1. Introduction
The President (Dr David Hare): It is over 28 years since a young postgraduate student went to a phone box near the computing science department of Glasgow University to phone the work colleague of the father of a friend to talk about what it is like to be an actuary. This young man had previously thought about being an actuary. He had, in fact, been offered a job, more or less, by Douglas McKinnon, the then General Manager of The Scottish Mutual Assurance Society. But he had decided to stay on and to finish his PhD. So, now that the thesis was nearly finished, his thoughts were turning to the future. And, dare I say it, he was swithering between becoming an accountant or an actuary.
So, he phoned the father of a friend and was given the name of a contact in London at Sun Life Unit Trusts. I am afraid that I cannot remember the name of the man, but, if it was you, please be in touch. I owe you a coffee at the very least.
I can only remember one thing from the conversation: “I love my job”. And that clinched it for me. To hear a businessman speaking with passion about what he did was the thing that made me think: “I want to become an actuary”.
A couple of months later I enrolled at Heriot-Watt University, in the first running of the postgraduate diploma course in actuarial science, and, a year later, on 4 August 1986, I started work with Scottish Mutual, little knowing that in a little bit more than 25 years from then I would be standing here as the President of my profession.
One of the great things about being an actuary is that what that man said to me on the phone is something that most of us here could say: that we love being actuaries. I think that we all have bad days in the office and have days when we, or our families, think life should not be like this. But, in general, I think we derive great satisfaction, and, perhaps, a thrill, from one or more of: the variety of work; the problem-solving challenges; the technical complexity with which we grapple; or, perhaps, the public policy implications of our work. Whatever we do, we are fortunate that we can say we love our jobs.
Whether I am going to love being President for the next year, I do not know. I will certainly give it my best shot and thanks again to you and to Council, in particular, for giving me this privilege.
Over the last 30 years a lot has changed: Big Bang happened as I was studying for my investment exams; the launch of the euro; several credit crises; and a few stock market crashes. A number of changes have happened in the world of economics, and on the world scene we have seen the rise of the East with phenomenal growth rates in China, and other countries, and the consequent implications for us in Europe and the West.
There have also been a number of changes within financial services: unit linking; pensions simplification; the rise of the personal pension, and then the mis-selling scandal; and the shift to low inflation with implications for mortgage endowments and the insurance industry in the eyes of many of its savers. Sadly, we had Equitable Life: words that still hang over us, to some extent. But we have done a lot of work to learn from that experience and to move on.
Within the Institute and Faculty itself, we are now talking about the Institute and Faculty. When I first joined it was the Faculty or the Institute. And, almost, never the twain should meet. I remember the first Joint Council Meeting in York, and the significance of that event. Things moved on quickly, and in 2010 we merged the two bodies.
I should also mention the Financial Reporting Council (FRC) as one of the big changes. The issues around Equitable Life led to the Morris Review and then the requirement for oversight of us as a professional body. This led to the Board of Actuarial Standards, which is now replaced by the Actuarial Council of the FRC, following the restructuring in 2012.
In summary: there has been a lot of change in our economy; a lot of change in our industry; and a lot of change in our profession.
2. Relevance of the Professional Body to the Membership
We must respond to change and be conscious of what that means for us as an organisation and as actuaries. Very soon after the merger in 2010 a new strategy was developed to follow on from our Mission. What I find, when I go round speaking to people, as I had to do as the President-Elect, is that not everybody is aware of the Mission and the Vision of the organisation, and not many people are aware of the strategy that we follow. So I thought it might be quite helpful for us to look and see what we are here for, and how that is reflected in what we do.
2.1. Our Mission
Figure 1 shows the Mission of the profession. It is interesting. It has what you would expect: we are here to regulate actuaries. That is first and foremost what the professional body is here to do – to make sure that those of us who are members do the right thing and have the right standards. We do that in conjunction with the FRC, but we set a lot of the professional standards ourselves.
Mission of the profession
We regulate, but we also promote. Some of our members expect us to be a lobbying force for actuarial roles and the importance of actuarial thought and thinking. That is something that we do.
However, what I want to highlight here is the first element: “… in the public interest, to advance all matters relevant to actuarial science”. The Institute and Faculty is here for more than just our members. At the merger, in the Mission and Vision that we adopted and voted for as members, we have chosen to give ourselves a duty to serve the public interest and to advance actuarial science.
