Future of risk management discussed at Global Financial Crisis Seminar

Speakers at the seminar at Staple Inn covered financial modelling, systemic risk and the lack of commonsense in risk management in the past. Delegates included researchers, regulators, actuaries and mathematicians.

Faculty of Actuaries President Ronnie Bowie said the Actuarial Profession had an important role to play in providing a forum for debate for those at the centre of financial regulation.

Mr Bowie said: “It is clear that the risk management functions that were in place before the global financial crisis was flawed, and that contributed to the depth of the turmoil we have experienced in recent months.”

“As a Profession, it is essential that we help the industry understand the mistakes that were made and take steps to prevent them from happening again. While actuaries have traditionally worked in pensions and insurance, I believe we can play an important role in developing better risk management functions within companies and organisations.”

In presentations at the seminar:

• Researcher, consultant and lecturer in quantitative finance Dr Paul Wilmott spoke about the lack of commonsense in risk management and how the “wrong sort of maths” contributed to the current problems. In particular, he criticised the tendency of quantitative analysts to use the most elegant rather than the most appropriate models.
• Institute of Actuaries Fellow Ralph Frankland spoke about the difficulty of forecasting a one-in-200-year event. He said: “We turn to history as our only potential source of information, but there simply isn’t enough data. In the future, the industry and regulators also have to be aware of the different prior beliefs that are inevitably used when we are using a particular model and choosing the data to insert.”

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Enquiries: Tel. Fleur Morrison on 020 7632 1453 or email fleur.morrison@actuaries.org.uk

Notes to Editors

1. Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.
2. Members of the Profession have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyds.
3. The Profession is governed jointly by the Faculty of Actuaries in Edinburgh and the Institute of Actuaries in London. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of the Profession in society.
4. The Profession is available to provide expert comment to the media on a range of actuarial-related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.