The International Actuarial Association (IAA) has released a report outlining a new global risk management framework aimed at preventing future financial crises and improving financial governance.
The report calls for the introduction of counter-cyclical regulatory arrangements that would change capital requirements for market participants when market bubbles appear.
"Putting in place capital shock absorbers that build capital capacity in boom times would allow for the gradual controlled deflation of bubbles with a reduced impact on systems and the economy," IAA's enterprise and financial risk committee chair Tony Coleman said.
The report urges a wider use of risk management concepts at a micro level and Coleman highlighted remuneration incentives as an area of interest.
"A sound risk culture will ensure timely reporting of risk-critical information that allows management to take corrective action before risks erupt," he said.
"Remuneration is a key driver of cultural change and so we support increasing capital requirements for market participants with remuneration incentives focused on excessively short-term results."
The role of a country risk supervisor is also being put forward as a way to manage risks across geographic boundaries and industries.
On the back of the release of the report, the Institute of Actuaries of Australia said while Australia's banking system is robust it is not insulated from global events.
"The skills and approaches actuaries have been developing over many years are now more relevant than ever as nations and organisations look to practices that will better detect and mitigate the impact of calamitous risks in the future," Institute of Actuaries of Australia president Trevor Thompson said.