2.2. Our Strategy
There are five aspects to our strategy:
∙ Education
∙ Member support
∙ Regulation
∙ Public affairs
∙ Research and Learned Society.
2.3. Education
First and foremost is education, ensuring that the criticisms that Morris had of our syllabus do not recur, making sure that the syllabus not only moves with the times, but also builds on the research that is done to meet the challenges of the marketplace as it evolves. There is a lot of work done on the education syllabus, but how you deliver it is also important.
The delivery of education is far more than just students sitting in a room. We have students in a huge number of countries throughout the world. We examine, and have over 100 different examination centres outside the UK alongside ten in the UK.
How we help people to learn is a big challenge. Our education strategy involves role play for students to learn softer skills; presentations; commercial awareness; and various internet-based approaches as well as face to face teaching.
With over 12,000 entries for the last sitting of the exams, the logistics are phenomenal. We occasionally have to deal with exam papers being hijacked in mail vans, and losing scripts. We have to minimise that risk, and its impact. So, much work is being done on automation, such as document scanning, which also means that the papers can be marked simultaneously by first and second markers.
There is a huge, sophisticated team behind the scenes to deliver the exams that you sat, whereas all you saw was the exam paper in the exam hall.
2.4. Member Support
The second element of our strategy is member support. If all our member support consisted of just meetings in this room, then we would be failing most of our members. More than 40% of our members are outside the UK, and a large part of the UK membership is not within easy travelling distance of London for an evening meeting. This Address and all sessional meetings are now videoed so that they can be made available to our members throughout the world.
2.5. Regulation
The third element in our strategy is regulation. Yes, we do have rules and regulations to meet, but we also have professionalism standards. How to make those standards live in the lives of actuaries is something on which a team of our people work. Under the leadership of Ben Kemp, our General Counsel, and the lay chair of our professional regulation committee, Sir Philip Mawer, there has been a really important transformation in the professionalism training that is available. Those of you who are members will have received an e-mail about the experienced actuary professionalism training that goes live in a couple of weeks’ time. That will be the next iteration of our training in professional standards in the modern world.
2.6. Public Affairs
Public affairs, the fourth strand in our strategy, is very much more than just grabbing newspaper headlines. In fact, we are not trying to grab newspaper headlines. We are trying to influence because there are issues which the world faces that we, as actuaries, can help inform.
2.7. Research and the Learned Society
Finally, the fifth aspect of our strategy is that of research and the learned society. What is very, very important is to build on the legacy and the experience of the past that forerunners have chronicled for us with the research that is currently done today. We want to keep building on that work and have a really vibrant research community. We have over 700 people involved in research among our members.
Our research covers both quantitative and qualitative issues such as customer behaviour; how best to market; and how best to inform them in communication and education. Philip Scott mentioned the Actuarial Research Centre, the centre in Edinburgh that started last year, and is an important development through which the profession is sponsoring two PhD students a year, to research subjects which are particularly relevant to the insurance industry.
Those are the five prongs of the strategy of the Institute and Faculty of Actuaries. You will notice that there is nothing specifically concerning international. The reason is that over 40% of our members are based outside the UK and so we are already an international organisation. Everything we do has to consider how it will work overseas as well as in the UK, so that we can aim towards an equivalence of experience for our members, wherever they are. Of course, the internet is a key tool to that end.
Equivalence of experience is going to be one of the themes for my presidency. It is interesting that I stand here as the fourth President of the Institute and Faculty. I am the second from the Faculty heritage, which is nice. I am the third Scot. (You might need to think about that!)
2.8. Role of the President
Each President has a chance to put their emphasis on the strategy. When I was younger, I would have come to an event like this to find out what the strategy was, and it was very much in the President’s gift, or so it seemed, to decide what the professional body was going to be doing for the next 2 years. But we are too large a body to be able to do nowadays: we have a turnover of about £30 million, as you will see in the accounts, if you include the Continuous Mortality Investigation. We have a staff of over 100 people. We are a big organisation. You cannot just change the strategy every year, depending on what the President wants to do.
The role of the President has changed to become that of a proactive ambassador for the decisions of the Council. The governance of the professional body is really important to us, bringing a broad base to bear on the decisions of the body and our priorities. So, our governance has the Council setting strategy and although the President is obviously a member of Council and can influence its decisions, the main role of the President is to be an ambassador for those decisions.
