THE Reserve Bank of Zimbabwe (RBZ) has expressed interest in collaborating with the Actuarial Society of Zimbabwe (ASZ) to encourage local financial institutions to support scientifically-supported solutions, according to deputy governor Innocent Matshe.
Last week, ASZ in partnership with the Australia-based University of New South Wales Business School, launched the first-ever actuarial-focused academic congress in Zimbabwe in Victoria Falls.
The congress brought together local and foreign professionals and academics in the actuarial space to discuss ways in which the discipline can be widely used in other areas besides insurance.
This is because actuarial science involves using mathematical and statistical tools to estimate and assess risks based on an event.
Actuarial science uses probability and statistics to define, assess and solve the financial consequences of unknown future events.
“I think this is a very timely conference for Zimbabwe. We have challenges that need not only technology but brain power; brain power that can solve complex economic and financial problems. And this is a group with very complex and very forward-looking financial systems and knowledge,” Matshe told NewsDay Business in an interview.
“We need actuarial science for so many different aspects of not only insurance, but banking. At all levels, actuarial science can give us better insights based on concrete analysis that scientifically can point towards a solution for both risk and general banking activities in this complex economy of ours.”
He added: “As a regulator, we would really love to work hand in glove with the Actuarial Society to make sure that whatever decisions our financial institutions take they are anchored in scientific evidence that is proven.”
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Actuarial science is mostly used in the fields of life insurance and retirement planning.
However, the study of financial institutions’ liabilities and the enhancement of financial decision-making are further areas of application for actuarial science.
This can be done by using actuarial science to analyse the economic, financial and business implications of uncertain future events within banks.
Using actuarial science, depositors will be able to assess a bank’s ability to keep their money.
“Our motto is ‘we predict the financial future’ in a way. So, whether it is a bank or an insurance company, they are financial even in a mining company. So how do we fit in? If you look in today’s terms, banks are managed in what we call risk-based frameworks, whether we are managing their capital or operations,” ASZ president-elect Prosper Matiashe said.
“So, us as actuaries, we bring much impact there. For example, what is the possibility that we are going to have fraud that takes a US$1 million off the balance sheet? If we see the possibility is above the probability of a certain level, we then assess how we mitigate it.
“Banks manage a lot of risks and one of the key ways we come in there is to quantify the risk so that people can have a tangible measure of whether things can go wrong.”
He said actuaries were king in pricing risk in terms of charging interest and offering rates that ensure the bank stays operational.
Matiashe will replace ASZ outgoing president, Tafadzwa Chiduza next year in March.
