by Olubunmi Ojo
Risk Management function of an Actuary
With unbeatable analytical skills, they help organizations plan for the future and protect themselves from loss. By understanding the very nature of risk, they play a key role in the psychological, physical, and financial stability of society. With actuaries’ help, businesses can grow, retirees can invest with confidence, and people can enjoy peace of mind.
How they carry out risk management function
Explaining what they do would not be complete without explaining risk.
Risk comes in many forms. Everybody and every organization faces risk. As experts in measuring and managing risk, we fill a significant need in our society.
As an actuary, our contribution to society’s psychological, physical and economic well-being is incredible. If risk management programs didn’t exist, our economy would not be able to flourish.
To illustrate, here are just a few of the problems we solve:
- We determine how much an insurance company should charge for auto insurance, taking into account many factors such as the car that is being insured and details about the driver.
- We develop life insurance products so that parents can enjoy adventurous recreational activities such as rock climbing while feeling secure that their children will be cared for in the event of an accident.
- We determine how much an insurance company should charge for homeowners insurance, considering a number of factors such as where the home is located.
- We determine how much an insurance company should charge businesses for the many different types of insurance that businesses need, such as liability insurance and business interruption insurance.
- We help companies establish their retirement plans.
- We assist banks in managing their assets and liabilities and develop ways to manage financial risk.
Generally, risk is at the heart of the problems we solve.
Actuaries: The backbone of financial security
Insurance companies, financial planners, and many multinational corporations are hesitant to make certain moves without consulting the actuary first. That’s because the problems they solve provides a safeguard against catastrophe and this gives them the confidence to grow. And that benefits everyone.
The future is uncertain and full of risk. Risk is the chance that an undesirable event will occur, but risk is also opportunity.
Where do they work? Anywhere risk is present.
The insurance industry can’t function without actuaries. We calculate their costs and determine the premiums for policyholders; and while we don’t forecast the weather, we can tell them how much they can expect to pay in claims after the next disaster.
Private corporations rely on the actuary’s risk evaluation to frame their strategic management decisions. And because their judgment is highly valued, the career paths often lead to upper management and executive positions. They are also employed as consultants. Whether they are a part of a nationwide firm or an independent one-person practice, they help companies design pension and benefit plans, evaluate assets and liabilities, and stare down risk–all alongside top executives.
Actuaries also work for the government too, helping manage its programs and overseeing public companies to ensure compliance with regulatory laws.
They also work for:
- Colleges and universities
- Banks and investment firms
- Public accounting firms
- Labor unions
- Rating bureaus
- Fraternal organizations