Ronnie Bowie, the first President of the Institute and Faculty, set his priority to change: he was our change champion. He led the merger of the two bodies and then led the project to start transforming the executive and the infrastructure of the body.
He handed on to our first lady President, Jane Curtis, whose priorities were regulation and improving the links we have with regulators and the FRC. We have a very strong position where we have good relationships with the FRC and a number of people on government working parties on pensions, and that is largely thanks to Jane and her gracious way of dealing with people.
Jane’s successor was Philip Scott, whose priorities were brand and leadership. He has championed the need to recognise that it is not just our visual identity that is important, but also having values for the organisation and a Mission so that we know what we are about and can all get behind it and pull together. His legacy is of leadership, and of brand values and a brand promise.
2.9. External Influence
I should like to build on that very firm foundation and start to improve the extent to which we influence what is happening outside. When you think of the number of issues that are facing both our society and the societies in which so many of our members work, there are a lot of similarities. Everybody has pensions issues: how we are going to fund retirement. In China the support ratio is something like six to one and they are worried that it is going to fall. In Britain if we had a dependency ratio of six to one we would be thrilled.
Then there are other issues. How do you fund healthcare in a way which is sustainable for society going forward? There is the issue of insurance solvency and what is adequate protection for customers? What are the implications of capital requirements which are too large; and what are the implications of requirements which are too small? And there are issues of solvency – when I have been touring in other parts of the world on your behalf the industry representatives and regulators that I meet are talking of exactly the same issues about which we are talking under Solvency II in the UK. These are important issues.
There are a number of areas where the skills of actuaries are very important to the public debate. We have a lot to contribute but we will only contribute if people think that we are relevant. In a recent survey that we did there were some very positive things said about us by some people, but 70% of Members of Parliament (MPs) had never heard of the Institute and Faculty of Actuaries. About 50% of MPs had heard about actuaries. They thought they were clever people but hard to understand. If you look at journalists, you find that some journalists are aware of us, but other journalists think that dealings with us are just too complicated and difficult.
That is the background against which we are trying to influence public policy. We have given ourselves the obligation through our Mission to advance all matters relevant to actuarial science in the public interest. We need to do something about our relevance and how we are perceived as being relevant by the world outside. We are not going to achieve that unless we continue to be relevant to each other and have members engaged with their professional body. I would like my theme as President to be “Ramping up our relevance”.
2.10. Role of Volunteers
We depend upon our volunteers. We have 2,700 active volunteers for the profession, which is a phenomenal percentage of our membership. But we still need to do more than that because of the opportunities that are available to us. The sad thing is that until we have more members aware of what their professional body is trying to do, I do not see that we are going to take advantage of those opportunities.
2.11. Executive and their Roles
What I would now like to talk about is our professional body and what it is trying to do for us. I thought I would start off with the staff. Derek Cribb, our Chief Executive, joined the profession as a change consultant in 2010 and within a few months he had been appointed Acting Chief Executive and then, in 2011, after the strategy was finished, he was asked to become permanent – or as permanent as any job is these days!
We are very fortunate in having Derek. He has long experience of change management within financial services, both in insurance and in banking. Derek has put together a really first-class team of directors who lead different parts of our work.
Memoria Lewis heads up member support. Memoria joined us as a permanent member of staff last year following a period as a consultant. Memoria comes with over 20 years of experience in international business consultancy, particularly in change management and business transformation.
Memoria’s team are the people who put on events like this. They are the people who oversee the website, the design and the delivery of Continuous Professional Development (CPD), and all our other training material. They are the people who think about community within the profession, setting up member interest groups in different parts of the world, and trying to do what they can to give us a world-class member experience.
Trevor Watkins joined the profession in 2005 after a distinguished career in higher education. He leads our education and examination work. I have mentioned the exam centres that we run. It is a massive organisation in terms of logistics as well as one which ensures that the syllabus keeps up to date, whilst also ensuring that we form links with appropriate universities throughout the world. What we are particularly pleased about is that 17 of the top universities in the world that teach actuarial science are affiliated to us. They have accreditation agreements with us so that when students sit their university exams, the quality of those exams are of a sufficient quality that students can automatically gain exemptions from our exams if they pass their university exams to a sufficiently high standard.
Paul Reynolds joined us last year round about the same time as I joined the presidential team and is our director of our public affairs. He came from the Pension Protection Fund, where he looked after strategic communications, public affairs and internal communications. He calls himself a “Sir Humphrey”, being a career civil servant. He has been a private secretary to one of the ministers in the Department for Pensions. He is also responsible for research and all the consultation work and stakeholder engagement which we undertake with government and regulators.
