Professionalism challenges facing today’s actuary

Neil HilaryMumbai 18-19 June 2015

 

      

Actuaries blasted in wake of UK’s pensions crisis

Worldcom's ex-boss gets 25 years

Double rebuke to actuaries over savings products

Gangmaster culture spreads across

Britain.

Internet scandal forces Japanese stock exchange

to halt trading

Doctor accuses drugs giant of 'unethical' secrecy

Actuaries ‘need to be overseen’

BA price-fixing investigation

Faked BBC phone-in competitions

What are Business Ethics?

… the application of ethical values to business behaviour …

© IBE

Identifying values

Business values

Ethical values

Respect

Openness

Integrity

Transparency

Honesty Efficiency

Profitability

Quality

Trust

Customer focus

Forward thinking

Performance Reliability

Teamwork

Responsibility

Fairness

Profit

Market Share

Sales

SharePrice

Bonuses

League tables

Why Bother?

Sets the tone of the business Underlines consistency of conduct Underpins risk management Competitive advantages in recruitment and

retention of staff Attractive to customers It pays! (in the long term)

Why bother?.........Because:

Core ethical values

Expressed in a Code of Ethics

Influences conduct

Reinforces corporate

culture

Reduces risk

Enhances trust

& reputation

&

Sustains financial

performance

Ethics and compliance debate

Ethics Prevention Principles based Values driven Implicit Spirit of the law Discretionary

Compliance Detection Law based Fear driven Explicit Letter of the law Mandatory

Hot Topics in Business Ethics

Bullying & harassment Misleading (numerical) information Bribery & corruption Speaking up/whistleblowing Conflicts of interest Marketing policies Work/home balance

Simple ethical tests for a business decision Legal

Is it allowed?

Transparency:Do I mind others knowing what I have decided?

Effect:Who does my decision affect or hurt?

Fairness:Would my decision be considered fair by those affected?

Some red flagsIf you hear someone say any of these, you can expect

something unethical is about to happen! “Well, maybe just this once.” “No one will ever know.” “It doesn’t matter how it gets done as long as it gets done.” “It sounds too good to be true.” “Everyone does it.” “Don’t worry, it’s part of the culture.” “Shred that document.” “We can hide it.” “No one will get hurt.” “We didn’t have this conversation.” “I don’t want to know.”

Professionalism and Ethics

Sounds familiar?

Is professionalism just another name for business ethics?

Does it have extra dimensions?

Professionalism in Practice

Professionalism concerns behaviour of professionals and the profession which will:

maintain the reputation and integrity of the profession

serve the interests of our clients serve the public interest (common good)

Professionalism at two levels

professional issues facing the profession, e.g. responding to regulators helping to educate government, the media and public ensuring that the profession is ‘fit for purpose’

individual matters of professionalism, e.g. high ethical standards adhering to the code and standards of practice reporting if necessary (whistle-blowing)

Professionalism for the individual - 1

fiduciary relationship with client or employer focusing on how issues may affect stakeholders

and bringing such issues to attention of the client

addressing the questions the client should ask or which those affected may ask

understanding and communicating well operating within competence and experience

Professionalism for the individual - 2

readiness to speak your mind – not ‘compliant’ integrity in advice prepared to report (blow the whistle) if necessary not taking a narrow technical view operating within code and standards of practice demonstrating good judgement

What are people looking for in a professional adviser?

integrity objectivity knowledge experience being up-to-date and relevant sound judgement good communication

Benefits to the public of a profession

quality assurance (education, CPD, standards) reliability and relevance of professional advice availability of the required service fiduciary relationships with clients possibility of complaint and redress concern for the interests of third parties

Earning trust

We need to build a basis for trust, starting with openness transparency accountability

We need to earn respect through the quality of our work our relationships and integrity

Generic professional issues

economy with the truth

Generic professional issues

economy with the truth answering the question as asked …

???....

Generic professional issues

economy with the truth answering the question as asked not making clear the limits of advice

Generic professional issues

economy with the truth answering the question as asked not making clear the limits of advice not considering the wider impact

…on third parties

Generic professional issues

economy with the truth answering the question as asked not making clear the limits of advice not considering the wider impact

…on third parties failing to blow the whistle

Unacceptable professional behaviour

poorly founded public criticism of other actuaries not showing respect for diverse people and views denigrating actuaries from other traditions rudeness or talking down to non-actuaries

Unacceptable commercial behaviour

using position at one employer to develop another taking commercial information to another firm competing for business on assumptions cutting corners to stay within budget

Where might we now be at risk?

over-reliance on complex models underestimating the fatness of the tail (not) treating the customer fairly poor communication of risk inadequate scrutiny and peer review conflicts of interest

Do we see ourselves as we want to see ourselves…

…or as others see us?

Don’t let time and change overtake us!