Humor: Scrambled Actuarial Reporting

Some actuaries are convinced that adding more important details really helps. With more details and more information you are able to explain you models better and as we all know: better communication is key in actuarial science.


Here is an example of detailed information (click on the image!)

Some(times) details don't matter
Unfortunately more information and more details generally disturb efficient decision making. The next text shows that some details don't really matter.

Smoe acaruites are covcnined taht adding mroe imnrpotat deaitls rlaely hleps. Wtih more dleitas you are albe to eplaxin you mlodes bteter and as we all konw: btteer cmniutcoiaomn is key in aratiuacl sieccne.

Sirnpigrulsy tihs is not ture. Tihs txet sowhs taht smoe daeilts dno't rlaley mttear.

The arutacial aidnceue isn't rlaley istretneed in the daeilts, but in caelr ipunt (fsrit ltteer of a wrod) and oumotces (last letetr of a word). The dtilaes (letetrs) in bweteen can be mexid up in evrey rodnam oerdr you lkie. Keep in mnid tihs iponmatrt lsosen in your nxet peeiatntsorn.

Explanation
According to a study at Cambridge University, to read and understand a text well, it doesn't matter in what order the letters in a word are placed. The only condition is that the first and last letter of each word remain the same. The rest can be a total mess up. This is because the human mind does not read every letter by itself but the word as a whole.

DIY
Let's conclude with an 'example text' for the opening-slide of you next board presentation:

Daer Board mrebmes,

Agtlhouh we hvae to tkae fetdanmaunl dniecioss tdoay, it wlil not be ncseresay to udasnertnd or dcssius all knid of tcihcenal dtileas.

The relust of my avicde is pertseend in scuh a way as to esurne taht we can stcik to the mian ptinos and hneieadls.

The vrey fcat that you wree albe
to raed and udnreastnd tihs txet,
greauetans taht we wlil hvae a
sefscuucsl mtineeg.

Yuor aivdosr

Scramble your own opening-slide text for your next presentation at:

Words Scrambler

No doubt, your next report will be actuarial scrambled.... ;-)

Related sources and links
- Words Scrambler
- MRC Cognition and Brain Sciences Unit
- All My Faves

The Ten Actuarial Commandments

We all (think to) know The Ten Commandments from the holy scripts by heart, do we?

Now close your eyes to see how far you can get in quoting those simple ten guidelines in life.............

The Ten Commandments for Investors
Just like the Ten Commandments for Man, God - more specific - created The Ten Commandments for Investors. Let's compare the two, while - at the same time - you can check out your Commandment-Memory on Man as well:

Risk-Return-Supervision Development
As you may have noticed, The Ten Commandments are a mix of rules-based and principles-based principles.

Just as in our own life, it's interesting to see how we apply and implement these two different kind of rules during the evolution of a financial institution (insurance company, pension fund, bank, etc.):

In time, the ideal supervision model consists of three phases:

• Phase I: No rules
  In this phase we cannot value or the company. Chances are substantial the company is 'at risk'.
  
  
• Phase II: Rules-Based Supervision
  In phase Ia 'Rules' are mostly perceived as 'Have to's" . As a result Risk will be reduced, but Return as well. Once the board, actuaries and financial specialists are becoming aware and will see the advantages and new possibilities of managing risk. 'Have to's" will develop into 'Want to's" . The Risk-Return Ratio will increase  and even a better Return will result.
  
  
• Phase III: Principles-Based Supervision
  Just like with the implementation of Rules-based Supervision, in case of Principles-Based Supervision, the Financial Institution needs time to adept to the new situation. At first there might be a unbalance between Risk and Return. It takes time to calibrate Risk and Return again.
  
  After a while actuaries, investors and management will translate Rules-Based principles into own rules that fits the company's specific risk in an optimal way. The company will be able to take more risk and to optimize its own Risk-Return Ratio.

Take a look at your own company's development and see for yourself where you fit in on the Risk-Return-Supervision lines....

It might be possible that you have to conclude that you aren't able to increase your Risk-Return ratio in the end. In this case it's likely you've become (so called) 'Supervisory Compliant': Your risk appetite probably corresponds more or less with the supervisor's minimal risk view. Instead of redefining your own risk appetite and restructuring your products from a risk-management perspective you merely implied new regulations and supervisor guidelines. As a result your Return and Risk-Return Ratio implode....

Ten Actuarial Commandments
Having learned the possible effects of supervisory rules in practice, we may now conclude with The Ten Commandments for Actuaries.

The Ten Commandments for Actuaries

1. There's only one God, as he's omnipotent he's also an actuary.
   As you're only an actuary: be humble.....    Remember: As God wants something in Return, you'll have to take Risk!!
2. Reality can't be comprised in a model.
   Use your brains. A model is a help, not a decision machine. Don't mix up God with Risk or Chaos. Chaos for us humans (actuaries) can be defined as "Unrecognized Order" (quote). 
3. Never blame anything or anyone than yourself for an unexpected or negative outcome.
4. Be consistent, act sustainable. But change your opinion just in time, if circumstances or facts urge you to do so.
5. Alway show respect to others, even if you think different. Appreciate where you come from. Nobody is perfect, not even you.
6. As there is no 'right' model, never criticize other models, actuaries or other people. Try to give your opinion without slaughtering the other.
7. Never advice or state anything you do not really mean or cannot defend.If you're not sure or don't know, tell it or get help.
8. Always cite your sources or give credits to others that helped you.
9. Don't 'steal' the advice.
   Never include the final decision to be taken in your advice. Wrap up arguments, consequences and present scenario's so the board has to make a choice and not you.
10. Don't get carried away by results, reports or performances of others.
    Stick to your own consistent approach.

Apply supervisory rules and actuarial commandments in a conscious way...

Risk Quotes

I'll not even try to give a definition of 'Risk Management'.
More than the word Risk, Risk Management is full of traps and paradoxes.

Just to mention some.....

Risk Management is...

• not primarily about risk that can be calculated with a 99,x% confidence level
• dealing with Risks you know will come, but can't be calculated
• more about correlation in time than mean estimates and standard deviation
• more about prevention, foreseeing and managing risk than capitalisation of risk
• more about taking risks to benefit, than trying to exclude risks
• fighting risk instead of excluding risk
• making Plans B and C, in case your confidence level fails

Avoiding Risk

One of the trickiest parts of Risk Management is that we often  are trying to avoid Risk at any price.

By doing so, we introduce a new risk: It gets harder to achieve shareholder and client value.

Often returns will decline because of over-capitalisation and a risk-return unbalance.

Finally we have to compete in new risk areas we're not experienced in. 

It's all well expressed in a cartoon on cartoonstock:

'We've considered every potential risk, except the risks of avoiding all risks.'


Personally I prefer the challenging Risk Management quote of Jos Berkemeijer, that states:

 "Risk Management: the art of foreseeing hindsight."

Better than trying to define Risk or Risk Management, it is to study and get inspired by Risk Quotes.

Therefore I conclude this Blog with a link to the Blog 'Risk Quotes'

You can place a random quote like this one:

Random Risk Quote

on your website or Blog by copying the next javascript code.

<script type="text/javascript" src="http://goo.gl/WdMOK"></script>

Install Instructions

1. Copy above JavaScript code (select;CTRL-C).
2. Paste (CTRL-V) the code on your webpage or Blog
   Blogger: Go to Design Tab, Click on Add a gadget;
   Click on 'HTML/Javascript' Gadget
   Paste the above code in the gadget and Save. 

Related Links
- Risk Quotes
- Riskviews: quotes
- Best Risk Management Quotes
- Death of Risk Management