Then we have Anne Moore, the director of finance and operations. She joined us in 2011 having spent over 20 years in the public sector in a number of senior finance roles. She runs not just finance but all the infrastructure of the profession such as HR, IT delivery and property. The latter is a big issue just now as we move to new premises. We will still be in Staple Inn Hall, you will be glad to know, but we are looking for better offices nearby that will better serve the demands of a growing professional body.
Last, but by no means least, is Ben Kemp, our General Counsel. Ben joined us last year to become General Counsel and head of our professional regulation area. He was a partner in a London law firm and had been our lawyer. He had such high regard for us he wanted to join us!
I have highlighted our top team. In total we have 122 people. I hesitate to single out some in preference to others. However, I would like to mention Dan Watts, who is the man who supports the presidential team and does a sterling job keeping us on the straight and narrow. I would also like to mention Wen Li, who will be watching on video. Wen is our member of staff who lives in Beijing, but she is employed through Hong Kong for a variety of reasons. Wen does a lot of great work raising our profile among our members in China, through the different universities in China and South East Asia with which we are affiliated.
It is interesting that there are some people in our team who are even more enthusiastic about actuarial work than I am and you are. It is great to have such a strong team working with us to try to advance the aims of the Institute and Faculty of Actuaries.
It is probably invidious to highlight one particular area, but I am going to do that. It is member support and it really excites me. It is largely because of their enthusiasm that I was willing to let my name go forward to become President. Those of you who are active volunteers will know that it now feels different being in the Institute and Faculty by comparison to what it felt like at some points in the past. We really have a buzz about the organisation, and that is largely down to the leadership team and to the quality of the people and what they are trying to do for us.
The member support team cover CPD, so their work is relevant to all of us. They do a lot of work in planning conference programmes and administering our other events. But they are also thinking about how to make it all more easily accessible. There is now a lot more material on the web than previously. Once we have finished building the virtual learning environment, which is currently under construction, there will be even more material available to us. So expect great things from these people because that is what they want to deliver for you.
2.12. Relationship between Staff and Members
Before I finish this first phase, which is about the professional body and what it is doing to serve the members, I want to champion the relationship between staff and members. I have heard it said that our staff are not part of the Institute and Faculty of Actuarial because they are not actuaries. I do not find that at all. I do not think it is appropriate to have volunteers running our professional body any longer because there is just too much going on in our busy business lives for us to deal with all the infrastructure in addition. In fact, in many ways, we are not that good at such activities. Why not employ professionals who can do a better job? That is what we have with our staff in the Institute and Faculty.
We are largely a member organisation. That is different to a PLC or a business organisation. We still need to work out what is the best way of engaging members as the membership body develops. However, I think that we have done very well over the last year in particular, and it is such a thrill to be part of this change.
This year I also want to champion how we ensure that we deliver a good membership experience to the 40% outside the UK as well as the 60% in the UK. If we get that right, then we will be delivering a better member experience to people in Edinburgh, Glasgow, Manchester, York and Bristol. We have members throughout Britain who do not come to London-based events all the time. So if we are delivering good services to Beijing, we will also be delivering them to Birmingham, and so on.
That is an important element and you will be hearing more about it, because we have people who lead member groups in different parts of the world, and we are thinking how best to engage with them and cross-fertilise ideas for the good of all our members.
3. Relevance of the Membership to the Professional Body
3.1. Role of Volunteers
I have covered the relevance of the professional body to the members. What about the relevance of the members and, in particular, the volunteers, to the professional body? We have 2,700 volunteers. That means a very large percentage of our membership are volunteering. That is fantastic but we need to have more.
Thirty of the volunteers are your Council. Of course, Council’s job is to oversee the development and implementation of the strategy. A lot of that activity is delegated down to the management board and the risk and audit committee, but Council are people who hold the strategy of the profession. They take that responsibility very seriously.
I should like to highlight six more of the key volunteers. Within the professional body, we have what we call Practice Executive Committees (PECs). They are the engine room of the work of the profession among its members.
There is a leader for each committee in a particular area. Chris Watts leads the Finance and Investment PEC. Jules Constantinou leads the Enterprise Risk Management PEC. Sue Elliott leads the Health and Care PEC. Alastair Clarkson leads the Life PEC. Duncan Anderson leads the General Insurance PEC. Jim Boyle leads the Pensions PEC.
