Showing posts with label success. Show all posts
Showing posts with label success. Show all posts

Mar 5, 2011

Supervisory Compliant, is it enough?

Risk management is tricky business... Being 'Officially Compliant', 'Just Compliant' or in other words "Supervisory Compliant", is not enough to help your CEO survive with your company in the complex market battle!

Whether you're an Actuary or Risk Manager of an Insurance company, Bank or a Pension Fund, the risk of being 'Supervisory Compliant' is simply : bankruptcy!

Becoming 'Supervisory Compliant' in complex programs like Solvency-II, Basel III or Legal Pension Fund Risk Frameworks, consumes so much time and effort, that almost no time seems to be left for contemplating or doing the essential Risk Management work properly.

Just being 'Supervisory Compliant' implies:  constantly running after the Supervisor to become  'just in time' officially compliant and not having enough time to think about the (f)actual relevant risks.

Supervisory Compliance becomes very frighting when Risk Appetite and Valuations are rashly based upon the minimum Supervisory requirements, as is (e.g.) the case in the Dutch Pension Fund legal framework. Boards stop thinking about the actual risks and feel compliant and satisfied once the Supervisory Compliance Boxes are checked.

A new look at compliance
Let's take a look from a new point of view at the complete Risk Management Compliance Field:

In basis there are three types of 'being compliant':

  1. Supervisory Compliant
    When you're Supervisory Compliant, you officially comply to all legal Risk Management compliance requirements. Your Supervisor is happy...

  2. Professional Compliant
    You comply to your own professional Risk Management standards. You are happy...  but what about your Supervisor? Comply or Explain....

  3. Success Compliant
    Being Success Compliant implies that all Risk Management requirements that are key to have success - e.g. key to survive in the market on the long run - are met.

Let's zoom in at some specific areas in this chart:

Bias areas
It's perhaps hard to admit, but in our attempt to be complete, we define and manage a lot of (small) risks that do actually exist, but are in fact not really or limited relevant with regard to company continuity.

Distinctive Character area
The Distinctive Character area is perhaps the most interesting area. To get grip on this area urges us to 'Think outside the Circle'.

By doing so we'll be able to manage risks that  our competitors fail to do. Here we can achieve 'Distinctive Character' by managing risks more efficient or by turning risks into profits. Examples are: Derivatives that limit our investment risks. Specialized experience rating (rate making) on your portfolio on basis of characteristic and unique risk profiles.

Tricky area
The tricky area is the area that consists of Supervisory Risks you tend not to find important, but that are very important for achieving success in the market. Tricky areas could e.g. be: Deflation Risk, Longevity Risk or Take Over Risk.

Reversed Thinking area
This is perhaps the most interesting risk area.

To explore this area you'll not only have  to 'think outside of your circle', but - just like in reversed stress tests with Banks - try to think backwards, to find out what could cause a certain event or loss.

This reversed thinking process succeeds best as a group. Group members should be professionals and non-professionals from different types of business, education and background.

A successful group mix could e.g. consist of : an actuary, an accountant, a manager, a marketing manager, a compliance officer, an employee, a client, a shareholder representative and last but not least the receptionist.

Try to find time to manage your company to new heights and stop being just 'Supervisory Compliant'.....

Dec 11, 2010

Actuarial Thought Leadership: What is success?

What is success? Are you a successful actuary?

Simple questions, easy to answer you would think. Right?


To illustrate the deeper  meaning and the nuance of success, let's take a look at the next 'Best Practice of Success'. A real life story from Joshua Maggid.....

'Best Practice of Success'

That day, together with my new colleague James, I entered the Pension Board's holy board room. All eight pension board members welcomed us with a hopeful smile and a firm handshake.

After introducing James as our company's brand new super professional, an unbeatable actuary and a seasoned specialist in asset liability matters, all seemed set for a successful presentation by James. Todays subject: Board decision on the new - next year's - asset allocation.

As expected, in a more than splendid and fluently short presentation, James handled everything a pension fund board member could possible think of or ask for. From headlines to all the important details. In roughly half an hour James showed his outstanding technical skills and impressed all board members. They were flabbergasted. What a knowledge, this was what one would call real Thought Leadership!

