We’ve all heard the jokes about actuaries. My personal favourite is this: “How can you tell an extraverted actuary? – he’s the one that looks at your shoes when he’s speaking to you!”, and we all know that the “average” actuary works in an insurance company. However, these stereotypes are fast becoming a thing of the past. The modern actuary is increasingly looking “outside of the box,” and it is becoming common that they are embedded in wider risk management in corporate businesses.
Actuaries love nothing better than to turn a complex problem into a model using their mathematical skills. A risk model is a mathematical representation of a system or process, based on probability distributions of the underlying risk drivers. For example, this may be a model of an uncertain supply chain, operational cash-flow, or any business process. Historical data, as well as the views of risk experts are used to parameterise the model and the risk distributions. Continue reading