Dynamic financial models capture the characteristics of the business and allow companies to determine business strategies appropriate to their risk tolerance.
Traditional business representations project expected outcomes. Dynamic Financial Models add to this by modeling:
Variability
Interaction of risks
Relationships between products and services
The effect of risk control mechanisms (pricing, insurance and dividend policy)
Companies use Dynamic Financial Models to capture the characteristics of their business and manage strategic, operational and financial risks. Projected Key Performance Indicators (KPIs) are continually monitored to ensure that both the probable outcome and the likely variability match the overall risk tolerance of the organisation.
The variability of each KPI illustrates the risk introduced by the business strategy being considered. Once breaches of acceptable limits are identified, scenario testing over all the KPI drivers leads to the development of a strategy consistent with the level of risk that the business can tolerate.
Key specialist: Conor O'Dowd
Relevant experience:
General insurance and asset consulting background.
Experienced in quantifying uncertainty in general insurance liability portfolios
Expertise in design and implementation of Dynamic Financial Analysis models for general insurance and other complex business groups
Has advised insurers on implementation of effective capital management frameworks and their connection to integrated performance management
Chaired the working group of the Institute of Actuaries of Australia on revised general insurance prudential standards
