Risk Management Quotes

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387 Comments on “Risk Management Quotes”

  1. riskviews Says:

    “It is better to be vaguely right than exactly wrong”
    Carveth Read—1898 (from Max Rudolph)

  2. riskviews Says:

    It turns out that while strategists’ forecasts are remarkably close to the mark much of the time, they are woefully unreliable during inflection points.

    For example, strategists overestimated the S&P 500’s year-end price by 26.2 percent on average during the dot-com bust from 2000 to 2002. Then they underestimated the index’s year-end price by 10.6 percent during the early recovery in the first half of 2003.

    It happened again during the financial crisis. Strategists overestimated the S&P 500’s year-end price by 64.3 percent in 2008 and then underestimated it by 10.9 percent during the first half of 2009. In other words, the forecasts were least useful when they mattered most.

    Nir Kaissar

  3. riskviews Says:

    “uncertainty is a tough sell…but it is not an impossible sell, and the world’s moving in that direction” Michael Lewis

  4. riskviews Says:

    Doubt is not a pleasant condition, but certainty is absurd. Voltaire

  5. riskviews Says:

    Whenever there is a simple error that most laymen fall for, there is always a slightly more sophisticated version of the same problem that experts fall for. Amos Tversky

  6. riskviews Says:

    Unwarranted disappointment is is the hallmark of excessive optimism and unwarranted surprise if the hallmark of overconfidence.
    Hersh Shefrin

  7. riskviews Says:

    Using the same co-variance matrix to measure risk and to optimize positions inevitably leads to biases in the measurement of risk.
    Philippe Jurion

    • riskviews Says:

      Only extremists believe that the market view of price is the exact right value of a security. Only madmen believe that the market view of risk is an accurate portrayal. Mathematical models that profess to analyze the market view of risk usually assume that the instrument that they are analyzing is tradeable right up to the instant of oblivion. Rarely is that the case. But exactly when the position is going to be untradable is unknowable. And that is just one of the real world risks that are not included in the models.

  8. riskviews Says:

    I can’t remember, however, an instance when reading a 10-K’s “risk” section has helped me in evaluating a business. That’s not because the identified risks aren’t real. The truly important risks, however, are usually well known. Beyond that, a 10-K’s catalog of risks is seldom of aid in assessing: (1) the probability of the threatening event actually occurring; (2) the range of costs if it does occur; and (3) the timing of the possible loss. A threat that will only surface 50 years from now may be a problem for society, but it is not a financial problem for today’s investor.
    Warren Buffett

    • riskviews Says:

      The other thing about those 10k risk disclosures that makes them extra useless is that management usually doesn’t disclose whether they are doing anything about the risks that they describe.

  9. riskviews Says:

    If you break from the herd and something unexpectedly bad happens, you will get personally blamed.

    But if you do what everyone else is doing, you can blame factors beyond your control if it all goes wrong. So the obvious incentive is, from a personal point of view, to follow the crowd.

    Ben Moshinsky

  10. riskviews Says:

    “As soon as the government attempts to regulate any particular set of financial assets, these become unreliable as indicators of economic trends.”

    Charles Goodhart

    • riskviews Says:

      Known as Goodhart’s Law. More broadly stated as “When a measure becomes a target, it ceases to be a good measure.” (Wikipedia)

  11. riskviews Says:

    ice cream sales and forest fires are correlated because both occur more often in the summer heat. But there is no causation; you don’t light a patch of the Montana brush on fire when you buy a pint of Häagen-Dazs.

    Nate Silver

  12. riskviews Says:

    You are most likely to overfit a model when the data is limited and noisy and when your understanding of the fundamental relationships is poor;

    Nate Silver

  13. riskviews Says:

    Studies from Katrina and other storms have found that having survived a hurricane makes one less likely to evacuate the next time one comes.

    Nate Silver

  14. riskviews Says:

    risk transfer was illusory. When large banks and thrifts sold loans into securitization pools, the contracts typically included “reps and warranties,” which obliged them to buy back a defaulting loan if it did not meet the lending standards specified in the contract.

    Sheila Bair

  15. riskviews Says:

    The likelihood that investors and speculators would heed the warnings of a government official when asset prices are increasing at annual rates of 20 to 30 percent a year is not especially high.

