Actuaries work with insurance and financial institutions to measure, manage and mitigate the risk. Actuarial risk examines the possibility of assumptions such as frequency of events, the severity of losses and correlation of events. Actuary analyse risk and cost associated with these events using software such as Excel to build financial models and perform the risk analysis……
A life carries many risk. One third of human population faces at least one heart attack in their lives. Globally, more than 10 million people are diagnosed with cancer and 40% will survive. The cost of life insurance is determined by your level of risk. Your age, gender, smoking, occupation, medical history and hobbies can carry certain level of risk. Life insurance actuaries calculate how different risk factors affected a person’s mortality.
In financial world, institutions are faces credit risk, market risk, interest rate risk, equity risk, volatility risk, inflation risk, currency risk, operational risk, liquidity risk and reputational risk. A risk is a cumulative effect of chances of uncertain events that make a potential negative impact on asset. This can be qualitative or quantitative, actuary should be use financial instruments to hedge business against them.
In Enterprise Risk Management (ERM) is a top-down strategy to identify, assess risk in the organisations and prepare for potential losses, hazards, dangers and other potentials for harm the organisations operations and objectives. ERM calculate the amount of risk that the organisation is willing to take and trying to minimize the deleterious effects of risk on its capital and earnings. The actuaries prime responsibilities are setting up company’s risk appetite and risk limits, building company models, identifying and planning for emerging risks, valuation of risk and risk mitigation programs and performing stress test.
Actuaries always calculating the risk and how much cost associated with risk and uncertainty by using advanced mathematics and statistics tools. An actuary will be the backbone for insurance and reinsurance companies, multinational corporations and investment companies.