to know, although adding behavioral models to financial models would really improve the value prop there. However, there is lots of competition along this dimension.
How to think could be something much like how the article Mark submitted – learn how people who run company’s think and what they consider useful. The article rang true, but there is real development in psychometrics and psychographics so there are certainly other models that could be useful for those who desire guidance or want external validation for their interpretations.
How to act is tricky, because it may at first seem like the bluff confidence of the salesman is the key. However, studies I have seen of successful executives suggests that the real secret of success is high levels of engagement. Read that as: lots of (focused and effective) attention paid to lots of things over lots of hours. No magic there, but it does require a high tolerance for engaging with the unfamiliar and committing to a path before knowledge is complete. These traits seem to be the opposite of the “hyperrational” dominant actuary of Mark’s submission.
David Hopewell, FSA CFA
From: Stephen Britt
[mailto:Stephe...@iag.com.au]
Sent: Tuesday, February 09, 2010 2:22 PM
To: Ingram, Dave; baxt...@bigpond.net.au; in...@list.soa.org
Madigan, Kevin
I don’t know.
I think one of the unintended consequences of the current actuarial educational regimes is that it causes some to believe that every important thing that an actuary may need to know can and should be on an exam or part of some actuarial syllabus. That just isn’t true.
David asks “What are the qualities that are needed to be a good CRO? Can/Should the actuarial profession work to help actuaries gain those qualities?” We could ask the same question about being a good Chief Actuary or CFO or CUO or CEO or highly sought after consultant or … or … or … Many of the skills required to be a highly successful profession are independent of the profession. The soft skills are usually picked up along the way or provided by employers to all aspiring management types. I don’t think the various societies should worry too much about that; I do think we should try to make it clear, though, that obtaining an actuarial credential is a ticket of admission to the profession and not the terminal point of professional education.
Mark writes “The main skills that I am seeking as an employer are superior negotiating skills, communication skills and an ability to make quick decisions without having to retreat to one’s desk to see what the model predicts.” But this is true for many employers in more traditional actuarial roles. A very senior actuary at a large multi-line insurer usually must have those skills in order to be effective.
I like that Mark’s article is pointing out that moving into the world of risk management is different than moving from pricing to reserving or from insurance to reinsurance, etc. It is a huge leap, not a lunge. As actuaries we are so accustomed to applying our skills in environments that we perceive as being different from one another, but that are actually very related. I also agree 100% with Mark’s observation that the typical actuarial career path tends to be very insular and makes it hard for many actuaries to work with non-actuaries. This is a problem, but I don’t know what the profession can do about it other than reminding actuaries and their employers that we would all be better off if actuaries gained experience working closely with non-actuaries.
Regards,
Kevin
Kevin M. Madigan, PhD, ACAS, MAAA
Consulting Actuary
Pinnacle Actuarial Resources, Inc.
The Firm of Choice
125 High Rock Ave
Saratoga Springs, NY 12866
( Office: 518-288-0139 | Fax: 309-807-2301 | Mobile: 518-526-9390
* Email: kmad...@pinnacleactuaries.com
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From: Ingram, Dave
[mailto:Dave....@willis.com]
Sent: Tuesday, February 09, 2010 8:02 AM
To: baxt...@bigpond.net.au; in...@list.soa.org
Subject: INARM Message - What it takes to be a CRO
Great stuff Mark.
Max Rudolph
I agree with Jim Bridgeman. As another example, some surveys a few years back showed insurance CRO jobs being filled by bankers. Later this changed to people with insurance backgrounds (sometimes actuaries). Many of us felt this was due to both of Jim’s comments – the bankers did not understand the nuances of insurance and they were used to looking at risk in a certain way that needed to be broader. I think that all of us suffer from the risk of blind spots and plan to steal the term for future discussions. This is a great discussion!
Max
Max J. Rudolph, FSA CFA CERA MAAA
Rudolph Financial Consulting, LLC
From: Jim Bridgeman
[mailto:brid...@math.uconn.edu]
Sent: Thursday, February 11, 2010
2:38 PM
To: 'Jetha, Shiraz (OIC)';
in...@list.soa.org
Subject: (SPAM-MEDIUM) RE: [Spam]
RE: [Spam] RE: [Spam] RE: INARM Message - What it takes to be a CRO
How many senior managers in NASA over the years did NOT begin their careers as engineers or test pilots?