    Charles P. Kindleberger and Robert Z. Aliber

  16. riskviews Says:

    In the strict formulation of the causal law-if we know the present, we can calculate the future-it is not the conclusion that is wrong, but the premise.

    William Duggan

  17. riskviews Says:

    Complexity is a defining characteristic of society and many of its technologies today. Yet simplicity and linearity remain the defining characteristics of the theories we use to explain bad events that emerge from this complexity.

    Sidney Dekker

  18. riskviews Says:

    Each manager is loss averse regarding any outcomes that will be attributed to him. In an organizational setting, the natural feeling of loss aversion can be exacerbated by the system of rewards and punishment. In many companies, creating a large gain will lead to modest rewards, while creating an equal-sized loss will get you fired. Under those terms, even a manager who starts out risk neutral, willing to take any bet that will make money on average, will become highly risk averse. Rather than solving a problem, the organizational structure is making things worse.
    Richard Thaler

    • riskviews Says:

      Compensation for traders is often very different. If they make a large gain, they get a very large bonus. If they make a large loss, they move on to be a trader for a different firm. The most successful traders in banks move out to create their own hedge funds where they keep 20% of gains and close the fund if there are losses. Result is that traders are highly risk seeking.

  19. riskviews Says:

    Life is divided into three periods—that which has been, that which is, that which will be. Of these the present time is short, the future is doubtful, the past is certain. Seneca

  20. riskviews Says:

    “When the sailor returned to his hometown he knew one thing the farmers back home never knew: that there was more than one way of doing things. The farmer thought he was the center of the world, the sailor knew he wasn’t. I think this a healthy knowledge.”
    Carsten Jensen

  21. riskviews Says:

    Apart from the known and the unknown, what else is there?

    Harold Pinter

  22. Dave Ingram Says:

    “The honest answer then was that the only thing that had changed was our perception of risks and uncertainties that were always there. And it’s the same answer I give today about the current global business and financial situation.”
    Hugh Courtney in response to the question “Does 9/11 change everything?”

  23. riskviews Says:

    Carelessness and overconfidence are usually more dangerous than deliberately accepted risks.
    Orville Wright

  24. riskviews Says:

    “In the current environment, any breach that even suggests something inappropriate is going to be dealt with extremely seriously,” said Simon Hayes, a partner at U.K. executive search firm Odgers Berndtson. “It’s no good talking about cultural change if you’re not going to follow through with action when inappropriate cultural behavior is demonstrated.”

    • riskviews Says:

      This is being said in the wake of reported terminations of 30 trainees for cheating on a training exam.

  25. riskviews Says:

    Gambling is placing capital at risk in a zero sum game with an uncertain outcome in a system in which the odds are generally unfavorable over long periods of time. Investing, on the other hand, is placing capital at risk in a positive sum game with an uncertain outcome in a system in which the odds are generally favorable over long periods of time.
    Cullen Roche

    • riskviews Says:

      So investing is better because positive sum over time means that investors have a positive expected value while gamblers have a negative expected value???

  26. Dave Ingram Says:

    A dangerous premise built into many control systems is that they are designed to function most efficiently in stable conditions; that is,
    their norm is stability rather than turbulence.

    Roger Miles

  27. riskviews Says:

    Diversification is not a guarantee against loss, only against losing everything at once. Peter Bernstein

  28. riskviews Says:

    “What we anticipate seldom occurs, what we least expected generally happens.”

    Benjamin Disraeli

  29. riskviews Says:

    “I have noticed that even people who claim everything is predetermined and that we can do nothing to change it, look before they cross the road.”
    Stephen Hawking

    • riskviews Says:

      I’ve always wanted to ask someone who says that they do not believe in risk management if they would sell their seat belts to me for $50.

  30. riskviews Says:

    …the vision of the mind that has captured the imagination of philosophers, cognitive scientists, economists, and political scientists since the 18th century – a dispassionate mind that makes decisions by weighing the evidence and reasoning to the most valid conclusions – bears no relation to how the mind and brain actually work.
    Drew Westin – Clinical Psychologist

  31. riskviews Says:

    What, never?
    Well, hardly ever!”
    W.S. Gilbert

  32. riskviews Says:

    Risk models only have value if they are used effectively in combination with a limit management and control process.
    Jawwad Farid

  33. riskviews Says:

    The hard fact is that economic models are quantitative parables, not explicit and complete descriptions of reality. The step of understanding the model’s “intuition,” “basic message,” and so forth is devilishly hard. That’s why we have such deep verbal discussions about economic models, where we imagine physicists just test them and are done. (They don’t, but that’s another story.)

