Banks have managed the wrong risks

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Risk Management and RAROC > Forum > Banks have managed the wrong risks

Banks have managed the wrong risks
Guus P.
Over the last couple of years, financial institutions have been spending an awful lot of money and effort on understanding and managing their market risks, credit risks and operational risks in tremendous detail.
At the same time they have completely failed to understand and prepare for far greater economic, strategic and systemic risks.

Managing the risks
Enzo Zamboni
Threre are two differents poins of view:
1) The complexity of management of the risks is related with complex quantity, real dates, and information in the industry´s sector, production, markets, etc.
2) The management of the risks in the financial industry is complex in relation to the introduction of new financial instruments, but not in the reality of the markets.
It´s necessary to rapidly create new financials instruments for the evaluation and perception of risks.

Financial management risk
Franci Lenne
It's now too easy to declare that the management of the risks by financial institutions has not been right. No strategic institutional advisors were able to prevent that event, as their customers are focused on short term management and financial business more than on long term and true economy. The problem is that those financial organizations were sure not to lose, even if the risk occurred, as they expect to be supported by Governments on that specific case. Note that it is what happened! No reason it will not continue, and we will see the continuation of the financial crash all over the world, until we enter in a new era. Let’s hope this era will be there as soon as possible: strategists have to be prepared and shall NOW reinvent the new world business strategy as soon as possible, forgetting previous wrong paradigms.

Risk Management
Abdul Sayeed Khan
The CEOs' should have better vision in order to run the companies and mitigate the risk. No matter how much effort is required to improve his vision.

Just What Has Changed?
Femi Oni
In these harsh times witnessed by such evident credit squeeze amongst other issues with attendant step-in reactive approach of central banks across the world, it should be asked that what has changed? Have we come up with anything close to a breakthrough? Something like the big bang! Are we not using the same bail-outs and reliefs and of course Basel II and other frameworks are more that ever before taking the center stage.
Without playing to the gallery I stand to be corrected but its apparent that the world has refused to learn. Despite the deluge of scientific and technological advancements, the citizens of the world have failed to take lessons from the events of the past. Nothing has changed!

Risk Management and RAROC
I still think we are all concentrating on a very short termist approach. The future of banking [and of the world] is dependent on how we evaluate risk now and how we build blocks to manage existence of these institutions. How can we by and by be able to run our private lives, even if by trial and error reasonably successfully, [our primitive ancestors did it even better], and fail in managing our financial institutions? Our basic intuitions are far superior than any risk management solution!

Risk Management needs Information
Balachandran Nair, Bank Official, India, Member
I think risk management is all about letting every individual in the organisation into the loop. The Management Information System, particularly in banks, generally works on information disseminated on a need-to-know basis. Its time that management realized that the more informed an employee is, the better will he/she be equipped to handle risk issues.

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