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.

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


You can comment below, or link to this permanent URL from your own site.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: