Mathematicians meet the market

Graduates studying risk management are in demand

2005 SAS Academic Intelligence Award Winner  

In most countries career opportunities for gifted mathematicians are limited: teaching or research. By contrast, the Centre for Business Mathematics and Informatics of North-West University in Potchefstroom, South Africa can offer its students a range of exciting opportunities in the world of business.

The Centre started its activities in September 1997 as a joint venture between Absa Bank and the erstwhile Potchefstroom University for Christian Higher Education. Its vision is to become a Centre of excellence in risk management solutions for the financial services industry, fulfilling the industry's need for expertise in risk management in the form of appropriately trained students, execution of industry-directed projects and research, and the development of tailor-made courses for the industry.

Business Mathematics and Informatics (BMI) is a multi-disciplinary study that is focused on the integration of financial, mathematical and informatics principles with the aim of training students for careers in the financial services industry in general, though at the Centre there is a specific research and training focus on risk management.

Riaan de Jongh, Director of the Centre explains, "The field of study came about as a result of the growth in derivatives markets and the mixed organizational and economic challenges that companies face. Financial services sector companies urgently need experts who have a sound knowledge of risk management and the necessary analytical skill set. It presents a great opportunity for young people who are very strong in mathematics to become highly successful business professionals."

The teaching program consists of a three-year undergraduate BSc degree in Business Mathematics and Informatics, and includes a sound combination of subjects such as applied statistics, mathematics, economics, bank risk management, numerical computing and accounting. Students may choose between four different areas of specialization, namely risk management, business intelligence, financial mathematics and actuarial science. For the best students, there is the option to follow a further postgraduate (Honors and Masters) degree in Business Mathematics. A key element of the teaching program is the inclusion of integration subjects, where students are assigned a real business problem to tackle. There are currently more than 250 enrolled students of whom more than 40 are postgraduates.

Tomorrow's risk experts
"Risk management is a fascinating area for a business-focused academic institution, because it is the first area, to my knowledge, in which statistical science has been written into international regulatory policy, i.e. the Basel II accord. So to be an effective risk analyst or manager you have to understand probability theory and methods of measuring uncertainty and so on – our philosophy is that tomorrow's risk experts need a thorough grounding in mathematics, statistics and computer science. This combination serves as a foundation for using business tools effectively. And that is where SAS comes in," says de Jongh.

"SAS plays an important role in the curriculum for the simple reason that most large banks and financial institutions here in South Africa use SAS for risk management and business intelligence," says de Jongh. "In fact a colleague at another university recently told me that his students were experiencing difficulties in finding employment in the financial services industry simply because SAS was not yet on their curriculum."

Covering the pillars of Basel II
Specialist courses cover the Basel II framework with topics such as market risk, credit risk, operational risk, volatility forecasting and portfolio construction. But there is also a strong hands-on element. "We give the students the theory, but as soon as possible we set them practical projects. We tell them, 'here is the problem, now go and solve it using SAS'," says de Jongh.

A student who stays on for the Masters degree program does a six-month placement with a financial institution on a project that is jointly structured by the customer organization and the student's supervisor. Though the Centre for BMI retains control over the academic quality of the student's work, the financial institution sets the topic and evaluates the success of the project on the business deliverables; there is a project sign-off similar to a commercial consultancy project. The company can then decide if it wants to retain the services of the student after the course has finished.

"Last year we had more requests than we had students, and every single student was offered a job. Demand for their knowledge and skill set is still outstripping supply," says de Jongh. A clear benefit from the Centre's point of view is that the course supervisors learn about the real-world problems currently faced by industry, and this is valuable input that can help to refine and improve course content.

There was a lot of input from banks, and in particular Absa Bank, in the design of the course to ensure that it would meet these present and future needs. Students typically find work with one of the four major banks in South Africa: Nedbank, Standard Bank, First National and Absa. In addition there are excellent opportunities at more specialized banks and credit rating agencies, at legal and consulting companies and at overseas banks such as Lloyds TSB and HSBC. In fact, one of the most interesting project collaborations was with Lloyds TSB in Brighton in the United Kingdom. The project meetings were conducted by videoconferencing, and the student received a very high rating on the deliverables. And of course, he was offered a job with the company.

"When a bank or other financial services company employs one of our students, they get someone who can hit the ground running in the risk management or business intelligence area. They have all the tools they need and there are no recruitment fees. In today's business environment that is a huge benefit," says Professor Machiel Kruger, Head of the SAS Lab at the Centre for BMI.

Equally important is the fact that the students have experience of the business world, so they have a "can do" attitude. "For that reason we make a conscious effort to set students projects that take them outside the comfort zone," adds Kruger. "After all, working in business is also about soft skills such as interpersonal relationships and you do not learn these on a pure mathematics course." They are required to document their findings in reports that are easy to understand for a general business audience.

De Jongh's senior faculty members all have extensive business experience as well as knowledge of economics, statistics, applied mathematics and computing. As such they obviously knew SAS, but before the program was set up they had little knowledge of risk. "This is, after all, a fairly new topic for academic study," says de Jongh. "SAS South Africa approached us and after we read the excellent reviews they received from the Global Association of Risk Professionals (GARP Review) and the broader risk community, we knew that this was the software around which we could build our risk courses."

SAS offers deep understanding of risk
SAS South Africa recognizes that it too enjoys huge benefits from this relationship, since academic validation is very important to many companies in the financial services industry. "The Centre for BMI and the SAS Academic Program in South Africa are building bridges between business and academic thought leaders in risk," comments Nina Frauenfeld, Manager of the Academic Programme for SAS EMEA.

Professor André de Waal, Head of Artificial Intelligence and Data Mining at the Centre, illustrates this point: "As an example, many people in business have heard about the power of neural networks and want to use them, but they do not know where to start. Sometimes they turn to an academic institution for help. So we built an intermediate model using SAS Enterprise Miner that shows the practical application of neural networks, and demonstrates that with SAS, neural networks are easier to use than business people think."

"A lot of the feedback from customers is constantly being passed on to SAS' research and development teams in Cary, North Carolina – SAS' world headquarters," adds Frauenfeld.

"It is difficult to imagine how we could teach students about risk management and business intelligence using any software other than SAS," concludes Kruger. "Other software products tend to be 'black boxes' where the students do not really see what is happening, whereas SAS is so flexible and transparent that it enables the student to get a really deep understanding of risk algorithms and the transformations that are going on. That is good from the point of view of academic discipline, and it is good from the point of view of the students' future employers."

North-West University's Centre for Business Mathematics and Informatics received the 2005 SAS Academic Intelligence Award for its innovative use of SAS software in curricula and research projects.

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