Any risk manager who has not had a grounding in the technical aspects of risk and of the field generating the risk will have no credibility. But that’s only a necessary, not a sufficient qualification. So you can’t start with the soft skills, you have to start with the nerdy ones. Then acquire the soft ones, to the extent you weren’t born with them even before you technical educations.
Even if you think that answer is informative, don’t forget that the senior managers at NASA had some gaping holes in their risk management repertoire. They couldn’t have done the risk management job without being engineers or pilots, but the very fact of being engineers and pilots introduced blind spots into the risk management process. (Given that the risk management philosophy was not and could not have been “take no risks at all”)
Jim
Jim Bridgeman
The issue is communications. The rule is, you haven’t communicated unless the recipient has heard you. And that’s your responsibility, not theirs. So, in every communication you start by understanding fully who it is that you are communicating to, how they think, how they hear. Then translate what you need to say into how they can possibly hear it.
At the CRO level you’re going to need to be able to do that as second nature.
Jim
James G. Bridgeman, FSA, CERA, MAAA
Department of Mathematics
University of Connecticut
860-486-8382 (office)
860-416-6509 (cell)
From: Hopewell, David
[mailto:dhop...@Aegonusa.com]
Sent: Tuesday, February 09, 2010 3:48 PM
To: in...@list.soa.org
Loreley
I joined this group just a few days ago with the objective of becoming more familiar with the ERM discipline. I’ve been reading many very interesting e-mails and I was especially “touched” by this thread given my uncommon perception of the role of the actuaries and their education. It was very interesting to read Mark’s e-mail as I concur with most of what he wrote. Given my extensive experience in different countries and at different managerial levels, I definite agree that soft skills are very uncommon in the actuarial profession.
Whether a CRO or any other upper management executive position it is not about the degree of technical expertise in one discipline. Successful executives are individuals who make good decisions in “not so ideal” environments with limited amount of information; using common sense as main drivers....posses the ability to influence others, have extraordinary negotiation skills, manage well internal politics and are able to market themselves extremely well among peer, reports and their managers.
Unfortunately, the Actuarial profession and education system in many countries is not providing even the basic training needed to start developing those soft skills. I do not want to focus too much on education but just give an overview of current top MBA vs. FSA programs:
MBA (top business schools such as Kellogg, Chicago, etc)
· Focus, developing leadership skill
· Class participation is must and key to obtain good grades
· Team assignments are key to pass a course
· Case studies are often used for soft skill courses to set up the discussion
· Answers to questions are not right or wrong, they need to be justified
FSA (USA; Canada)
· Focus, developing technical expertise
· Self study, you pass an exam and you pass the course
· Individual courses assignments by internet
· Case studies are mainly used as source of data for a question
· Answers to questions are right or wrong in 95% of the cases.
· Memorization (list, formulae, etc.) is key to passing an exam
We could write for hours and hours regarding what is the best system but; I guess results are just a good starting point. The reality is a top business MBA graduate will probably be sought after by many industries and will be able to assume very different roles in any organization including that of a CRO. He/she might not be as technically sound as an FSA but he/she has the ability to utilize those soft skills learnt to his/her advantage and hire the technical expertise needed. On the other hand, and FSA who is ERM specialist will probably have a far superior technical knowledge, might be able to built extremely sophisticated models to analyze risk from as many dimensions as anyone can imagine; yet, he/she might not be able to communicate the complexity of his/her findings in a language most executives will not understand or “sell” his/her ideas to the CEO or negotiate risk appetite with all stakeholders.
Act. Loreley Pena Banchik ASA, MAAA
From: Stephen Britt
[mailto:Stephe...@iag.com.au]
Sent: Tuesday, February 09, 2010 2:22 PM
To: Ingram, Dave; baxt...@bigpond.net.au; in...@list.soa.org
Jim Bridgeman
How many senior managers in NASA over the years did NOT begin their careers as engineers or test pilots?
