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Comprehensive Actuarial Risk Evaluation
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The global financial crisis revealed some significant gaps in risk management. The underlying
cause is in truth a variety of contributory factors. One of the contributory factors, often singled
out as a root cause is the reliance the banking industry placed on sophisticated mathematical
models. There are two elements to this issue, firstly the extent and use of the models to make
informed decisions, and secondly the models themselves. Mathematical models are deductive
by nature, and simplifications of real life. The problems with models can be the premise, the use
or the validity/accuracy of the underlying thing it tries to represent. There is scope for
fundamental misunderstandings between model creators (and their models) and management
who make decisions based upon the outputs. The failure of management to understand the
nature of the models and any associated overconfidence in their decision making ability can be
addressed, at least in part, by having a Comprehensive Actuarial Risk Evaluation (CARE)
performed by an actuary
International Actuarial Association - Personal Name
NONE
Comprehensive Actuarial Risk Evaluation
Management
English
2010
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