The Institute and Faculty of Actuaries (IFoA) has today (31 May) published the outcome of its review of the sources of ‘Group Think’, its impact (good or bad) and suggestions on how to address it.
- Awareness of the issue of ‘Group Think’ key to addressing the risks it creates
- Review stresses the importance of a healthy and robust internal challenge culture in organisations
- Regulators can impact the propensity to ‘Group Think’ by their choice to pursue rules based or principles based approaches.
The IFoA led this review on behalf of the Joint Forum on Actuarial Regulation (JFAR) as part of its ongoing commitment to that forum.
‘Group Think’ is defined in the review as the tendency for one’s own judgment to be influenced by the apparent consensus view of assumptions, methods, processes or approaches leading to a reduction in the variety of ideas in the market.
The review found that regulators can have a role in addressing ‘Group Think’ by their choice to follow either principles or rules based regulatory approaches.
The review also found that the risks associated with ‘Group Think’ are significantly reduced simply by understanding the propensity to participate in group thinking in the first place.
Colin Wilson, President-elect of the IFoA, comments,
“The IFoA undertook this review of ‘Group Think’ on behalf of JFAR to better understand its impact on the actuarial profession. Interestingly, we found that organisational culture was the most significant influencer of ‘Group Think’ behaviour.
“In organisations with good governance structures, this creates a positive impact. Conversely, in organisations with poor governance, there is a risk of fixed structures that discourage fresh thinking and innovation to challenge the industry norm.
“We also found that regulators have the ability to influence the tendency for ‘Group Think’ behaviour and should recognise the impact of both rules based and principles based regulatory approaches. A positive message came out of the review that confirmed the role regulators have in promoting knowledge of best practice, and raising awareness of standards and how they apply.
“While the review looked at ‘Group Think’ in the context of the actuarial profession, it was found to have a wide application. There is a continuing need to support “speaking up” environments as part of the solution to promoting positive working environments and organisational cultures. Raising awareness of the ‘Group Think’ issue is the key to addressing the risks.
“This report builds on the important work that the IFoA have been doing to support good organisational culture through the Quality Assurance Scheme, which we launched last year for businesses who employ actuaries.”
About the Institute and Faculty of Actuaries
The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body.
Research undertaken by the IFoA is not commercial. As a learned society, research helps us to fulfil our royal charter requirements to further actuarial science and serve the public interest.
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.
Members of the IFoA 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 Lloyd’s.
Members are governed by the Institute and Faculty of Actuaries. 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 actuaries in society.
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More information on the Quality Assurance Scheme can be found at: http://www.actuaries.org.uk/regulation/pages/quality-assurance-scheme-qas or by contacting QAS@actuaries.org.uk
About the Joint Forum on Actuarial Regulation (JFAR)
The Joint Forum on Actuarial Regulation (‘JFAR’) was established in 2013 and comprises the Financial Reporting Council, the Institute and Faculty of Actuaries, the Financial Conduct Authority, the Pensions Regulator and the Prudential Regulation Authority. The JFAR is a unique collaboration between regulators to co-ordinate, within the context of its members’ objectives, the identification and analysis of public interest risks to which actuarial work is relevant.
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