Any risk manager who has not had a grounding in the technical aspects of risk and of the field generating the risk will have no credibility. But that’s only a necessary, not a sufficient qualification. So you can’t start with the soft skills, you have to start with the nerdy ones. Then acquire the soft ones, to the extent you weren’t born with them even before you technical educations.
Even if you think that answer is informative, don’t forget that the senior managers at NASA had some gaping holes in their risk management repertoire. They couldn’t have done the risk management job without being engineers or pilots, but the very fact of being engineers and pilots introduced blind spots into the risk management process. (Given that the risk management philosophy was not and could not have been “take no risks at all”)
Jim
Mark Baxter
Colleagues,
I have found the responses to my e-mails quite fascinating as I (wrongly) assumed that I would be pilloried or at the very least vehemently disagreed with.
I was asked last night to provide a follow up to the Institute of Actuaries of Australia to my article, would anyone object to my taking extracts from this thread?
Thanks in anticipation and regards
Mark Baxter
Chief Risk Officer
Wealth Management
Commonwealth Bank of Australia
Stephen Britt
Note: This e-mail is subject to the disclaimer contained at the bottom of this message.
I’m sorry I have to disagree you here, Dave. A cohort of similar personality types learning about team dynamics will have a tough time in any practical applications.
Learning management skills within a diverse group of students must expose actuaries to a wider range of ideas, ideologies and skill sets.
It helps us to gain respect if we build up respect for other disciplines.
Aimee Kaye
I am really enjoying reading all of your comments. In recruiting CROs or Risk Mangers for insurance organizations and consulting firms, every entity has a different idea of the skill sets they require and how their “Risk” Leader will interact and influence their organization. I hope that the SOA’s new CERA designation will help.
Aimee Kaye
President
Actuarial Careers, Inc.®
Tel: (914) 285-5100
Fax: (914) 285-9375
Email: aime...@actuarialcareers.com
"Leading you to a brighter future. That's our job!"
Visit our continuously updated website: www.actuarialcareers.com
sam.gu...@us.pwc.com
These are all good comments, especially the one indicating that all actuaries should be aware of risk management and ERM principles and practices, no matter what practice area an actuary works in.
I have found that one of the key skills of actuaries mentioned earlier in this discussion string, a deep understanding of the specific risk areas involved and the context in which those risk areas are placed in, is quite important. Nevertheless, although actuaries have sometimes been thought of as being specialists in a narrow siloed area, I have always thought of my actuarial education to be one that has provided me at least some knowledge about other related areas (those 'other' areas in the course of my career have included investments, marketing, cost accounting, human incentives, selection of insurance risks, ...) and a needed level of curiosity to more deeply explore those areas in more depth than a basic education can provide on an as-needed basis. This recognition that my background and knowledge base is not the only relevant one has enabled me to recognize at least some of the consequential effects of decisions, and when knowledge and viewpoints from other experts in a multidisciplinary team are needed.
Current conditions are no different -- an actuary cannot be an expert in everything (although some might think so). Recognition of where your own expertise stops and other views/experiences should be drawn upon remains important. A CRO has to be able to manage her/his understanding realizing that her/his background may not be the only one that is needed.
Sam
| From: | Laughlin Ian <aohl...@bigpond.net.au> |
| To: | in...@list.soa.org |
| Date: | 02/12/2010 01:22 AM |
| Subject: | Re: [Spam] RE: [Spam] RE: INARM Message - What it takes to be a CRO |
Some context for my comments below: for many years I have worked in general management and board roles (i.e. not in actuarial positions) and in that time have had to deal with some significant risk management issues. So I look at this issue from both sides of the fence. A few years ago I joined the Australian Institute's risk management practice committee because I thought the profession had much to offer in risk management, but much to learn too.
They might repeat some earlier points, but here are a few thoughts ...
- Being an actuary is a very good place to start, and it's a much better place to start than most others. Actuarial skills provide a great foundation, which if complemented by a deep understanding of ERM, some real-world business experience, and some of the soft skills mentioned previously, should produce a person very well equipped for ERM work in financial services.
- So the challenge is to encourage and help those of us with the interest in developing a wider set of skills to build on the foundation they already have.
