Summary
The current financial crisis presents a case study of a “financial tsunami” (as former Federal Reserve Chairman Alan Greenspan recently called it) on what can go wrong. Its ramifications are far-reaching and the lessons learned will be embedded in risk management practices for years to come. This document contains 35 relatively short essays where a number of authors have expressed their personal views and opinions on what went wrong and the implications for the future.
The essays are organized by the following topics:
- Explanations, Causes and Cures: they address the philosophies and origins of how the crisis began, with anecdotes about what has happened and insight into encouraging thought leadership going forward
- Prudent Enterprise Risk Management Strategies: the essays in this section discuss the failure to implement the enterprise risk management processes, as well as the importance of a corporate culture that aligns desired performance and incentives with the risks undertaken.
- Societal Themes: these essays provide an interesting commentary on the interconnectivity of individual’s behavior with the resultant behavior and roles of the markets, regulation and the inherent responsibilities to society.
- Effective Risk Modelling: these essays discuss the robustness of models to crisis situations.
- Insights from the Insurance Industry: the authors of these essays share their insight on what has worked and what has not in the insurance industry and suggest how these learnings could be applied to other industry sectors in terms of analytical tools, regulation, contractual obligations and prudent risk taking schemes.
The essays are largely not technically challenging, though some of them assume the knowledge of the U.S. markets and basic concepts of credit derivatives. There are some overlaps in the material discussed among the essays.
http://www.soa.org/library/essays/rm-essay-2008.pdf