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Vancouver - The Future of Our Profession: Critical Skills ...

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  • 1. Critical Skills Needed For Future Success Perspectives from the Marketplace June 23, 2003 1 Critical Skills Needed For Future Success n Results of marketplace research n Highlights of member research regarding this subject n Implications n Initiatives underway at the SOA to address these implications 2 1
  • 2. The SOA sponsored research among employers in the marketplace Primary objectives of the research were to: n Identify most important skill set requirements by the marketplace n Identify any gaps and needed changes to existing education and qualifications n Recommend new markets to target n Determine potential opportunities and demand for actuaries by market as identified in the strategic plan n Determine high-level perceptions in marketplace of the actuarial profession 3 Why is this research important? Why now? n Convergence and consolidation within the broader financial services industry n Perception that actuaries are losing positions of power and influence within the organization n The Chief Risk Officer is a growing role financial service organizations – employers must find value in actuaries assuming the role 4 2
  • 3. Markets focused upon for the research n Traditional Actuarial Employers • Practice Areas — Health Benefit Systems — Finance — Life Insurance — Retirement Systems • Consulting/Insurance/Government n Broader Financial Services • Banking: Commercial and Regional • Investment Banking • Mutual Fund Management • Financial Advisors • Brokerages 5 Level of skill desired by traditional actuarial employers Ranking of Skill Area Relative Level of skill required Importance Business Savvy 1 Business Communications Business Acumen Quantitative 2 Performs calculus- based statistical modeling; adept with calculus, finite and infinite series, differential equations, performs cal culus- based statistical modeling Risk Management 3 Designs enterprise financial and other kinds of risk management strategy and tactics; analyzes and manages mitigation of enterprise risk Financial 4 Creates pricing models for new securities issues; analyzes Institutions/Markets assets/liabilities and recommends management strategy and tactics Accounting 5 Analyzes details of financial statements, prepares pro forma projections, performs asset valuations and liability analysis Economics 6 Forecasts short-term economic trends, can explain monetary policy and global trade dynamics Source: 2002 SOA Market Opportunity Research, Leading Solutions Group 6 3
  • 4. Level of skill desired by employers in the broader financial service market Ranking of Skill Area Relative Level of skill required Importance Business Savvy 1 Business Acumen Business Communications Risk Management 2* Designs enterprise financial and other kinds of risk management strategy and tactics; analyzes and manages mitigation of enterprise risk Quantitative 2* Adept with calculus, finite and infinite series, differential eq uations; applies multivariate statistical analysis of variance; knows the general linear model Financial 3 Models and analyzes financial risk for enterprises, analyzes Institutions/Markets market sectors or funds, creates pricing models for new securities issues Accounting 4 Analyzes details of financial statements, prepares pro forma projections, performs asset valuations and liability analysis Economics 5 Forecasts short-term economic trends, can explain monetary policy and global trade dynamics Source: 2002 SOA Market Opportunity Research, Leading Solutions Group * Both Quantitative and Risk Management skills averaged to an equal relatives importance 7 Relative importance of skills sought by employers varies by practices area…. Relative Importance of Skill Sets by Traditional Practice Areas 3.0 3.00 2.9 2.7 2.7 2.6 2.5 2.4 2.4 2.50 2.4 2.3 2.0 2.0 2.00 1.9 1.7 1.8 1.8 1.7 1.50 1.4 1.41.4 1.5 1.3 1.3 1.0 1.00 0.50 0.00 Quantitative Accounting Financial Economics Risk Business Savvy Institutions/ Management Markets Life Insurance Retirement Systems Health Benefits Systems Finance Source: 2002 SOA Market Opportunity Research, Leading Solutions Group 8 4