- Working in ERM doesn't necessarily mean becoming a CRO or even aspiring to be a CRO. There are many other roles and potential roles within financial services that would provide a challenging and interesting role for someone skilled in ERM.
- Every actuary, even those working in narrow technical fields, should have a good basic understanding of ERM in order to understand how their work fits into the wider picture, and so to better do their job.
- The need for a rounded set of skills is not restricted to work in ERM. It applies equally to many other aspects of actuarial work, and as a generality, this is a weakness for the profession.
- The profession may be constrained in how much it can help a person gain a rounded set of skills, but it can help understand what is required in ERM. In Australia, we have started to recognize this by including in our requirements for CERA (in addition to passing an exam etc) a mandatory 2-day workshop. This is intended to have a strong practical focus - for example, a major part of the time is devoted to case studies and "war stories" (from people who have dealt with real risk management issues). This is only a small step of course, but it's in the right direction. This discussion has prompted me to ask if we should shift the focus even further.
- I strongly agree with Jim's comments about communication and his point about where responsibility lies. In this context, it is worth reading "Why won't they listen to me?" in the article on "Do Actuaries Have a Larger Role to Play in Enterprise Risk Management?" here: http://www.actuaries.asn.au/IAA/upload/public/AA_DEC09_web.pdf
So can we throw a switch and become the pre-eminent risk management profession in financial services? Of course not. Should we pursue the prize? Absolutely!
Ian
Ian Laughlin
m +61 (0) 408500720
p +61 (02) 99601752
Skype ianlaughlin
e (alt) ianlau...@gmail.com
1. As
actuaries, how can we promote ourselves in the ERM arena (Our Strengths)?
2. What
are the potential areas of improvement for actuaries related to ERM (Our
Weaknesses)?
3. What
are the foreseeable forces and trends that will impact actuaries wanting
to compete as ERM specialists?
Twenty-three percent of the 103
members who were solicited to participate responded to our survey. The
members of the ERM Applications Committee reviewed the results and are
confident that the responses can be used to develop promotional material
for the profession, and to make recommendations on potential areas of development
for actuaries.
The following four, open-ended
questions were asked of those surveyed:
1. What
are the strengths/skills that actuaries possess that give them an advantage
in competing for leadership roles in ERM functions?
2. What
are the weaknesses/knowledge gaps that put actuaries at a disadvantage
in competing with other risk practitioners for leadership roles in ERM
functions?
3. What
are the key forces or events that will likely have a positive impact/influence
on actuaries practising in the ERM services arena?
4. What
are the key forces or events that will likely have a negative impact/influence
on actuaries practising in the ERM services arena?
______________________________________________________________________
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Frank Reynolds
The war vets profited from being officers overseas and so most (2/3) were not in what you consider as actuarial roles but rather were administrators
The actuaries from the 1970's and 1980's usually only have the technical knowledge and very little knowledge of people (oh I know there are exceptions)
The actuaries from the last 20 years think that they are mere number crunchers and that some one else will provide the judgement.
I think we need a major overhaul of the exam system but even more importantly an overhaul of the academics who now control it
At 05:43 PM 09/02/2010, Madigan, Kevin wrote:
I don’t know.
I think one of the unintended consequences of the current actuarial educational regimes is that it causes some to believe that every important thing that an actuary may need to know can and should be on an exam or part of some actuarial syllabus. That just isn’t true.
David asks “What are the qualities that are needed to be a good CRO? Can/Should the actuarial profession work to help actuaries gain those qualities?†We could ask the same question about being a good Chief Actuary or CFO or CUO or CEO or highly sought after consultant or …  or … or … Many of the skills required to be a highly successful profession are independent of the profession. The soft skills are usually picked up along the way or provided by employers to all aspiring management types. I don’t think the various societies should worry too much about that; I do think we should try to make it clear, though, that obtaining an actuarial credential is a ticket of admission to the profession and not the terminal point of professional education.
Mark writes “The main skills that I am seeking as an employer are superior negotiating skills, communication skills and an ability to make quick decisions without having to retreat to one’s desk to see what the model predicts.†But this is true for many employers in more traditional actuarial roles. A very senior actuary at a large multi-line insurer usually must have those skills in order to be effective.