    John Cochrane

  34. riskviews Says:

    “I still remember the teasing we financial economists, Harry Markowitz, William Sharpe, and I, had to put up with from the physicists and chemists in Stockholm when we conceded that the basic unit of our research, the expected rate of return, was not actually observable. I tried to tease back by reminding them of their neutrino –a particle with no mass whose presence was inferred only as a missing residual from the interactions of other particles. But that was eight years ago. In the meantime, the neutrino has been detected”.
    Merton Millier, 2000

  35. riskviews Says:

    Any time you make any kind of causal statement about economics, you are at least implicitly using a model of how the economy works. And when you refuse to be explicit about that model, you almost always end up – whether you know it or not – de facto using models that are much more simplistic than the crossing curves or whatever your intellectual opponents are using.
    Paul Krugman

    • riskviews Says:

      And a somewhat related point: when people claim to have a sophisticated understanding that transcends models, what, exactly, would they ever regard as evidence that their sophisticated understanding is, you know, wrong?
      Also Paul Krugman from the same blog post.

  36. riskviews Says:

    The business of finance seems to have devolved into a world of rent-seeking and zero-sum games.
    Ashby Monk

  37. riskviews Says:

    “All institutions, regardless of size, must resist the temptation to under-invest in the systems and controls they need to prevent greater risk and larger losses in the future.”
    Thomas Curry

  38. riskviews Says:

    there is no universally accepted formula for assessing diversification. In fact, the whole topic of diversification is typically clouded with hand waving and qualitative judgments.

    John Dowdee

    Read more: http://www.nasdaq.com/article/how-to-assess-realworld-portfolio-diversification-cm232437#ixzz3BGRQbOwS

  39. riskviews Says:

    THe fact is that one side thinks the profits to be won outweigh the risks to be incurred, and the other side would rather avoid danger than accept an immediate loss.

  40. riskviews Says:

    That it reached conclusions quite different from what the ordinary uninstructed person would expect added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress,and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority.That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority.

    JM Keynes speaking about Economics

  41. riskviews Says:

    Economists who have spent their entire careers on equilibrium business cycle theory are now discovering, in effect, that they invested their savings with Bernie Madoff.
    Paul Krugman

  42. riskviews Says:

    all organizations have a risk attitude that ranges from extreme risk aversion to a radically risk seeking culture. Most often the actual risk attitude plays itself out in risk taking behaviors that underlie the basis for a risk appetite framework and strategy. Within the context of a risk culture which is defined primarily by the risk taking behaviors of its employees, every person has a risk attitude and appetite for risk.

    Chris Mandel

  43. riskviews Says:

    As part of its ethics activities, Enron created a Code of Ethics manual. Clearly, someone at Enron thought this was a great idea. And it was. Except that all 64 pages of the manual were disregarded on countless occasions.
    Samantha Greves

  44. riskviews Says:

    I found that if you have a goal, that you might not reach it. But if you don’t have one, then you are never disappointed. And I gotta tell ya… it feels phenomenal.
    from Dodgeball the movie

  45. riskviews Says:

    “Risk is the factor of a stratagem measured by what man is powerless to control.”
    ― Mike Norton, White Mountain

  46. riskviews Says:

    “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy…your main constituencies are your employees, your customers and your products”. Jack Welsh

  47. riskviews Says:

    “Knowing is not enough; we must apply. Willing is not enough; we must do.”

    Johann Wolfgang von Goethe

  48. riskviews Says:

    Handing off full responsibility for the bank’s enterprise risk management is the wrong reason to have a CRO. The result is likely to be an expensive compliance bureaucracy that creates a false sense of security. Russ Banham

  49. riskviews Says:

    Complexity is the enemy of transparency and complexity is not a good thing in finance.
    Hank Paulson

  50. riskviews Says:

    To our knowledge, no macro stress test carried out ahead of the crisis identified the build-up of vulnerabilities. The message was overwhelmingly: “The system is sound”. Rather than being part of the solution, stress tests turned out to be part of the problem. They lulled policymakers and market participants into a false sense of security. There is a serious risk that, unless their limitations are fully understood, they will continue to do so in the future.

