Saturday, 3 December, 2011 1 Comment
I confess that I haven’t read the full report (it runs to 200 pages) but, between the report itself (link below) and the CII summary document, the message sounds eerily familiar to the voices that have been going round in my head for the last few years!!! Don’t be afraid I am not a threat!
Much of what the voices were telling me resulted from extensive research into the nature of complex systems that was prompted by the “genius” of Dr Jacek Marczyk (Founder & CTO at Ontonix). Much of what I have learnt and sought to bring to the attention of those engaged with mitigating and managing risk in insurance (and wider Financial Services) has, unsurprisingly, found its way into the pages of this very blog, numerous Linkedin Group and “real world” discussions.
Whilst my “journey” has been intellectually rewarding the same cannot be said in financial terms!
My experience is such that I don’t expect that there will be rapid and sweeping change as a result of this report. Although, bearing in mind the nature of the risk management “weaknesses” and given what we know about the societal cost of major Corporate failure, it would be perfectly reasonable to ask: why not?
It isn’t as if there haven’t been warnings. This is an extract from a report into systemic risk, prepared during 2006:
Two particularly illuminating questions about priorities in risk management emerge from the report. First, how much money is spent on studying systemic risk as compared with that spent on conventional risk management in individual firms? Second, how expensive is a systemic-risk event to a national or global economy (examples being the stock market crash of 1987, or the turmoil of 1998 associated with the Russian loan default, and the subsequent collapse of the hedge fund Long-Term Capital Management)? The answer to the first question is “comparatively very little”; to the second, “hugely expensive”.