I like that Mark’s article is pointing out that moving into the world of risk management is different than moving from pricing to reserving or from insurance to reinsurance, etc. It is a huge leap, not a lunge. As actuaries we are so accustomed to applying our skills in environments that we perceive as being different from one another, but that are actually very related. I also agree 100% with Mark’s observation that the typical actuarial career path tends to be very insular and makes it hard for many actuaries to work with non-actuaries. This is a problem, but I don’t know what the profession can do about it other than reminding actuaries and their employers that we would all be better off if actuaries gained experience working closely with non-actuaries.
I have read this debate with much interest and I am not hopeful for the profession’s move into enterprise risk management. As the Chief Risk Officer of a division of a major bank in Australia I feel as if the profession is not creating the skill set needed for general risk management roles. The main skills that I am seeking as an employer are superior negotiating skills, communication skills and an ability to make quick decisions without having to retreat to one’s desk to see what the model predicts. Risk Management by its nature is very diverse and requires a diversity of approach and can accommodate a wide variety of professions, we do not need to own it but we need to be of a collaborative mind set. All too often actuaries like to try to adopt the intellectual high ground which comes across as arrogant and patronising and are often unwilling to defer to other professionals. This does not help when risk management is already dominated by other professions that we need to convince of our worth.
So really as an employer the soft skills are the ones that I seek the technical skills are often a given and can be provided by a wide range of professions.
For those of you who are interested you may want to read my article “A cycle through the risk management countryside†in the December issue of Actuary Australia.
http://www.actuaries.asn.au/IAA/upload/public/AA_DEC09_web.pdf
All the best
Mark Baxter
Chief Risk Officer
Wealth Management
Executive General Manager
Commonwealth Bank of Australia
From: Nick Albicelli [ mailto:njalb...@yahoo.com]
Sent: Tuesday, 9 February 2010 8:26 AM
To: Hopewell, David; in...@list.soa.org
Subject: Re: INARM Message - Building on our Strengths in the ERM Arena
David's point about what is the actuarial franchise is correct (well, you can add pension liabilities and the regulations regarding pension liability valuation too). So even if the current shift away from building markets for risks (e.g. securitization) to holding such risks in a financial institution's portfolio (balance sheet) is secular instead of merely cyclical, it will not help actuaries. To the extent that actuaries are the insurance/pension mathematicians, why would a non-insurance financial institution choose an actuary versus someone with similar mathematical and statistical skills (such as someone with a Master's in Financial Engineering from a top University) but without the additional investment in learning about these other areas?
Further, Max's point comparing actuaries to value investors is correct, but I don't see that as a good thing for the profession. If you want to select a portfolio of insurance risks, use an actuary. But if you need to select a portfolio of US equity, CRE, FX, etc., there are specialists in each of those fields whose skills are better suited to selecting that portfolio than the general math/finance of an actuary. And although the math techniques used by actuaries *are* useful for risk management, it is in some ways a step back from "front office" to "middle office" that I'm not sure the profession is ready or willing to make.
I fear that the opportunity for the profession to transfer to non-insurance firms through technical skills alone has already been lost to the MFE degree. But the actuarial field can and should redouble its efforts to promote non-technical communication skills and business judgment such that actuaries are seen as the best candidates for management within insurance companies, who can understand the complex math that underlies almost all of finance today. From there, maybe branching out into other types of firms, relying on the combined technical and non-technical skills, might be an easier sell. Otherwise the profession will be entirely on the defensive and seriously outnumbered when the MFE granting institutions begin to see opportunities for their graduates at insurance companies.
From: "Hopewell, David" <dhop...@Aegonusa.com>
To: "in...@list.soa.org" <in...@list.soa.org>
Sent: Mon, February 8, 2010 1:10:39 PM
Subject: RE: INARM Message - Building on our Strengths in the ERM Arena
Actuaries seem to be very well if not uniquely positioned to intermediate between the business of insurance and the statutory financial requirements that need to be met in order to run an insurance company in the US. That seems to be our franchise.
As major contributors to the current state of the math and practice of funding long dated liabilities, we also run a risk that some of the methods developed are found wanting and are replaced by others based on frameworks developed outside the actuarial profession. That seems to be a difficulty being a profession that is inherently conservative because of appropriately low acceptance of the risk of failure from new approaches.
