A common question about our profession is “…and what is it that actuaries actually do?”.
In a nutshell, actuarial consultants analyse the financial implications of future risk and uncertainty, assess the potential costs and potential returns, and advise on the best path forward.
Actuaries do this using financial math, statistics, and educated judgement to evaluate the likelihood and financial implications of possible future events. Using those evaluations, actuarial consultants then help organisations develop strategies to better manage risk.
There are three specific areas of strategic value an actuarial consultant can add to any organisation.
Strategic value an actuarial consultant can bring to your business
Data and decision making
The term “big data” has become a buzz word in recent years. Data analysts and scientists have proliferated globally to support the many different decisions organisations need to make. Hard on their heels artificial intelligence and machine learning are rapidly emerging to analyse diverse data sets.
Many organisations work towards having rich, complete data sets on which to base decisions. However, even where they do have good data, it is often not directly relevant to the issues on which decisions are needed. The reality is that many business decisions have to be made based on very little data.
Actuaries excel at using imperfect data, and small data sets, to create useful insights which improve strategic decision-making for the future.
Historical data is often used as a basis for forecasting. That is undoubtedly helpful, but to be really useful any projection needs a future focused perspective brought to bear on insights gleaned from the past.
Actuaries use insights gained from analysing historical data, however imperfect, together with an understanding of the context in which past events occurred and broad industry knowledge, to create useful, prospectively focused, models as a basis for decision making. Actuarial consultants specialise in delivering future focused perspectives.
Judgement around uncertainty
Every organisation faces uncertainty of some kind, and many use models to help them navigate that uncertainty. However once a model is in place organisations often tend to fall into too slavishly following the output of the model, no matter what. But the model may not – in fact almost certainly will not – deal with all the uncertainty. Models have limitations which can impair the decision-making process if not properly taken into account in the way the model is used, and interpreted.
Actuarial consultants who have substantial business experience are expert in working with uncertainty. They are skilled at applying judgment to build, use, and interpret models as tools to inform decision making.
What to look for when hiring an actuary
The right actuarial consultant can help your organisation unlock its potential. As a partner to your business, an actuary will help you better understand risk and navigate uncertainty to make the best possible decisions for your organisation.
When you look to engage an actuary, be mindful to understand the detail of their experience and track record of helping businesses achieve their goals.
For more information about the actuarial consulting profession or to explore how an actuary may be able to help achieve your business objectives contact us.