Actuarial Risk Identification Architecture (ARIA)
The Actuarial Risk Identification Architecture (ARIA)
is used to identify the hotspots in a holistic and dynamic fashion. Hotspots relate to current or emerging risks which, due to their changing nature or level of uncertainty, pose increased risk to the public interest.
The ARIA identifies three sources of risk, each with sub-categories; macro environmental drivers, the inherent risk in actuarial work and market characteristics. It also recognises that the ongoing activities of the JFAR members influence the risk to the public interest of actuarial work. There are dynamic interactions between these sources of risk and influences on risk which may have compounding, offsetting or domino effects.
Macro environmental drivers
The blue cog represents the risks to the public interest from actuarial work that are influenced by external drivers: social, technological, economic, environmental, political, legal/ regulatory, ethical, international.
There is inherent risk in actuarial work due to its complexity and this is represented in the teal cog. The nature of the risk will be influenced by the practice area, activity and also by the task in hand. By considering both practice area and activity the JFAR aims to reduce the risk of silo thinking.
Actuarial risk will be influenced by the structure and culture of the markets and companies in which actuaries work. The navy cog in the centre of the ARIA represents the risks to the public interest which arise from these. The market characteristics include professionalism, culture, group think, embedded processes and incentives, firm/pension fund strategy and business models.
The ongoing activities of the JFAR members influence the risk to the public interest of actuarial work. The orange cog represents the ways in which the JFAR regulators reduce the risk to the public interest. Each JFAR regulator has a different focus to their supervision and a different approach to identifying, researching and mitigating risks.
There are dynamic interactions between these sources of risk and influences on risk which may have compounding, offsetting or domino effects. These are represented by the grey lines.
The JFAR has identified eight hotspots where there is a perceived increase in risk to the public interest where actuarial work is central. To examine the hotspots in depth click here.