  • 5. …as does the level of proficiency 10 Skill Set Gradient Mean Response by Traditional 9 Practice Area 8.0 7.6 8 6.6 6.3 7 6.4 6.2 5.9 6.0 6.0 5.9 5.6 6 5.4 5.3 5.4 5.4 5.2 5.0 4.9 4.9 5 4.3 4 3 2 1 0 Quantitative Accounting Financial Economics Risk Management Institutions/ Markets Life Insurance Retirement Systems Health Benefits Systems Finance Note – Measured on a competency scale where 1 is least competent and 10 is most competent. Source: 2002 SOA Market Opportunity Research, Leading Solutions Group 9 Overall, business acumen and communications were very important for all segments 3.00 Relative Importance of Business Savvy Skills 2.6 2.6 2.6 2.5 2.50 2.4 2.4 2.2 2.2 2.1 2.0 2.00 1.8 1.9 1.8 1.9 1.8 1.5 1.50 1.4 1.3 1.00 0.50 0.00 Business Self-Development Leading People Relating to Others Business Acumen Personal Courage Communications Overall Traditional Practice Areas Broader Financial Services Source: 2002 SOA Market Opportunity Research, Leading Solutions Group 10 5
  • 6. Employer’s image of actuarial ability Negative Themes Positive Themes n Narrow n Hard workers n Poor n Motivated communication/interpersonal n Bright skills n Potential n No imagination n Quantitatively skilled n Lack in solutions n Expertise n Poor managers n Communicators n Too linear n Solve complex problems n Lost in detail n Understand products n Not able to see big picture n Thinking ability n In technical box n Business advisor n Cannot multi-task n Manage risk Source: 2002 SOA Market Opportunity Research, Leading Solutions Group 11 The SOA is also utilizing members’ experience to define critical skills Percentage of member respondents who rated profession as the one profession posing the greatest competitive challenge 30% 29% 24% 23% % of Respondents 20% 12% 10% 7% 4% 3% 0% MBAs Accountants Financial Risk Analyst Economist Statistician Other Engineers Source: 2002 SOA Member and Candidate Survey 12 6
  • 7. This SOA is also utilizing members experience to define critical skills (cont.) Other skills and credentials/degrees obtained by Members (Number of Members with other Degrees or Credentials -- 2002) 600 500 400 300 200 100 0 MBAs PhD CFAs FLMI CLU/ChFC JDs CPAs Source: 2002 SOA Membership Database 13 Other important facts we learned from members n Members feel the most important services provided by the SOA is to maintain and enhance the value of the actuarial credentials and to promote the profession to employers n Members measure the SOA’s effectiveness in maintaining the value of the credential through: • Compensation levels for actuaries relative to other professions • Number of opportunities available for actuaries • Number of actuaries in positions of power 14 7
  • 8. Implications of the data n In order to achieve the desires of members, actuaries will need to enhance their skills (according to those who would hire and promote them) n A gap exists between our members and employers in the perception of actuarial skills and abilities • Members believe improving image first will stimulate the demand for actuaries • Employers believe actuaries need improved skills before they will be more utilized in broader markets and promoted to senior positions n Actuaries and employers of actuaries must dedicate time for training of “business savvy skills” 15 Initiatives underway to address the implications The SOA’s Strategic Planning Committee is conducting additional research to address the following questions of employers: • Who do employers hire if not actuaries to identify, manage, and mitigate risk and why • How do employers perceive these competitors vs. actuaries among a number of dimensions • What skills do employers seek for a professional to manage enterprise risk • Why are (or are not) members obtaining additional skills/credentials/degrees 16 8
  • 9. Outputs of research will help to n Create a branding and awareness building campaign for the profession n Determine market opportunities that are most viable and changes the SOA might want consider, if any, to the current education and qualification process in the long-term 17 Initiatives underway to address the implications n Basic Education • Investigating a risk management actuarial track • Reconstructing the ASA course to integrate business communications n Continuing education • Management and Personal Development and the Actuary of the Future Sections will be hosting a webcasts and other events devoted to “business savvy” skills • Increasing partnerships with non-actuarial organizations to enrich actuarial thinking with external perspectives • The SOA is considering a relationship with Kenan-Flagler Business School of Executive Education at University of North Carolina, Chapel Hill to offer opportunities for development of general business skills 18 9
  • 10. Initiatives underway to address the implications n Attracting the best and brightest • Push to look beyond the traditional candidate with strong math focus in order to attract an array of skill sets 19 10
