By Charumini de Silva
The first South Asian Actuarial Conference 2017 kicked off yesterday in Colombo,outlined the challenges posed on the actuarial profession and how they could generate new ideas to create business.
Organised by the Actuarial Association of Sri Lanka (AASL), the two-day conference themed ‘Creating Value for Business’ was attended by eminent actuaries from around the globe to discuss and learn from thought leaders in the fields of risk management, technology, education and regulatory standards.
Delivering the keynote address, Central Bank Assistant Governor C.J.P. Siriwardana spokeextensively on risk management, innovation, regulation and capacity building.
He emphasised on the importance of tackling daily challenges strategically and effectively as businesses need to make their own organisation sustain and grow in a healthy environment.
“We all know that each day will pose us new challenges and issues. We cannot finish off our tasks easily and live in luxury in this ever changing environment. Therefore, anybody in the financial markets has to be prepared for facing these very challenging situations on a daily basis,” he added.
Siriwardana stressed that in line with these developments, the global financial markets whereactuaries operate are adapting new business models, corporate governance practices, innovative technology, and effective risk management frameworks together with building up technical expertise in the field while ensuring adequate information security against rising cyber-attacks.
At the same time, he emphasised that the financial regulators are also gearing up their regulatory and supervisory functions by adapting risk-based approaches, requiring financial institutions to have regular stress tests, imposing myriad new reporting requirements, putting in place new regulations and maintaining of international standards with the aim of ensuring customers are protected and avoiding downfalls witnessed previously in the financial sector.
“It is important to ensure that financial systems would be strong enough to whither any future crisis that might arise. We live in an increasingly complex and volatile world, one that is hard to perfectly predict, control and regulate. As a learning organisation, we have to learn lessons on how to avoid mistakes of yesterday,” he said.
Managing risk as well as proper risk governance, effective regulation and innovation together with focused education could set the platform for creating value for businesses, he said, adding they are essential for maintaining public confidence, earn respect, reputation and credibility. Against the back drop of an elusive global recovery, he asserted that South Asian countries continue to lead the global growth. “Our region gives home for 25% of global population with over $3 trillion of annual production adding to the global GDP. South Asia is now on the rise in terms of economically, socially, politically and technologically.”
In the wake of recent global financial crises, he said there were significant criticisms on the regulatory and risk governance structures and their effectiveness in failing to prevent high profile financial institution failures. Also rising financial scandals have further eroded public perception of the effectiveness of risk management tools and regulatory measures.
“Each time when a crisis or a scandal occurs, regulators are compelled to react by imposing more stringent regulations.This involves imposing a plethora of new rules and regulations. There cannot be a set of complete laws and regulations that could deal with every risk and change in market behaviour. We also have to understand that today’s acceptable practices and behaviours may lead to criticisms in the future,” he pointed out.
In addition, he said regulatory authorities today are articulating new set of laws to comply with global regulatory standards linking with global financial stability agenda.
Highlighting that failure to understand the limitations of risk measurement techniques leads to mistakes, misunderstandings, misinterpretations and errors; he said professionals must have a clear understanding when and where these quantitative techniques are useful and relevant.
Since risk management jargons are often confusing, as risk professionalsSiriwardana said actuaries have a corresponding responsibility to explain their techniques and results to non-technical experts or policy decision makers in a simple, concise and transparent manner. “Your accurate diagnosis is utmost important and you who are in this profession will be trend setters in respective organisations.”
Though financial innovation plays an important role in the financial landscape today, he cautioned actuaries to be mindful of bad innovations in global financial markets are also proceeding rapidly without controls.
According to him the challenge of financial innovation is to create products and services which address emerging needs of the clients and the functions of finance without abusing clients’ trust.
In terms of capacity buildingSiriwardana explained that skills development and innovative mind set have become a vital prerequisite for adding values to individualorganisations and to leverage on the opportunities in the market.
Adopting international best practices, use of the latest technology and highly focused education were outlined as few areas that educators of the future should pay special emphasis on.
“I believe South Asian region is in the process of laying solid foundation to supply quality professionals who will be global leaders in actuaries industry,” Siriwardana expressed his confidence. In conclusion he said: “This conference will be an ideal opportunity to integrate and eventually create a cross national dialogue among you to address issues confronted by you in creating value to your respective organisations.”
Chief Guest International Actuarial Association (AAI) President Tom Terry expressed his confidence in the industry and pointed out that there are many new areas actuaries could get involved in to bring in their expertise and technical knowledge which could add professional perspective to new endeavours.
This was the first time that a AAI President had visited Sri Lanka. IAA is the apex body of all professional actuarial associations worldwide and has around 70 member associations.
He said the job of IAA was to give voice to the actuarial science profession globally, particularly where that global voice can make a difference.
“Of course creating a single voice in a diversified profession is not easy. However, I think that the Sri Lankans and the rest of the associations in South Asia can and should be part of that voice,” he added.
He commended the efforts of the local actuarial associations and called them the strength of the IAA.
Terry sincerely hopes that the first South Asian Actuarial Conference, which took off yesterday, will continue in a robust way in the years to come.
“This is an amazing turnout. It is not because of the organisers alone but the attendees as well. It shows your commitment to the profession. You are not here to listen to the speakers but also to actively participate. Getting to know more professionals from different sectors is an important takeaway from this kind of a forum,” he stressed.
Guest of honour Insurance Board of Sri Lanka (IBSL) Chairperson Indrani Sugathadasa said the uncertainty of economic and financial decisions such as changing interest rates and taxes, the problem of a rapidly ageing population, natural disasters, digitalisation and regulatory requirements change the insurance landscape constantly.
Against this backdrop, she asserted the biggest challenge now is how companies can more effectively manage their operations, risks and opportunities and provide a holistic vision of their value creation process. For insurance companies, she said it is essential to adopt a strong and mature risk culture in order to make informed decisions to satisfy long-term business goals and also meet regulatory requirements.
Noting that traditionally in the insurance businesses risk has been considered solely as the domain of the actuary, Sugathadasa pointed out it is no longer the case.
“In the present circumstances, although the risk culture starts at the top management level, it must trickle down to all employees, especially the ones who interact with customers for them to understand and feel the company’s risk culture and risk management framework,” she added.
She went on to say that there is a dearth of actuaries in Sri Lanka and emphasised one reason that can be attributed to this dearth was a lack of information as to how one could become an actuary and also the importance of that profession.
She suggested encouraging more people to obtain actuarial qualifications and enter the profession. “I suggest that the Actuarial Association commence a project towards popularising this profession. The IBSL is ready to facilitate such an initiative.”
Pix by Lasantha Kumara