Over the past year, it has been a project of Memoria Lewis, and of her team in member support, to make sure that we are really clear on the purpose of the PECs. The role of these committees has changed over time with different emphases or strategies for the profession. Where we are now is in a very good place where the different PECs have consistent terms of reference for what they are trying to do. And what they are doing, within each of their subject areas, is to champion emerging issues to make sure that the profession is keeping up to date and equipping our members to give high quality actuarial advice in whatever area they happen to work.
In addition to CPD and events, they oversee the research that needs to be done. They look at regulatory activity that is relevant to their area and prepare drafts of consultation responses and anything else that come in to do with their area. In fact, Jim Boyle was just telling me he is off to Europe tomorrow to speak to a Member of the European Parliament about employer-covenant research that was sponsored by the profession. That sort of access we are very pleased to secure because, as our Mission says, we are seeking to advance actuarial science in the public interest, and Europe is a very important area for us.
I have highlighted the people who run the committees. Each one is supported by a committee of volunteers, and in almost all cases there are a number of subcommittees of volunteers working hard to push forward the agenda of the Institute and Faculty in that subject area. There are over 400 people on these committees.
There are another 400 people (with a waiting list of 59) in the 400 Club, which is a sounding board off which the Institute and Faculty can bounce ideas. Again, it is a really helpful initiative and we use their input at Council to obtain a sense of what our members are feeling.
We have over 300 people who are active speakers for us at conferences. We have over 100 people who are careers ambassadors, and the list goes on. 2,700 volunteers in total and we want to have more.
3.2. Membership Engagement
Memoria has also introduced the membership engagement programme. Debbie Atkins is our manager of this, and she is even more enthusiastic about actuarial work than I, and almost as enthusiastic as Memoria, hard though that would be. What Debbie has done is put in place an infrastructure that gives everyone access to volunteering opportunities.
I first became a volunteer around 1988 because somebody in Scottish Mutual wanted to stop being a member of a committee. The easiest way to stop was to offer a name as a replacement. We need a better system when we are such a large organisation, and that is what has been put in place.
All volunteer opportunities are advertised on the web so that anybody can apply. We ask the executive to put together a role profile and, in their applications people say why they fit the role for which they are applying. So there is clarity over what is expected, and an awareness of what the person is going to bring. That is working very well. We have a much broader base of volunteers than we have had in the past.
Where the next iteration is probably going to go is in developing a volunteer manual that will go on the website.
3.3. Volunteer Governance
One of the elements which we are still debating is the extent to which a volunteer should be accountable for delivering the role? We have all been at meetings where not everybody had read the papers and were not able to contribute. Some of us have been on working parties where not everybody has done what they were meant to be doing. If volunteers are so important – which they are – to the Institute and Faculty, then volunteers delivering on what they volunteered for must be really important too. But, of course, we have to find a balance because people are not trying to do a bad job when they volunteer. We are searching for an ability to hold each other to account for what we do for the Institute and Faculty.
As a first step, the management board, which comprises the presidential team, a number of senior executive posts, and a number of members of Council and which meets to oversee the implementation of Council’s strategy, from this session, are going to have one-to-one performance reviews from the chair of the committee.
Alan Whalley is about to take up that role following the sterling work of his predecessor, Alan Phillips. One innovation that we decided just last week was that Alan should do performance reviews of all members – including the President – on their role on the management board. That is a first good governance step to demonstrate that volunteers can be relied upon to deliver for the Institute and Faculty.
3.4. International Mentor Network
One particular initiative that I want to do in this area, apart from generally championing the role of volunteers, encouraging people and making them feel appreciated, is in response to a comment that was made to me in China. In China, a number of our Fellows have very senior posts in insurance companies, such as Chief Actuaries. They, typically, move into those posts much earlier in their careers than would happen, say, in the UK. A question is: what support can we give our colleagues when they have really difficult challenges? It can be quite lonely to be the Chief Actuary of a life office.
We are going to be setting up an international mentor network, aimed at people in senior positions of responsibility in their companies, particularly in China and South East Asia, in response to the request. I dare say it will also apply further afield. We have some very experienced actuaries in the UK who have been there, done that, lived through it, and I am sure they would be very pleased to share their experiences and be there as a sounding board for people in other parts of the world. Look out for that initiative on the volunteer network because it will be advertised. If you have experience and would like to help younger colleagues in China and South East Asia, please sign up.
