In some ways the biggest risk that we face is unemployment risk, because the biggest asset that most people have is the stream of wages that they will earn from their jobs.

Twenty years ago, as a young actuary who had just gotten his ASA, I made a promise to myself that I would build up my investment knowledge base, and spend one hour a day improving my skills.? Why did I decide to do this?? I realized that few actuaries were good with investments (then, on this side of the Atlantic), and that most of the risks that life insurance companies faced were driven by assets, not liabilities (still true for now).? That was different than what the actuarial syllabus would lead one to believe, but nonetheless true.? I only know of one life company that failed from bad liability pricing (calculation of premiums).? All the rest died from bad asset strategies.

That “one hour a day” (six days a week) made me invaluable to many of the companies that I served, and opened a lot of employment doors for me.? It also allowed me to make a jump out of the insurance world, at least for now.? In a knowledge based economy, continually improving your skills is a great way to advance your career, and limit downside when the inevitable bumps happen due to M&A, etc.

Now, to the average person entering the work force, it pays to look at the underlying economics of the industry to see how stable employment prospects will be.? No one is perfect in making these judgments, but there are often industries to avoid.? Examples: certain traditional media companies are being destroyed by the internet.? During the tech bubble, it was cool to work for tech companies, but how much future is there if they don’t make any money.? Wall Street is wonderful, but periodic layoffs can knock out a lot of people on the margins of the business.

Also, understanding the underlying economics of your industry instantly makes you more valuable to your employer, since many only understand the technical craft that they pursue.

Finally, cultivate friends.? Be competent, but be warm.? Help others in need when they are looking for work.? Be willing to lend a sympathetic ear to colleagues in their job troubles.? Network at industry functions.? Start a blog to demonstrate expertise.? (Okay, nix that one. 😉 )? Treat vendors with kindness and respect; learn their business if you can.? Join industry task forces to solve larger problems.

We can’t control our employment futures in entire, but we can influence how well we bounce when things don’t go right. To repeat, three ways to mitigate unemployment risk:

• Continually improve your skills
• Understand your industry
• Build a network of friends in your industry