RISK USA Conference – October 2009

Many, many good questions and good ideas at the RISK USA conference in New York.  Here is a brief sampling:

  • Risk managers are spending more time showing different constituencies that they really are managing risk.
  • May want to change the name to “Enterprise Uncertainty Management”
  • Two risk managers explained how their firms did withdraw from the mortgage market prior to the crisis and what sort of thinking by their top management supported that strategy
  • Now is the moment for risk management – we are being asked for our opinion on a wide range of things – we need to have good answers
  • Availability of risk management talent is an issue.  At both the operational level and the board level. 
  • Risk managers need to move to doing more explaining after better automating the calculating
  • Group think is one of the major barriers of good risk management
  • Regulators tend to want to save too many firms.  Need to have a middle path that allows a different sort of resolution of a troubled firm than bankrupcy.
  • Collateral will not be a sufficient solution to risks of derivatives.  Collateral covers only 30 – 50% of risk
  • No one has ever come up with a theory for the level of capital for financial firms.  Basel II is based upon the idea of keeping capital at about the same level as Basel I. 
  • Disclosure of Stress tests of major banks last Spring was a new level of transparency. 
  • Banking is risky. 
  • Systemic Risk Regulation is impossibly complicated and doomed to failure. 
  • Systemic Risk Regulation can be done.  (Two different speakers)
  • In Q2 2007, the Fed said that the sub-prime crisis is contained.  (let’s put them in charge)
  • Having a very good system for communicating was key to surviving the crisis.  Risk committees met 3 times per day 7 days per week in fall 2008. 
  • Should have worked out in advance what do do after environmental changes shifted exposures over limits
  • One firm used ratings plus 8 additional metrics to model their credit risk
  • Need to look through holdings in financial firms to their underlying risk exposures – one firm got red of all direct exposure to sub prime but retained a large exposure to banks with large sub prime exposure
  • Active management of counterparties and information flow to decision makers of the interactions with counter parties provided early warning to problems
  • Several speakers said that largest risk right now is regulatory changes
  • One speaker said that the largest Black Swan was another major terrorist attack
  • Next major systemic risk problem will be driven primarily by regulators/exchanges
  • Some of structured markets will never come back (CDO squareds)
  • Regret is needed to learn from mistakes
  • No one from major firms actually went physically to the hottest real estate markets to get an on the ground sense of what was happening there – it would have made a big difference – Instead of relying solely on models. 

Discussions of these and other ideas from the conference will appear here in the near future.

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Explore posts in the same categories: Black Swan, Counterparty Risk, Credit Risk, Debt, Disclosure, Emerging Risks, Enterprise Risk Management, ERM, Financial Crisis, Modeling, Regulatory Risk, Risk, Risk Culture, Risk Learning, Risk Management, Sub prime

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