Maybe we should define risk as what needs to go right, instead of what could go wrong. Although I would like to claim credit for this view of risk, it came from James Bone of Global Compliance Advisors, LLC. I met James at a Compliance Week round table last week discussing risk management and regulatory [...]
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What Went Wrong at Lehman?
Complinet interviewed David DeMuro, head of compliance at Lehman Brothers during its last days in 2008. It should come as no surprise that the warning signs were there for everyone to see but in the midst of a bubble, employees were too scared to raise their hand because there was still money to be made. [...]
Failure to Conduct Diligence Can Lead to SEC Sanctions
If you advertise that you have due diligence process, you had better follow that process. The Securities and Exchange Commission brought an administrative proceeding against an investment adviser for failing to follow its advertised due diligence program. The Hennessee Group promoted its process for evaluating and selecting hedge funds as the “Five Level Due Diligence [...]
Risk Assessment – Getting It Right
PricewaterhouseCoopers LLP sponsored this webcast: Corporate leaders have long recognized that the pace of change continues to increase in velocity, thus challenging management’s execution of the business’ strategic and tactical plans. Enterprise Risk Management (ERM) is a management tool that can be effective in identifying and assessing the risks that come with change and allow [...]
Ten Principles for a Black Swan-Proof World
Nassim Nicholas Taleb penned an opinion piece in the Financial Times: Ten principles for a Black Swan-proof world . Check out the piece for details behind each item: 1. What is fragile should break early while it is still small. 2. No socialisation of losses and privatisation of gains. 3. People who were driving a [...]
Ways Companies Mismanage Risk
René M. Stulz put together Six Ways Companies Mismanage Risk for the March issue of the Harvard Business Review. Professor Stulz summarizes his thoughts in that “conventional approaches to risk management present many pitfalls. Even in the best of times, if you are to manage risk effectively, you must make extremely good judgment calls involving [...]
Dilbert on Risk Management
Dilbert and company and looking at risk management software this week. Does any of this sound familiar? Ethical issues and bad data? Misunderstanding what it can do?
The Risk Management Formula That Killed Wall Street
Felix Salmon published a great article in Wired that looks at the Recipe for Disaster: The Formula That Killed Wall Street. The article looks at the widespread use of the Gaussian copula function. In assessing the risks in mortgage backed securities. The theory behind Gaussian copula function tries to overcome the difficulty in assessing the [...]
When Markets Turn
The Economist ran a special report on the future of finance last week. One item caught my eye – When Markets Turn: A Parable of How Modern Finance Can Go Wrong. The story looks back at the collapse of the Long-Term Capital Management in 1998. The article puts some of the lessons of that funds [...]
The Growing Importance of Enterprise Risk Management
Kyle McNabb writes about The Growing Importance of Enterprise Risk Management on his Forrester blog. In this article he lets us know about the things he learned after talking with a large number of professionals that work for or directly support executives responsible for compliance and risk management endeavors Boards and CFOs will prioritize initiatives [...]
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