    Claudio Borio, Mathias Drehmann and Kostas Tsatsaronis

  51. riskviews Says:

    We are just looking in the wrong places, expecting the future to resemble the past.
    John Mauldin

  52. riskviews Says:

    Thus when all things are considered, it will be found best for the Nation to leave the Borrowers and the Lender to make their own Bargains, according to the Circumstances they lie under; and in so doing you will follow the course of the wise Hollanders, so often quoted on this account: and the consequences will be, that when the Nation thrives, and grows rich, Money will be to be had upon good terms, but the clean contrary will fall out, when the Nation grows poorer and poorer.
    Dudley North 1691

  53. riskviews Says:

    The corporate governance of large banks was characterized by the creation of Potemkin villages to give the appearance of effective control and oversight.
    Parliamentary Commission on Banking Standards Report (June 2013)

  54. riskviews Says:

    Computer models alone can no longer calculate meaningful probabilities about what will happen next in the eurozone. Instead, what really matters now in places ranging from Finland to Greece are non-quantitative issues such as political values, social cohesion and civic identity. Above all, the question of “credit” is key to working out whether bonds can ever be repaid. But this is not credit in the mathematical sense by which banks have often defined it (as a projected probability on a chart), but in the old fashioned, Latin – social – meaning (belief). The crucial variable, in other words, is whether voters have faith in their governments and central banks. Do they trust the safety of their banks? Are citizens willing to trust each other, and co-operate, when pain is imposed?
    Gillian Tett

  55. riskviews Says:

    Models themselves can provide tremendous insight, but they also can be, if not necessarily misused, certainly misunderstood. People can lose track of the fact that just because your model says you don’t have any risk, and you are running a very large balance sheet with a tremendous amount of leverage, it doesn’t necessarily mean that you should feel comforted. Internal models really need to be augmented by strong risk management capabilities, by individuals with experience who won’t just take models for granted, but actually take a look and see very large numbers and regardless of what the market is doing just ask the question: Does it make sense?
    Tom Wilson

  56. riskviews Says:

    He who is not courageous enough to take risks will accomplish nothing in life.

    Muhammad Ali

  57. riskviews Says:

    “From a risk perspective, it’s a challenging operating environment; the financial and credit markets are still brittle, economic recovery fragile and excess capacity in the insurance industry is driving competitive behaviour. Our risk management priorities remain to partner with the business and ensure we provide them with the right decision-support tools to identify and assess risk and the risk-reward framework to make those decisions.”
    Sean Ringsted

  58. riskviews Says:

    “Speed is irrelevant if you are going in the wrong direction.”
    M. Gandhi

  59. riskviews Says:

    “By far the most important lesson Mississippi has learned [from Huricane Katrina] is the value of preparedness.”
    — Mississippi Gov. Phil Bryant

  60. riskviews Says:

    For a central risk function, whether that is in a group centre or in a local company, one of the very important points is to strike a balance between the control aspect to your work and the support aspect to the business.
    Pierre Joos

  61. riskviews Says:

    “The economic crisis has put into question many of our beliefs. We have to accept the intellectual challenge.”
    Olivier Blanchard IMF Chief Economist (2011)

  62. riskviews Says:

    There’s no lone genius who figures it all out and sends down the magic formula.

    Jeff Bezos

  63. riskviews Says:

    “…those who like facts generally don’t like rigid ideologues.”

    Daniel Tracht

  64. riskviews Says:

    Managing an organization’s risks in individual silos is like trying to pick up a six-pack without the little plastic thingy that holds them all together; you can do it, but it is far harder than it would be if the cans were connected to each other.
    Andrew Bent

  65. Prof. Ray Says:

    Most people (corporation -(s) ) never think of sustainable risk management pragmatically unless they start losing money…some exploit loopholes and damn the consequences, some prefer to pay huge fines when caught because they know the limit (remit) of the law… some even consult with their lawyers before exploiting unethical loopholes… whois to be blamed…?

    What is your take on this…?
    Are you entangle in one of these fallacy web of narcissism?
    Don’t be the next ponzi, Bernie…etc…

    • riskviews Says:

      Perhaps it is a fundamental flaw in the ownership/governance model of the modern joint stock company. The owners have no real interest in the long term health of a firm – just an interest in what they can get out of holding a stock for a short period. The problems may be containable with some tweaks to regulations, but will not be solved until we stop our economy from being run by these extreme short term interests.

