Bob Dylan and the evolving role of Social Business in the redistribution of “absolute power”


Complexity to casualtyYou can’t fail to have noticed the sorry demise of some major High Street brands in recent years. It’s true that a lot of the “tales of woe” are as a result of the, immediate impact, of the global financial crisis but that is only part of the story. Because, there have probably been more casualties, large and small, as a result of the far-reaching “aftershocks” and resultant recession. Read more of this post

Krawcheck on banking complexity:: The Complexity of the Simplicity Solution


After so long it is encouraging to know that complexity in banking is, at least, getting a more frequent airing by others! But, unlike the headline in the recent FT article, we (at Ontonix) don’t believe that “fighting complexity is futile“…far from it! Einstein knew of the rewards available to those who “reached” the simplicity beyond complexity. The scale of the problems created by the excesses of our financial system should tell us that the quest is only futile if banks DON’T adopt a culture and the tools that facilitate “transformation”.

Joining the dots between the ongoing banking crisis and the enlightened output from, such as, Andy Haldane resolves nothing until we act upon what we have learnt! We can’t afford to overlook the obvious shortcomings in Risk Management, Regulatory failures and abandonment of Corporate Governance.

But SURELY, as the author has identified some of the current problems, it can only be a matter of time before sufficient number of enlightened, influential, individuals reach their “flipping points“, act to influence and educate the crowd  – at Ontonix we are doing our utmost to aid this process [refer following video] – so we reach a “tipping point” and effect a, long overdue, paradigm shift.

Krawcheck offers some basic ideas for “paring back the complexity risk” in banking. She argues for looking at the bank’s overall risk profile; for compensating bank executives based on the bank’s risk profile (in terms of debt and equity); paying out dividends as a percentage of earnings; reforming the credit agencies (sigh); and urging boards to worry about booming, not struggling, businesses. (The last advice makes sense, but if we need to remind boards of that, we’re really screwed.) All this is very nice, but very broad — and given, yes, the complexity of banking, it’s a little hard to see the kind of effect it would have.

In fact, except for her first notion, I’m not sure it would do much to either rein in complexity or too-big-to-fail. The devil here is in the details. How would you calculate the “overall risk profile”? Is this a mark-to-market process, in which daily, weekly or monthly numbers are generated, like the much abused and suspect value-at-risk? How, given the enormous complexity, would these metrics be generated — and by whom?

If JPMorgan Chase & Co.’s big ugly trade managed to escape the bank’s internal risk management operation — not to say regulators — how would that have found its reflection in the bank’s overall risk number? It’s a rule: It’s the stuff we don’t know, or don’t want to know, that tends to kill us. And just remember: We’ve had a devil of a time just trying to provide guidelines on bank capital. What makes anyone think calculating an overall risk profile would be easier?

Huffington Post 

Hopefully the following video will go some way to answering critical questions and paving the way to a, less volatile, sustainable future…

From quantum complexity to monied tossers


Probability and Measure

Probability and Measure (Photo credit: John-Morgan)

I am not expert (in anything!) but, unless I am very much mistaken, these scientists are striving for the simplicity on the other side of complexity that Einstein craved.

When confronted with a complicated system, scientists typically strive to identify underlying simplicity which is then articulated as natural laws and fundamental principles. However, complex systems often seem immune to this approach, making it difficult to extract underlying principles.

Simplicity and quantum complexity.

I particularly like the reference to “these systems have memory and are predictable to some extent; they are more complex than a coin toss”.

Which leads me, nicely, on to a recent paper by Nassim Taleb! “Why We Don’t Know What We Talk About When We Talk About Probability”

Taleb is one of the most well known and widely published, critics of the dangerously “naive” practice of applying raw mathematical probabilities [applied to individual or independent events e.g. the coin toss or spin of a roulette wheel] to the, serious and very real, world of finance and insurance*: where it is not ignorance of the subject that is the problem, so much as the blatant disregard for the medium and long term impact upon corporate profitability and social resilience.

A manifestation of the unacceptable face of “Irresponsible Capitalism”

Read more of this post

PwC on risk resilience:: you don’t want swans in your blindspot…or anywhere else!


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In this report PwC follow on from criticisms of the “reach” of conventional risk management contained in the, AIRMIC sponsored, “Roads to Ruin” report that I have previously commented on. Whilst we should ALL be grateful that the subject matter is being kept on the agenda, it is disappointing how few “risk professionals”, insurers, brokers and business leaders are aware of the shortcomings of what is deemed to be accepted “best practice”.

It isn’t only me who has focussed upon the potential implications for business and, to a greater extent, the UK (if not global) insurance industry. Mactavish Consulting have been ringing the alarm bells for, at least, 2 years.

Here is what their own summary had to say:

Black swans turn grey is a thought provoking paper looking at how the landscape of risk is changing from a past environment where boards believed their organisations could manage and control risks to the present where established risk approaches and thinking are being repeatedly outpaced.

Read more of this post

Insurance:: GIAS “Phase II”– turning threat into opportunity


I should pay Warren Buffett a royalty (not that he needs it) for excessive use of this phrase:

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“be greedy when others are fearful and fearful when others are greedy”

But few can doubt that we are paying the price for greed. Whether we are all more fearful could be debated but we are, certainly, financially, socially and environmentally  “poorer” for the experience. Hopefully, we are “wiser”!?

For obvious reasons the financial sector is fearful of what the future holds for them because of the implications of new “mechanisms” that are intended to avoid a repeat of financial meltdown. One thing for sure is that, as much of the cost of increased regulation, falling or unpredictable margins, etc. will be passed on to customers.

How hard a sell will that be for “reputationally damaged” institutions that have, knowingly, abused the trust they once enjoyed???

How much more attractive will their actions (and subsequent inaction) make, innovative propositions, from existing competitors and new entrants look? Read more of this post