David Hopewell, FSA CFA
Chief Financial Officer
Transamerica Capital Management
dhop...@aegonusa.com
319.355.4135
From: Max Rudolph [ mailto:max.r...@rudolphfinancialconsulting.com]
Sent: Monday, February 08, 2010 11:04 AM
To: in...@list.soa.org
Subject: [Spam] RE: (SPAM-LOW) [Spam] RE: INARM Message - Building on our Strengths in the ERM Arena
Let’s take the other side of this argument. What do other professions bring to the table that we don’t? I hate to see others extrapolate these arguments to say that we should not have a seat at the ERM table. I would argue that our training in valuing illiquid securities (such as insurance or pensions) is a huge advantage over those who always assume that the price in the market is correct and fudge their model parameters so they are equivalent. We see and understand multiple valuation tools which has to be considered an advantage. I would argue that we use the same tools as a value investor.
The last 3 years have been a great example. Let’s not sell ourselves short.
- Thanks, Jean-Yves.
- Hi,
- By Jean-Yves Rioux, FCIA
- THE CONSENSUS VIEW
- Our Strengths
- Our Weaknesses
- Positive Forces
- Negative Forces
- Operating environment – Weaknesses: Insufficient emphasis on business education. Lack of visibility of the profession.
- Operating environment – Opportunities: Highlight the contribution of the role of the profession in risk management given the current economic situation. Establish the profession as leaders in ERM. Promote the actuarial profession so that it is seen as the "go to" profession for financial and risk management issues.
- Operating environment – Threats: Actuarial field/role is being eroded by other professionals or associations (e.g., financial engineering, risk management). Loss of credibility for the profession if major pension plans or financial institutions fail. Perception among relevant stakeholders that actuaries have a narrow technical focus.
- The ERM Applications Committee welcomes your comments on possible initiatives to address any weaknesses or to build on our strengths in the ERM arena. Please send your comments to jer...@deloitte.ca.
- Jean-Yves Rioux, FCIA, FSA, CERA, is a member of the ERM Applications Committee.
- Sincerely,
- Jean-Yves Rioux, FCIA, FSA, CERA
- Senior Manager | Assurance & Advisory
- Deloitte & Touche LLP
- 181 Bay Street, Brookfield Place, Suite 1400, Toronto, ON, M5J 2V1
- Tel/Direct 416-874-4478 | Fax 416-601-6590
- jer...@deloitte.ca | www.deloitte.ca
- Deloitte is proud to be the Official Supplier of Professional Services
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Jenny Bowen, FSA,
CERA, MAAA
| Vice President
| Risk Management
Swiss Reinsurance America Corporation
| 175 King Street, 10504 Armonk, USA
Direct: +1
914 828 8482 Fax:
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828 7482 E-mail:
Jennife...@swissre.com
http://www.swissre.com
1. As
actuaries, how can we promote ourselves in the ERM arena (Our Strengths)?
2. What
are the potential areas of improvement for actuaries related to ERM (Our
Weaknesses)?
3. What
are the foreseeable forces and trends that will impact actuaries wanting
to compete as ERM specialists?
Twenty-three percent of the 103
members who were solicited to participate responded to our survey. The
members of the ERM Applications Committee reviewed the results and are
confident that the responses can be used to develop promotional material
for the profession, and to make recommendations on potential areas of development
for actuaries.
The following four, open-ended
questions were asked of those surveyed:
1. What
are the strengths/skills that actuaries possess that give them an advantage
in competing for leadership roles in ERM functions?
2. What
are the weaknesses/knowledge gaps that put actuaries at a disadvantage
in competing with other risk practitioners for leadership roles in ERM
functions?
3. What
are the key forces or events that will likely have a positive impact/influence
on actuaries practising in the ERM services arena?
4. What
are the key forces or events that will likely have a negative impact/influence
on actuaries practising in the ERM services arena?
