While I enjoyed each article individually, together the four ‘risk’ articles in the August 2022 issue of The Actuary, plus the risk management board piece, really disturbed me. It wasn’t the articles themselves, but the overall perception that they gave together. When I approached the editor, questioning the lack of balance between risk and reward – the latter not even being mentioned – she sportingly invited me to explain what I had in mind.
In previous articles (Fiasco in the 1980s and the November 2015 issue of The Actuary), I suggested that actuaries needed to look at appropriate timeframes and become used to critical thinking, both of which I think have been lacking in the defined benefit space over the last 20 years. Even more importantly, for any situation requiring actuaries’ attention, I believe that they need to understand who all the interested parties are and draw a reasoned balance between them. As far as I could see, the articles achieved none of that.
Risk does not live in a vacuum; there must always be the potential for some form of reward attached. It may be ephemeral (speeding teenagers, for example) or longer lasting (a superb crystallised investment return). For financial institutions, the reward is likely to be a reasonably anticipated concrete economic advantage, but it could be merely survival.
Then I read the articles again. In every case, they were looking at unavoidable, exogenous, uninvited risks, which were being analysed more proactively than has been typical. While I think the authors could have spent a little more space on the opportunities (or rewards) that might become available, I accept that this was probably not foremost in their minds.
Other readers may have worked that out faster than I did and not been overwhelmed by the ‘risks of risk’ without any prospects of reward. Even so, I suggest that it would have been good if that had been made clearer by the magazine.
Jon Spain
6 September 2022