  66. riskviews Says:

    Investors were never ‘rational’ as defined by standard finance. They were ‘normal’ in 1945, and they remain normal today.
    M Statman

  67. riskviews Says:

    sometimes, I’ve believed as many as six impossible things before breakfast.
    Lewis Carroll

  68. riskviews Says:

    “Management that is destructively critical when mistakes are made kills initiative. And it’s essential that we have many people with initiative if we are to continue to grow.”
    William McKnight

  69. riskviews Says:

    There is a continuum between certainty and uncertainty, just as there is between factors inside and outside of our control. By studying the uncertain, we may be able to break it down into elements of greater and lesser risk, of greater and lesser predictability. In the same way, between absolute control and absence of control lies the middle ground of influence and persuasion.

    Chantell Ilbury & Clem Sunter (Mind of a Fox)

  70. riskviews Says:

    Thus we may say that there is an expanding funnel of doubt. The contours of the funnel vary with each one of us, for the concept is personal. Nevertheless, they must inevitably have much in common, since they all start from a common point now.

    If we could give numerical values to our uncertainties we could construct a probability dispersion table. For example, we might say that the probability that in 1960 the rate of interest will lie between 31/2% and 4¼% is .15, We cannot, of course, do this in practice. Yet the expanding funnel of doubt is in the background of our thoughts not only in regard to interest but also in regard to the other factors: mortality, expenses, taxation.

    FM Redington (1952)

  71. riskviews Says:

    Banking history is littered with examples of manipulative conduct driven by misaligned incentives, of bank failures born of reckless, hubristic expansion and of unsustainable asset price bubbles cheered on by a consensus of self-interest or self delusion.
    An important lesson of history is that bankers, regulators and politicians alike repeatedly fail to learn the lessons of history: this time, they say, it is different.

    From the report of the Parliamentary Commission on
    Banking Standards (2013)

  72. riskviews Says:

    A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.

    – Douglas Adams, The Hitchhiker’s Guide to the Galaxy

  73. Ric Bahr Says:

    There is no such thing as IDIOT PROOF.

  74. riskviews Says:

    It is not a crime to be a lousy manager, a failed risk taker or to lose simply boat loads of money. Many of our most prominent CEOs have done the same.
    Holman Jenkins, WSJ 27 April, 2013

  75. riskviews Says:

    Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits — of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.
    JM Keynes

  76. riskviews Says:

    I believe now that successful investment depends on three principles:
    (1) a careful selection of a few investments (or a few types of investment) having regard to their cheapness in relation to their probable actual and potential intrinsic value over a period of years ahead and in relation to alternative investments at the time;
    (2) a steadfast holding of these in fairly large units through thick and thin, perhaps for several years, until either they have fulfilled their promise or it is evident that they were purchased on a mistake;
    (3) a balanced investment position, i.e. a variety of risks in spite of individual holdings being large, and if possible opposed risks (e.g. a holding of gold shares amongst other equities, since they are likely to move in opposite directions when there are general fluctuations)

    JM Keynes

  77. riskviews Says:

    I am as certain as certain can be— that a financial community with a more even balance between men and women, young and old, could not possibly do any worse than the system we have now.

    Coates, John (2012-06-14). The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust

  78. riskviews Says:

    It would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain.
    John Maynard Keynes
    The General Theory of Employment, Interest and Money

  79. riskviews Says:

    Of the many elemental flaws in macroeconomic practice is the true observation that the economic variables in which we might be most interested happen to be those which lend themselves least to measurement. Thus, the statistics which we take for granted and band around freely with each other measuring such ostensibly simple concepts as inflation, wealth, capital and debt, in fact involve all sorts of hidden assumptions, short-cuts and qualifications. So many, indeed, as to render reliance on them without respect for their limitations a very dangerous thing to do.
    Dylan Grice

  80. riskviews Says:

    While its original approval document indicated that the SCP was created with a hedging function in mind, the bank was unable to provide documentation over the next five years detailing the SCP’s hedging objectives and strategies; the assets, portfolio, risks, or tail events it was supposed to hedge; or how the size, nature, and effectiveness of its hedges were determined.