After James finishes his presentation, silence fills the board room. A kind of holy silence... Every board member is overwhelmed by James' stunning presentation. The Pension Board President quietly  looks around and breaks the profound silence as he softly says: "Thank you James.... Gentleman... (a lack of ladies in pension fund board rooms still teases us)...., is there anyone who has a question?......  (silence continues..) .  If not..... Do we all agree on James' new asset allocation proposal? (silence continues, some board members nod their head..). Does anyone disagree with James' proposal?.....(no one replies verbal or non verbal)... If not... Thank you for your continuing support. As a pension board, we've just agreed to the new asset location for next year... Congratulations!.... Dear advisory actuaries - James in particular - thank you for your effective presentation and corresponding proposal."

As always after I visit a client with a colleague, we meet shortly after in a nearby coffee shop to evaluate the meeting as well as each other's performance, irrespective of any form of hierarchy.

When I meet James shortly after the successful pension fund board meeting in the local Starbucks, he comes in walking with a smile....

"Peace of cake ", he opens our conversation. "What do you mean?, I ask him. "Well, making a $ 0.2 million turnover in a 30 minutes presentation, without any questions or comments, seems like a dream. I couldn't have done any better. I surpassed myself. This was one of my most successful presentations ever", James replied.

I looked him in the eye as I dropped an uneasy silence..... "This was as bad as it could get", I answered James. "How do you mean, 'Bad'? It was great, everyone agreed on my proposal, no questions at all.", James responded agitated.  

"Well - in short - It was YOU that took the decision and not the board. That's whats wrong", I stated. James again: "That's not true, I only advised, the board took the decision, not I. Let's keep things clear here, please!".

"No", I answered, "It was actually you!.... You took the actual decision. And if things in practice turn out different from your proposal (as most likely will be the case), this pension board will blame you for a wrong advice two years from now.......  

By demonstrating your enormous technical power in a half hour monologue, you've overpowered the board in such a way that they could not raise any questions or give comments without the risk of showing a form of incompetence or loss of face.

As we discussed in our preparation, you should have presented at least three different scenarios. Each scenario with a a different risk appetite. You should interactively have helped the board with choosing a well understood risk-return scenario. Asking questions, wrapping up opinions, leading the discussion to a point where the board feels that they've clearly understood what's on the table and 'feels comfortable' with the common decision taken."

James replied with anger: "When I have to do it that way, my presentations would take two hours and my preparation as well.  Above all, I have to deal with ten similar clients next week. I simply don't have the time to pick it up the way you suggest."

Moral of the story
From the above example it's clear that 'short term success' is not the same as 'long term success'.

To prevent ending up only in the reality of our own believes, constructive peer reviewing each other's performances is key to keep delivering long term top quality.

So don't forget to discuss your 'actuarial eggs' with one of your actuarial colleagues.....

It takes 'new ethics' actuaries (and quants) to make pension fund business successful again.
Are you that actuary?

Related links:
- Making Decisions in the Pension Fund Board Room (PDF,2010)
- Investmentmentor:
   expectation, a force that will release either success or failure

Aug 15, 2009


We all want to be successful. But what is success?

Success could perhaps be defined as achieving the Result you want by using your core Qualities at the right Time given the right Circumstances (place,people,weather, atmosphere).

In formula: R = Q x T x C

Another way of looking at success has been defined by Hevizi:

It’s not WHAT you know.
It is not WHO you know.
It is not HOW you deliver.
It is ALL of it.

In the new world of tough competition for positions, careers and recognition it is important to remind ourselves that it takes 3 to be successful and compete.

We can look at this as the following formula:


Success explained
A more sophisticated, humorous yet interesting approach of success has been defined by Alain de Botton in the next TED video. Alain examines our ideas of success and failure:
Is what you define as success really your personal defined success or perhaps the unconscious copied succes definition of somebody else?

He points out that believing in winners and loosers is a narrow and wrong way of defining the world. On top of this, he gives randomness a place in the definition of success and stresses that there can be no success without loss....

Wrapped up, success could be defined as being satisfied and happy with your choices, actions, gains and losses.....

So never give up, discover the secrets of success and enjoy it!

Youtube Success Links:
Quest for success
Success by Deepak Chopra