4. Our Relevance to the Outside World
I have talked about the relevance of the professional body to the members. I have also covered the relevance of volunteers to the professional body. The other aspect on volunteering I want to mention is the importance of having a united position.
4.1. A United Position
One of the stories which is quite sad to hear is that, when Derek Cribb was first involved in the profession, he went along to the then Financial Services Authority (FSA) for a meeting and he was warmly thanked for the recent consultation responses. He said “Responses – plural?” And they said “Yes”. The Actuarial Profession had submitted three responses to an FSA consultation, from three different areas of the profession, and they were not mutually consistent. I think “contradictory” was probably the word that I am looking for, but it feels a bit hard. But I think that is what they were. The FSA gentleman said to Derek, “I did you a favour. I filed all three at the bottom of the pile”. That is not ramping up our relevance. We work much harder now in terms of having consistent responses.
I should just like to say a word of thanks to colleagues on both the non-life side and the life side. One of the big issues we have just now is the role of the actuarial function holder (AFH) under Solvency II. In non-life we do not have that role at all, whereas in life offices we have a bigger role. So you have the life AFHs thinking they are losing something, and you have the non-life AFHs thinking they are gaining something that they were managing well without.
How do you find a common position? What it needs is willingness to compromise, to talk and to explore issues. That is what the life and non-life PECs have been doing together for a number of months, and it has come together in a wonderful common statement. We have a meeting on Wednesday to finalise matters. This is a great example of members of the profession working very well together, with a common interest but with very different experiences, coming together to find something that works in the public interest as a common position from the profession. We will be looking to do more and more of this sort of thing as occasions present themselves.
4.2. Public Affairs
Public affairs is, in some ways, the relevance of us to the world. We have talked a lot about the issues that we face already in the world. What we need to do is to engage in a professional way. In the past, when we were smaller organisations, it was possible to engage through volunteers. But now, because of the size of our organisation, we need a professional team. So we have Paul Reynolds and his team of PR professionals and media experts. But we also have a team of policy managers, who are actuaries employed to facilitate the development, through volunteers, of material with which we can inform public debate.
When you have experts who know how to place such material in the press, then you can secure great coverage.
However, Press coverage, and securing headlines, does not adequately represent what we are trying to achieve in public affairs. Rather, what we are doing is seeking to influence the people across a wide range of organisations, whether we have submitted consultation responses to them, or we are on working parties with them, or we have regular consultation meetings with them. When you see the full list, it fills me with pride to think that I am part of an actuarial body that has such an amount of access to decision-makers and other opinion influencers.
We need to work hard to make the most of that position. The way that we do that is through our volunteers and all our research. As I say, we have hundreds of members who are involved in research. What we try to do is find channels for the member-led research that the PECs have identified we need to do. But sometimes we also have issues which come to us from outside, maybe requests from regulators or from other stakeholders looking for help on specific topics. We will then set up working parties to address such requests.
The issue that Jim is going to go to Europe tomorrow to discuss is a good case in point. Quantifying the employer covenant is such a key issue in pensions, so we have sponsored research in that area. We had a competitive tender and various firms did work for us, so that we were able to use the output in influencing and helping opinion-formers to be well informed in the debate.
Some strategic research is funded centrally, but a lot of it is done by the members, through member research groups, and also through consultation response groups. Each of the PECs has a group which will work with the appropriate policy manager.
We are very well placed to ramp up our relevance externally. It is “steady as she goes”.
5. Relevance to Employers
5.1. Our Skillset
The other topic we need to consider is the relevance of our skillset to employers.
Figure 2 is a slide that I used recently in a conference in Macao, near Hong Kong. There is an annual conference organised by the Actuarial Society of Hong Kong. I found myself speaking on what does an actuary bring to Enterprise Risk Management (ERM) given this is growth area? We expect it to be one of the strategic areas of focus for the Institute and Faculty.
Attributes required for ERM
We drew up a list of all the attributes that you need to have to be good in ERM. Then we colour coded each attribute according to whether or not it is covered by the actuarial syllabus. You will see lots of green ticks for things like identifying and measuring risk; classifying and monitoring risk; scenario analysis; stress testing; extreme events; risk mitigation; and economic capital.
There are question marks around some attributes, such as risks of the organisation as a whole. Operational risk is probably something on which we have done a fair amount of quantification, but less so on strategic risk. Similarly, we do not cover governance, culture, etc. as much as we could.
