Friday, July 31, 2009

British Academy to Queen: 4000 risk managers but no synthesis, didn’t see the big picture

Risk management was

considered an important part of financial markets. One of our major banks, now mainly in

public ownership, reputedly had 4000 risk managers. But the difficulty was seeing the risk to

the system as a whole rather than to any specific financial instrument or loan. Risk calculations

were most often confined to slices of financial activity, using some of the best mathematical

minds in our country and abroad. But they frequently lost sight of the bigger picture.