  • 11. Business Savvy Skills (what I’m going to discuss) • Yada, yada, yada. • I think I can, I think I can, I think I can. • Don’t follow me; I’m lost too. • I did it my way. • But that’s the way we’ve always done it. • The only thing we have to fear is fear itself. Business Savvy Skills (what I’m really going to discuss) • Business Communications • Self-Development • Leading People • Relating to Others • Business Acumen • Personal Courage 1
  • 12. Business Communications • Verbal communicator • Persuasive • Logical/engaging presenter • Has fluent business writing skills • Listens well • Shares information Self-Development • Learns quickly • Makes connections • Accountable • Possesses a range of interests • Ambitious 2
  • 13. Leading People • Assesses people accurately • Deals fairly with subordinates • Candid and compassionate • Engenders respect of others • Motivates others to excel Relating to Others • Flexible • Creates network • Builds collaborative trust • Handles conflict positively • Appreciates and fosters teamwork 3
  • 14. Business Acumen • Perceptive • Creative • Devises solutions • Balance • Builds processes • Exhibits broad knowledge Personal Courage • Composed despite fear • Consistent • Ethical • Truthful • Shows self-knowledge • Balances work, life and good health 4
  • 15. What next? • Actuary the Future • Management and Personal Development • Dale Carnegie/Toastmasters • Stop Managing, Start Coaching (Boughton) • Myers-Briggs et al • The Actuary’s Career Planner Business Savvy Skills (what we discussed) • Communication • Development • Leadership • Interpersonal skills • Know-how • Courage 5
  • 16. Special Thanks • Seinfeld • The Little Engine That Could • Bumper Stickers • Frank Sinatra • My first boss • Franklin D. Roosevelt • Mike Kaster 6
  • 17. Role of a Chief Risk Officer Society of Actuaries June 23, 2003 Zafar Rashid, FSA, MAAA Role of a Chief Risk Officer l Risk Policy l Governance Issues l Organization and implementation l Risk analytics and modeling l Data development and management l Risk monitoring l Control and management Page 1
  • 18. Risk Management Policy l Define objectives l Risk definition l Risk standards l Establishing risk appetite Risk Governance l Management/Board approval of policy l Approval of risk standards and appetite l Establish and manage reporting structure l Management of risk committees Page 2
  • 19. Categories of Risk l Market Risk l Credit Risk l Pricing Risk l Legal/Regulatory Risk l Operations Risk l Strategic Risk Risk Choices 1. Reject 2. Transfer 3. Accept Measure Monitor Manage/Control Page 3
  • 20. Measurement • Varies by nature of risk • VaR • RAROC • Present Value of Distributable Earnings • Sharpe ratios • Traditional measures of exposure • Economic value at risk Monitoring • Quarterly updates of exposures • Periodic reporting on maximum limits • Judgmental self-assessment at least quarterly • Regular meetings of divisional RMC’s Page 4
  • 21. Manage/Control • Divisional RMC’s reviews of new ventures, new lines of business and new products • Modification of asset and liability options • Preventive activities • Reinsurance • Other risk transfer options • Maximization of shareholder value The Corporate Risk Management Department l Centralized analysis where necessary l Facilitate BU risk/reward choices l Enterprise wide consistency l Careful selection of global parameters l Recognition of contagion/diversification impacts Page 5
  • 22. Creating Transparency l Local management of risk l Enterprise view of risk profiles l Improving capital and tax efficiency l Monitoring concentration l Managing counterparty exposure l Macro-hedging Organizational and Governance Skills l A strong grasp of company strategy and tactics l Strategic thinking l Organizational advocacy l Communication skills l Business and market savvy l Effectiveness with executive management l Effectiveness with the Board of Directors Page 6
  • 23. Modeling and Analytic Skills l Technical background l Pricing or valuation experience l Conceptual skills l Financial engineering expertise l An economist’s mindset Risk management l Reinsurance experience l Capital markets knowledge l Analytical skills l Creativity l Sense of urgency l Crisis response and management Page 7
  • 24. Lessons learned from experience l Implementing Enterprise-wide Risk Management l Creating a risk management culture l Overcoming fear and suspicion l Broad organizational buy-in l Empowerment and control l Trigger events Role of a Chief Risk Officer Use caution to enhance, not impede, progress. - Chinese Fortune Cookie Page 8

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