Reduce The Impact of Unforeseen Events?
_ Article, April 2021 _
Reduce The Impact of Unforeseen Events?
For businesses across the globe, 2020 was incredibly challenging. No one could have predicted the COVID-19 pandemic, let alone the economic and social impact that it would have. However, while it is impossible to forecast unforeseen events, such as the coronavirus pandemic, there are methods to help mitigate the impact that they have.
As the pandemic began, countries around the world started to implement strict social distancing measures in order to combat the spread of the deadly disease. This forced many businesses to close, while countless others shut their offices and incorporated a working from home strategy.
These changes naturally had a significant and instant impact on the world’s economy, leading to record-breaking unemployment rates and a global recession. In America, a decade-long run of job expansion came to an end with unemployment rates soaring to 8.9%, while similar scenes have been seen in the United Kingdom, Europe, and Asia.
Not only is unemployment growing, but the number of new jobs becoming available on the market is decreasing rapidly, meaning it is becoming more of a challenge to look for new positions. These issues are only going to become more significant as the recession takes hold, with the International Monetary Fund (IMF) finding that 2020 saw the global economy shrink by 4.4% over the year.
There can be no denying that the pandemic is the worst economic crisis since the great depression, and its effects are severely impacting businesses and employees across the world. However, forecasts also suggest that the global economy could rebound swiftly, with the IMF predicting 2021 could see a rebound of 5.2%.
Of course, while the pandemic has had a devastating effect for countless industries and businesses, certain areas have thrived. While 85% of restaurants could close, food delivery companies such as Uber Eats and Deliveroo have soared. In fact, Deliveroo CEO Will Shu said the pandemic has helped accelerate the delivery industry by three years! Online streaming is another sector that has flourished, with the likes of Netflix seeing an incredible 16 million additional subscribers over 2020.
Many professionals have found themselves in high demand, particularly those working in the medical industry. Doctors, nurses, medical brands, and pharmacists have all been working on the frontline over the last year, and their success has been crucial in helping the world return to some form of normality.
Although the post-coronavirus world is predicted to bounce back strongly, the effects of the pandemic are going to be felt for many years to come. While it is impossible to foresee what the future might have in store, it is possible to prepare for the unexpected, and actuaries can help you to do just that.
These highly experienced professionals are strategic thinkers and problem solvers, using their knowledge and experience to measure the risk of certain events. Utilizing this knowledge, they are able to ascertain the financial impact of certain circumstances on a business and the individuals involved.
Using an array of analytics, these professionals are able to help create strategic plans and implement options that are designed to help withstand the impact of these unforeseen circumstances. Actuaries can work across a wide range of areas, from insurance and pensions to banking and investments, helping to create a dynamic approach that can help overcome whatever might lie in store.
Actuaries are not just able to predict the spread of the disease and the number of cases, they are also able to help businesses prepare for these kinds of events. Many of those companies that survived the pandemic intact did so after having an actuary undertake a valuation for its employee benefits. This valuation would be according to the International Accounting Standard IAS 19, which would enable businesses to create a sufficient reserve fund to help them weather any bad periods and continue to pay staff without needed to terminate any.
These valuations are incredibly beneficial for businesses, but in order to create them, actuaries need to make several assumptions. These are based on existing and historical data, and these assumptions will include discount rates for future financial projections and also mortality rates to measure the risk of death.
The pandemic was a completely unprecedented global event. This saw many discount and interest rates being declined, leading to a significant shortfall for pension funds. However, mortality rates were also much higher. This made it a considerably difficult challenge for pension actuaries who had developed longevity models based on people living for longer. The long-term effects of the pandemic are still unclear, but the work of actuaries is helping to minimize the impact that it will have on pension providers.
The modern world has never seen the challenges that the pandemic has created. This is making it very difficult for businesses to operate and for pension providers to understand demand. However, actuaries are able to design a fair end-of-service plan that is designed to keep a company’s workforce in place at a fair and reasonable cost. Redundancies are incredibly difficult for every business, so these plans are crucial in helping them to whether the difficulties that might lay ahead.
Of course, the pandemic is also a chance for a change. Over the coming years, it is likely that we will see considerable reforms in not only the way that we work but also how pension funds are run. Technology is revolutionizing businesses across the globe, and it is only right that pensions and finance follow suit. However, while change is necessary, actuaries need to form a crucial part of the process in order to avoid any negative effects.
Are you looking for actuarial services? Here at TASC, we specialize in actuarial consulting, providing our clients with the very best advice and service possible, ensuring they are able to manage whatever emerging risks might impact their operations.
Want to find out how we can help you? Then get in touch today!