Use this Process to Extend the Scientific Method into Critical Decision-Making Skills for Any Career.
Posted September 4, 2020 by Jessica Fahrenholtz
Have you ever been in a situation where you were unsure of the possible outcomes and still had to make an important decision?
Ever wondered whether to take your phone on an adventure trip or vacation, afraid that you might lose it? Ever questioned how risky it is to fly? Or how worried you should be about sharks when you’re swimming at the beach?
Successfully navigating the path of life requires managing risks of all shapes and sizes. As scary as taking risks may be, they are a crucial part of success. In every career, you will be challenged to make decisions that have some level of risk. Understanding and analyzing those risks can be the key to your success.
Enter the Actuarial Process. Developed by leading actuaries across multiple industries, the Actuarial Process is a tool that leverages your mathematical and scientific knowledge to identify, characterize, and manage risk in any aspect of your life.
Similar to the scientific method, the Actuarial Process provides a framework upon which you can step through how to analyze any risky situation. It is a practical tool to have when it comes time to make the decision of how to manage those risks. If students understand the Actuarial Process, they can leverage what they already know about mathematics and the scientific method, and apply it to data analysis and risk management throughout their lives.
How is the Actuarial Process Similar to The Scientific Method?
If you already understand basic scientific and mathematical concepts in statistics and probability, you will find the Actuarial Process easy to master. Its structure is similar to The Scientific Method, providing an organized flow of how to conduct an analytical project that can be used to make mathematically-sound, real-world recommendations on how to manage risks. The graphic below helps demonstrate the similarities between the two processes.
The scientific method includes:
- Observing a problem and asking questions about it.
- Creating a hypothesis or prediction of what the outcome will be of your experiment.
- Experimenting to test your hypothesis.
- Using the data from your experiment to come to a conclusion.
The steps of the Actuarial Process extend the scientific method into the world of data analysis and risk management, relying more upon statistics and probability than the scientific method highlights; however, the fundamental structures behind both processes are very similar.
The five steps to the Actuarial Process include:
- Defining the project by identifying an area of potential risk.
- Analyzing the data you already have.
- Creating a model to better understand the problem and collect more data.
- Analyzing the risks using the results from the model.
- Making an educated recommendation based on the data
In both cases, students are asking probing questions to guide their actions. They are also testing what they think and trying to prove their point. Finally, in each case, students are making a conclusion based on data. But, the best part of the Actuarial Process that sets it apart is that students get the opportunity to solve real-world problems using hands-on modeling, data science, and risk analysis to help them make real-world, mathematically informed decisions.
Why is the Actuarial Process so important?
The Actuarial Process is a crucial tool student can use to thrive in the real world.
In school and at home, students often have their entire path mapped out for them. They don’t usually have to stop and think about their next move, let alone analyze the risk involved.
When students learn the Actuarial Process, they learn to make big, risky decisions in the smartest way possible. They learn the three major methods to mitigate and manage risks. And they learn how to think critically about any situation, using mathematics to analyze the best solutions. By learning the Actuarial Process, students are setting themselves up for success in college, their career, and life.
It is essential to understand; successful people don’t get that way by avoiding all risks. They become successful by carefully analyzing the risks in front of them and making an educated decision on what to do next.
Where can you use The Actuarial Process?
Risk shows up in all areas of our lives at different and unexpected times. Those that know how to handle these situations when they arise and make educated decisions will thrive and grow into the impactful humans they are destined to be.
While the Actuarial Process can be used in any area of life, one of the best ways to master it is to participate in the Modeling the Future Challenge.
Modeling the Future Challenge
The Modeling the Future Challenge combines real-world math modeling and data science to teach high school students how to manage risks and make mathematically sound decisions. Learn more about the Challenge and the Actuarial Process by downloading the Actuarial Process Guide!
Participants in the Modeling the Future Challenge get the opportunity to solve real problems in the world today. They solve these problems using the science and math skills they already have along with the new skills they learn through the Actuarial Process to find real data and drive their recommendations.
The Modeling the Future Challenge winners walk away with scholarships worth $55,000, but everyone walks away learning patience, determination, and grit. Best of all, students learn the skills to use the Actuarial Process in real-life scenarios to help drive smart decisions throughout their lives.
Additionally, the Modeling the Future Challenge gives students the job skills and experience of working with a team to solve a problem. They will also be presenting their polished ideas to a panel of professionals in their field. This life experience will help them grow academically and professionally. The 2020-21 Modeling the Future Challenge opens registration for teams of high school students on September 14th. You can check out registration information for The Modeling the Future Challenge here.
The Actuarial Process is a life skill that you will fall back on time and time again. Don’t miss the opportunity to learn this incredible tool that will be useful throughout your life.