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Real World Risk Institute

November 28, 2015

They work first to develop the principles and methodology for what we call real-world rigor in decision making and codify a clear-cut way to approach risk. Then they offer to teach those principles and methods to a small group of students. They are 2 risk takers, former full-time traders (with combined experience of more than […]

Economic Capital for Banking Industry

December 22, 2014

Everything you ever wanted to know but were afraid to ask. by Jawwad Farid in Finance Training Course For the last seventeen years I have hated conversations with board members around economic capital. It is perfectly acceptable to discuss Market risk, Credit risk or interest rates mismatch in isolation but the minute you start talking […]

Risk Culture doesn’t come from a memo

December 16, 2013

Nor from a policy, nor from a speech, nor from a mission statement nor a value statement. Like all of corporate culture, Risk Culture comes from experiences.  Risk Culture comes from experiences with risk.  Corporate Culture is fundamentally the embedded, unspoken assumptions that underlie behaviors and decisions of the management and staff of the firm.  […]

Future Uncertainty

April 16, 2013

Often called emerging risks. Going back to Knight’s definitions of Risk and Uncertainty, there is very little risk contained in these potential situations.  Emerging risks are often pure uncertainty.  Humans are good at finding patterns.  Emerging risks are breaks in patterns. What to Do about Emerging Risks… Emerging risks are defined by AM Best as […]

Math Wins

November 7, 2012

The emerging US election results are showing that the more math based people like Nate Silver were extremely accurate in predicting the outcome of the election and the GUT based people were totally off base. See NYT. This is the same comparison that psychologists have been doing for 50 years between clinical judgement and statistical […]

On Thin Ice

November 30, 2011

Most people who know that they are walking on thin ice will proceed very slowly and carefully. That is also the effect that we get when we fail to recognize losses. Everyone HOPES that things will turn out ok and either the losses will eventually emerge at a lower value (i.e. less loss) than expected or […]

Risk Assessment is always Opinion

June 10, 2011

Risk Assessment is most often done with very high tech models. There is a cycle for risk models though.  The cycle starts with a simple model and progresses to ever more sophisticated models.  The ability to calculate risk at any time of the day or night becomes an achievable goal. But just as the models […]

Rents vs. Risk and Reward

April 16, 2011

Many people talk and write as if risk and reward were the true trade-offs in a capitalist system.  It certainly makes risk management important if that were true. But unfortunately for us risk managers, and fortunately for business managers, choosing among risky alternatives is not the best choice for business success. In fact, the natural […]

Intrinsic Risk

November 26, 2010

If you were told that someone had flipped a coin 60 times and had found that heads were the results 2/3 of the time, you might have several reactions. You might doubt whether the coin was a real coin or whether it was altered. You might suspect that the person who got that result was […]

Turkey Risk

November 25, 2010

On Thanksgiving Day her in the US, let us recall Nassim Taleb’s story about the turkey.  For 364 days the turkey saw no risk whatsoever, just good eats.  Then one day, the turkey became dinner. For some risks, studying the historical record and making a model from experience just will not give useful results. And, […]

Around the Corner Risk

August 19, 2010

That is where the risk manager really earns their money. The risks that are coming straight down the road, well that is important to pay attention to them.  But those are the obvious risks.  I would not pay very much for help in avoiding serious accidents from those risks. But those round the corner risks, […]

Black Swan Free World (10)

November 17, 2009

This is the final post in a 10 part series. On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed […]

Black Swans

November 16, 2009

Nassim Taleb’s 2007 book, The Black Swan, has been a sensation and has spawned much controversy and discussion. For some lively discussion of his book try: ERMBooks On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World.  Riskviews has provided discussion of […]

Most Popular on Riskviews

November 15, 2009

Most Visited on Riskviews: Since August 2009 when the blog was restarted as a forum for ERM discussions. Risk Management Quotes 668 visits A haphazard collection of over 100 quotes from people who might be either famous or knowledgeable or both.  This page drew about 150 hits per month even when there was zero new […]

Black Swan Free World (9)

November 7, 2009

On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not […]

Black Swan Free World (8)

October 26, 2009

On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is […]

Black Swan Free World (7)

October 17, 2009

On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments […]

Black Swan Free World (6)

October 13, 2009

On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody […]

Black Swan Free World (5)

October 9, 2009

On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex […]

Unrisk – Part 3

October 6, 2009

From Jawwad Farid Transition Matrix Here is another way of looking at it. It is called a transition matrix. All it does is track how something rated/scored in a given class moves across classes over time How do you link to profitability? This is how profitability is calculated generally. Take the amount you have lent, […]

Black Swan Free World (4)

October 3, 2009

On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every […]

Black Swan Free World (3)

September 29, 2009

On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, […]

Black Swan Free World (2)

September 27, 2009

On April 7 2009, the Financial Times published an article written by Nassim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a […]

Black Swan Free World (1)

September 20, 2009

On April 7 2009, the Financial Times published an article written by Nasim Taleb called Ten Principles for a Black Swan Free World. Let’s look at them one at a time… 1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life […]

INARM Status Report

August 29, 2008

End of August Activity Report International Network of Actuarial Risk Managers The INARM Blog was started in April, 2008. About 2/3 of the material on the Blog consists of copies of the email discussions from the INARM listserv. The other 1/3 of the material consists of links to various sources of information about different ERM […]