  81. riskviews Says:

    The fact was that I was not a master of my actions, because I was not so insane as to attempt to bend events to conform to my policies. On the contrary, I bent my policies to accord with the unforeseen shape of events.
    Napoleon Bonaparte

    • riskviews Says:

      Note to self: check to see when I am being “so insane as to attempt to bend events to conform with my policies”.

  82. riskviews Says:

    “Avoiding the unmanagable and managing the unavoidable”
    Title of a UN report on climate change

  83. riskviews Says:

    “Most men would rather die than think. Many do.”
    Bertram Russell

  84. riskviews Says:

    There was a lot of hand-wringing last year among CEOs who cried “uncertainty” when faced with capital allocation decisions (despite many of their businesses having enjoyed record levels of both earnings and cash).
    Warren Buffett

  85. riskviews Says:

    “Chance favors the prepared mind.” – Louis Pasteur

    “The more I practice, the luckier I get.” – Gene Sarazen

  86. riskviews Says:

    “Blessed is he who expects nothing, for he shall never be disappointed.”
    Alexander Pope

  87. riskviews Says:

    We need to “recognize that ‘we are all in sales’”

    Cheryl Feltgen, chief risk officer for the home loans division, WaMu, 2006

    • riskviews Says:

      This is not as outrageous as it might seem. In 2006, many CROs were saying similar things. Those who did not were marginalized or fired. This is a function of the Maximizers being in charge of the banks. (See Plural Rationality and ERM.)

  88. Dave Ingram Says:

    Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present.

    Marcus Aurelius

  89. Dave Ingram Says:

    The ultimate result of shielding men from folly is to fill the world with fools

    Herbert Spencer

  90. riskviews Says:

    “It is not the strongest or the most intelligent who will survive but those who can best manage change.”
    ― Charles Darwin

  91. riskviews Says:

    “a major strategy selected is not one maximizing either efficiency or a particular reward, but one which allows persistence by maintaining flexibility above all else. A population responds to any environmental change by the initiation of a series of physiological, behavioral, ecological, and genetic changes that restore its ability to respond to subsequent unpredictable environmental changes. Variability over space and time results in variability in numbers, and with this variability the population can simultaneously retain genetic and behavioral types that can maintain their existence in low populations together with others that can capitalize on opportunities for dramatic increase. The more homogeneous the environment in space and time, the more likely is the system to have low fluctuations and low resilience.”
    CS Holling

  92. riskviews Says:

    “As I write in 2012 we certainly do not believe that it is over yet, and the worst may be yet to come. Efforts by governments to solve the underlying problems responsible for the crisis have still not gotten very far, and the ‘stress tests’ that governments have used to encourage optimism about our financial institutions were of questionable thoroughness.”
    Robert Shiller

  93. riskviews Says:

    “We’re doing the right thing… Many of the bad practices of the recent past were being phased out… Regulators are trying to do too much, too fast…. We are getting an overly bad press… There is huge misinformation out there about what we are doing to get things right… We have twice as much capital as before to pad against losses… We help clients raise money for socially-important projects in schools and hospitals…”

    “Businesses can be opaque. They are complex. You don’t know how aircraft engines work either.”

    Jamie Dimon at Davos 2013

  94. riskviews Says:

    “Outperforming the market with low volatility on a consistent basis is an impossibility. I outperformed the market for 30-odd years, but not with low volatility.”
    George Soros

  95. riskviews Says:

    “Once in the dear dead days beyond recall, an out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor. “Look, those are the bankers’ and brokers’ yachts. ‘Where are all the customers’ yachts?’ asked the naïve visitor.”

    Fred Schwed (circa 1940)

  96. riskviews Says:

    “You cannot allow any of your people to avoid the brutal facts. If they start living in a dream world, it’s going to be bad.”

    General James “Mad Dog” Mattiss

    Read more: http://www.businessinsider.com/general-maddog-mattiss-best-quotes-2013-1?op=1#ixzz2J0Vx39mV

  97. riskviews Says:

    AIG’s “models are guided by a few, very basic principles, which are designed to make them very robust and to introduce as little model risk as possible. We always build our own models. Nothing in our business is based on buying a model or using a publicly available model.”
    Gary Gorton –Dec. 5, 2007, AIG investor meeting

  98. riskviews Says:

    The problem of the use of statistical tools and theorems comes from the people that try to domesticate the randomness within certain events and variables by the use of certain assumptions that would be difficult to satisfy. Thus, the results obtained while using a model without data that satisfies the assumptions are, naturally, wrong. Furthermore, the design of this models does not grant protection against randomness or the consequences of a black swan event.

