Uncertainties are also difficult to quantify when it comes to life. When we talk about mortality or morbidity, it is relevant, but it would not be entirely accurate to classify it as only mortality or morbidity.
When a client wants to reduce future uncertainty, there are a few different ways to do it, but all of them require a risk manager or actuary who knows how to calculate downside risk. In some cases, the manager or actuary can also help you avoid scenarios completely.
The most effective way to speak about uncertainties is to break it down into its components. A big part of risk management is understanding the different components that make up the whole of a unforeseen circumstance. For example, if you explain a product that is something more tangible like insurance, it would not be as difficult for your client to understand because they are already familiar with the concept of insurance and benefits.
Many clients have limitations regarding business uncertainties, which sometimes makes it very difficult for them to make decisions. One of these limitations is language. This can be related to people’s inability to talk about death or discuss morbidity easily. However, there are still ways to communicate with them so that they can understand you and what you are talking about. The language and limitations of your client will determine the way you can talk about them.
You can use some methods to measure risk, which includes differences in scale and spectrum. There is a difference between small and large numbers, which is between large and small probabilities. Examples of these would be the difference between 0% and 1% for a mortality rate, or 0.01% for an event of unknown density to an event with a known density like an earthquake or tsunami.
Another way of measuring is through the use of probability. Probabilities are devices that measure how likely events are to happen; these can be calculated to fit under either a single event or multiple events. Not all events will cause the same amount of uncertainty. For example, an earthquake that causes a large amount of damage will have a higher probability than a hurricane.
If your client cannot comprehend what you are speaking about, they might benefit from using analogies and similes. Sometimes it is easier to talk about an issue when you give examples of something easier to understand and relate to. For example, suppose you are talking about an earthquake in China with a 30% mortality rate. In that case, you can use the analogy of New York with its lower probability of mortality.
Another way to help your clients understand risk better is through scenarios. Scenarios are events described by the actuary or manager using language that the client can easily understand. Scenarios can result from historical events, or they can be based on projections that are then used to determine probabilities.
Along with breaking down the risk into its components, it is important to discuss how they were calculated. It is beneficial to your client to understand how their business risks were calculated. For example, if you are using an actuary and a manager, you will have in-depth knowledge and understanding of the uncertainties being taken on. The alternative would be for your client to hire a different actuary and manager. They will potentially have different interpretations of your uncertainty, which would result in different decisions made for the client.
Another key aspect of client relation is making sure they understand what you mean. For example, if you are speaking to your client and they ask you to explain something more simple, it is important to make sure that you do so. And if they don’t understand you, it is important to clarify and repeat the information.
Finally, the last thing that you need to discuss in regards to communicating in client relation is delegating risk management responsibility. This is an essential part of the risk management process because it keeps all the different types and degrees separate to be managed properly and efficiently. This is an important part of communication because it helps you maintain your responsibility and help you with the client’s expectations.