______________________________________________________________________
For information pertaining to Willis' email confidentiality and monitoring
policy, usage restrictions, or for specific company registration and regulatory
status information, please visithttp://www.willis.com/email_trailer.aspx
Laughlin Ian
- Being an actuary is a very good place to start, and it's a much better place to start than most others. Actuarial skills provide a great foundation, which if complemented by a deep understanding of ERM, some real-world business experience, and some of the soft skills mentioned previously, should produce a person very well equipped for ERM work in financial services.
______________________________________________________________________
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Evmeier...@aol.com
- Emphasis on hyperrational vs. responsive approach
- Differences in risk appetite (lowest for actuaries)
- Emphasis on modeling approach for identifying risk vs. reluctance to accept models as valid
Risk! Act - Actuarial Services, Risk Management, Business Strategy
Mail to: evmeier...@aol.com
Frank Ashe
Frank Ashe
+61 (0) 425 291 833
To: 'Hopewell, David'; in...@list.soa.org
Subject: RE: INARM Message - What it takes to be a CRO
The issue is communications. The rule is, you haven't communicated unless the recipient has heard you. And that's your responsibility, not theirs. So, in every communication you start by understanding fully who it is that you are communicating to, how they think, how they hear. Then translate what you need to say into how they can possibly hear it.
At the CRO level you're going to need to be able to do that as second nature.
Jim
James G. Bridgeman, FSA, CERA, MAAA
Department of Mathematics
University of Connecticut
860-486-8382 (office)
860-416-6509 (cell)
From: Hopewell, David
[mailto:dhop...@Aegonusa.com]
Sent: Tuesday, February 09, 2010 3:48
PM
To: in...@list.soa.org
Subject: RE: INARM Message - What
it takes to be a CRO
Having made the transition to C suite in the last 12 months, I look at three areas, perhaps because that's all I can think of at once these days:
1. What to know
2. How to think
3. How to act
I think actuaries can easily achieve the threshold of what to know, although adding behavioral models to financial models would really improve the value prop there. However, there is lots of competition along this dimension.
How to think could be something much like how the article Mark submitted - learn how people who run company's think and what they consider useful. The article rang true, but there is real development in psychometrics and psychographics so there are certainly other models that could be useful for those who desire guidance or want external validation for their interpretations.
How to act is tricky, because it may at first seem like the bluff confidence of the salesman is the key. However, studies I have seen of successful executives suggests that the real secret of success is high levels of engagement. Read that as: lots of (focused and effective) attention paid to lots of things over lots of hours. No magic there, but it does require a high tolerance for engaging with the unfamiliar and committing to a path before knowledge is complete. These traits seem to be the opposite of the "hyperrational" dominant actuary of Mark's submission.
David Hopewell, FSA CFA
Chief Financial Officer
Transamerica Capital Management
From: Stephen Britt
[mailto:Stephe...@iag.com.au]
Sent: Tuesday, February 09, 2010
2:22 PM
To: Ingram, Dave; baxt...@bigpond.net.au;
in...@list.soa.org
Subject: [Spam] RE: INARM Message - What it takes
to be a CRO
Note: This e-mail is subject to the disclaimer contained at the bottom of this message.
Mark gave a pretty good summary.
Should actuary's pursue the 'soft skills' like active listening, influencing others, coaching, resolving conflict and public speaking? (BTW these don't look soft to me!) Any actuary with aspirations to the "C" suite should have them. As for providing courses, this is a pretty crowded field and the skills are not specific to the actuarial profession. Let someone provide do them.
Perhaps allowing up to 50% of CPD hours to be generated from attending appropriate management courses??
Steve.
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MANAGER
INTERNAL
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INSURANCE AUSTRALIA GROUP (IAG)
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- Operating environment - Weaknesses: Insufficient emphasis on business education. Lack of visibility of the profession.
- Operating environment - Opportunities: Highlight the contribution of the role of the profession in risk management given the current economic situation. Establish the profession as leaders in ERM. Promote the actuarial profession so that it is seen as the "go to" profession for financial and risk management issues.
- Operating environment - Threats: Actuarial field/role is being eroded by other professionals or associations (e.g., financial engineering, risk management). Loss of credibility for the profession if major pension plans or financial institutions fail. Perception among relevant stakeholders that actuaries have a narrow technical focus.
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of the Macquarie University Applied Finance Centre.
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