While the crisis may have subsided, there has been no let-up to the myriad unpredictable risks faced by risk managers. As a result, the risk landscape has grown more crowded and more complex. As governments try to fashion filters for a future increasingly nebulous yet almost certainly more volatile, they may themselves be the risk. Can they coordinate to stabilize the global economy? What will the unintended consequences of regulatory reform post-crisis be? Are lower future returns a given?
Under the specter of sovereign bankruptcies and muni-bond bubbles, spending-versus-austerity debates rage within, and between nations. Competing national interests threaten to fragment the Europe Union and strain relations between the economic poles, China and the U.S. Any drop in Chinese output is a blow to global recovery, yet China's continued dominance further skews the world's capital imbalance towards Eastern assets, Western debt.
Despite regulation, such as The U.S. Financial Reform Bill, much is outside governments' power to regulate: companies bigger than nations; shadow banks; over-the-counter instruments and forces of nature… Technology and the environment represent new levels of risk, as the Flash Crash and massive oil spill highlighted. For unprecedented legal liability, Goldman Sachs' CDO-selling settlement may be just the start.
How do risk managers model such macro risks? Will there be a flight to old-fashioned insurance? There's a call for "fewer mathematicians, more historians," among CROs. Meanwhile, some say the seeds are already set for the next crisis. Does the rising trend in U.S. home foreclosures, where the 2008 crisis began, signal a possible new cycle, a double-dip recession? |
