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The Actuary The magazine of the Institute & Faculty of Actuaries

Sting in the tail of economic crisis

The Financial Reporting Council (FRC) has highlighted current challenges with questions for users of actuarial information arising from the difficult economic conditions. Past experience shows that insolvencies have increased after the technical end of recessions as companies run out of working capital. Such conditions mean that the next twelve months are likely to be particularly difficult for directors, trustees and management and increase the risk that annual reports and accounts misreport facts and circumstances and contain unidentified errors and omissions.

The questions for users of actuarial information focus on the risks surrounding the business model, how those risks are managed, on understanding the key assumptions and cash flows underlying discounted values and on the quality controls on actuarial work.

Louise Pryor, director, Actuarial Standards, of the FRC said: “The last year has demonstrated how critical it is to understand risk and uncertainty when making significant and complex financial decisions. Trustees, directors and others who base their decisions on actuarial information need to be sure that they and their actuaries have a shared understanding of the relevant risks”.