There are some that we do not cover at all in our exams: influencing skills; and the impact of your behaviour on the culture and the development of the organisation.
One of the key issues we stress when we are speaking to students is the importance, not just of having the technical skills and professionalism of the highest standard, but also of having softer skills, such as communication and commercial skills. Skills which mean that you are listened to and allow you to inject the technical skills and the integrity that the organisation may well need.
One of the issues that actuaries face today is we are not going to have all the opportunities in business that we would like unless we can learn to be relevant to the businesses where we work and develop those softer skills. Many people have already done that and have had successful careers. It is not something that is covered that well in our syllabus. We do have a communications exam and we do have a business awareness course. But there is a lot more that can be done. This is one of the areas that you will see particular focus on within the member support and CPD offerings in the future.
I suppose an analogy is that you can take a horse to water but you cannot make it drink. Part of what the Institute and Faculty is doing here is creating water troughs from which we, as members, can drink, and thereby equip ourselves to move into other areas in our career.
Some might think that meeting such a need is evidence that the actuarial skillset is not as relevant as it used to be. To me that is flawed thinking. An interesting example came just a couple of months ago in my day job. I was at a meeting of a regional actuarial society with some of our colleagues to talk about the exciting data analytics work that goes on now in the industry.
My colleagues gave a really interesting presentation of what different firms are doing, analysing their data and their customers and then drawing business strategy conclusions from that to help them prosper as a business.
In the feedback that we received afterwards one of the actuaries present said: “But that was not actuarial, so why should actuaries be doing that?”. It is an interesting question. I ended up having to answer it. The fact is that, just because other people can do arithmetic, it does not mean to say that we should not keep doing it, and, just because other people might be able to problem solve, does not mean to say that we have no right to keep problem-solving. Even if it does not involve mortality statistics or stochastic modelling, the actual mindset and skillset can travel quite far in business challenges today.
Figure 3 is a list on the screen of what actuaries bring to business problems. We bring all the technical skills that we know and love. We also bring robust actuarial standards and integrity. We bring CPD and professionalism. We are very good at detail, but the best of us are also good at thinking big picture and drawing conclusions that help people to see the significance of data. We also have all the non-commercial research, through volunteers, that is done to try to advance our knowledge base.
What actuaries bring to business problems
One of the key things that I am keen to do in my year as President is to remind people of how valuable is our qualification. If we can combine our technical skills and our professionalism with a greater interpersonal sensitivity and better communication skills and commercial awareness, then we have a very, very strong basis on which to move forward.
6. Conclusion
6.1. Our Vision
Figure 4 outlines the Vision of the Institute and Faculty – I have shown the Mission already and I should like to finish with the Vision. It is that we will serve the public interest by ensuring that where there is uncertainty of future financial outcome, actuaries are trusted and sought after for their valued analysis and authority. It is a great aspiration. We are part of the way there. We need to get all of the way there and make ourselves really relevant to the world at large. That is partly carrying on doing what we are doing, but partly also amending our mindset in how we view our own professional body, how we work together and the expectations that we have of our skilled staff. It is also about clarity and common purpose on what we are trying to achieve.
Vision of the Institute and Faculty of Actuaries
I should like to finish by quoting a friend of mine, and to congratulate Kathryn Morgan for joining Council. At the Annual General Meeting Kathryn was one of the six people voted on from the general constituency. In this Hall a couple of months ago there was a paper on modelling from the Extreme Events Working Party. It was looking at the risks that are tricky to model, and some of the risks that you can miss because models cannot model everything. We had an interesting discussion afterwards about the difficulties of modelling some of the challenges.
We were given a wake-up call by Kathryn who stood up and said this: “So, let us not get depressed. We are the Actuarial Profession. We have the intellect to tackle these tricky problems and somebody has to tackle them. We, the actuaries, are in a good place vis-à-vis models. We know the shortcomings. We can communicate. We like thinking about problems. We like improving things and we have a public interest type of thinking. So we should seize this opportunity. Start influencing government not to make particular decisions in a political way but to make better decisions, understanding the pros and cons, the shortcomings of the data and the model. We can do this. This paper is a major start. Let us go out and change the world”.
Thank you for having me as your President. I look forward to working with you, with our staff, with our volunteers and with the other members. I hope you will join with me in making a start on changing the world.
