11 June 2010
Techniques used by scientists in fields such as biology and complexity are being applied to risk management in a radical new approach which promises to reduce unwelcome surprises.
Neil Cantle, an actuary at Milliman, will outline the CRisALIS™ approach at the Actuarial Profession’s annual risk and investment conference on 13 -15 June, Hilton Caledonian, Edinburgh. The approach has been explored as part of the Profession’s emerging risk working party.
One of the main ideas behind the approach is that risks emerge over time through multiple complex interactions. Rather than studying each component separately it is important to understand how the factors interact.
Mr Cantle said: “Existing frameworks aggregate things in a fundamentally different way to how risks happen in practice. We live in a world of complex adaptive systems, and these can tip over very quickly. The old approaches do not appropriately capture the emergent and multi-characteristic nature of risk – leading to dangerous conclusions.”
Marcus Bowser, a director at ratings agency Standard & Poor’s, welcomed the alternative approach to assessing risk.
He said: “Often existing systems of risk classification categorise events according to the primary cause. Whilst this method simplifies risk management through dimension reduction, it fails to recognise that businesses are exposed to events that crystallise due to the interaction of multiple risk factors. Alternative methods that recognise events occur due to the interaction of multiple risks, and facilitate identification of all root causes, are to be welcomed.”
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Enquiries: Tel. Liz Bury on 020 7632 2181 or email elizabeth.bury@actuaries.org.uk
Notes to Editors
- Actuaries provide commercial, financial and prudential advice on the management of a businesss 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.
- 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.
- 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.
- 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.