    Carlos Castro Correa

    • riskviews Says:

      Really like the phrase at the end of this quote, which is here modified to say
      “Models do not grant protection against uncertainty or the consequences of a black swan event”

  99. riskviews Says:

    We cannot, indeed, imagine our own death; whenever we try to do so we find that we survive ourselves as spectators. The school of psychoanalysis could thus assert that at bottom no one believes in his own death, which amounts to saying: in the unconscious every one of us is convinced of his immortality. Sigmund Freud

    • riskviews Says:

      Imagining the death of the company is at the heart of ERM. This creates a huge barrier to risk management, especially when chief executives are founders. The separation between themselves and their company is often weak. So these execs will not be able to imagine the death of their company.

  100. riskviews Says:

    “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” John Kenneth Galbraith

  101. riskviews Says:

    My concern with risk management is that many (not all) risk professionals are trying to redefine risk management to make it something broader than it actually is.

    Michael Rassmussen

  102. riskviews Says:

    It is clear that for the large majority of individual investors, taking a shower and doing nothing would have been a better policy than implementing the ideas that came to mind.

    Daniel Kahneman

    Read more: http://www.businessinsider.com/terry-odean-on-stock-picking-2012-12#ixzz2G0b7ZLZk

  103. riskviews Says:

    Facts that challenge such basic assumptions—and thereby threaten people’s livelihood and self-esteem—are simply not absorbed.

    Daniel Kahneman

    Read more: http://www.businessinsider.com/daniel-kahneman-on-wealth-management-2012-12#ixzz2FyXeUrDe

  104. riskviews Says:

    Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s “invisible hand” that is unredeemably opaque. With notably rare exceptions (2008, for example), the global “invisible hand” has created relatively stable exchange rates, interest rates, prices, and wage rates.
    Alan Greenspan

    • riskviews Says:

      Other things that are similarly true:
      With notably rare exceptions, Newt Gingrich is a loyal and faithful husband.

      With notably rare exceptions, Japanese nuclear reactors have been secure from earthquakes.

      Though unredeemably(sic) opaque, Mr. Madoff’s operations delivered excellent returns, with notably rare exceptions.

      With notably rare exceptions, the levees protecting New Orleans have held fast in the face of major hurricanes.

      With notably rare exceptions, locking all exits to the workplace is a harmless way to improve your employees’ productivity.

      With notably rare exceptions, petroleum extraction has minimal environmental impact.

      From Henry Farrell http://crookedtimber.org/2011/03/30/with-notably-rare-exceptions/

  105. riskviews Says:

    “Chance is commonly viewed as a self-correcting process in which a deviation in one direction induces a deviation in the opposite direction to restore the equilibrium. In fact, deviations are not “corrected” as a chance process unfolds, they are merely diluted.”
    ― Amos Tversky

  106. riskviews Says:

    In summary, neither our model projections for the 21st century nor our analyses of trends in Atlantic hurricane and tropical storm counts over the past 120+ yr support the notion that greenhouse gas-induced warming leads to large increases in either tropical storm or overall hurricane numbers in the Atlantic. A new modeling study projects a large (~100%) increase in Atlantic category 4-5 hurricanes over the 21st century, but we estimate that this increase may not be detectable until the latter half of the century.
    Thomas Knutson (NOAA)

  107. riskviews Says:

    “We believe that effective risk management is critical to the success of our business and is the responsibility of all of our employees. All of our employees are risk managers. Employees are expected and encouraged to escalate incidents and any matters of concern to management and to our compliance and risk departments in order to effectively manage risk. Consequently, we have established — and continue to evolve and improve — a global enterprise wide risk management framework that is intended to manage all aspects of our risks.”

    MF Global 2011 10K

  108. riskviews Says:

    “You cannot teach a man anything; you can only help him discover it in himself.”
    “All truths are easy to understand once they are discovered; the point is to discover them.”
    Galileo Galilei

  109. riskviews Says:

    “I have never seen dependable calculations made about common stock values, or related investment policies, that went beyond simple arithmetic or the most elementary algebra. Whenever calculus is brought in, or higher algebra, you could take it as a warning signal that the operator was trying to substitute theory for experience, and usually also to give to speculation the deceptive guise of investment.”
    Ben Graham

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