Risk Management Essays Released – Part 2 Systemic Risk, Financial Reform, and Moving Forward from the Financial Crises

by Bob Wolf, SOA Staff Fellow, Risk Management

BobWolfOn behalf of the Society of Actuaries, the Casualty Actuarial Society and the Canadian Institute of Actuaries, I’d like to introduce you to our just-released essay collection titled “Risk Management: Part Two – Systemic Risk, Financial Reform, and Moving Forward from the Financial Crisis.” This collection is sponsored collaboratively by the SOA/CAS/CIA Joint Risk Management Section, the SOA Investment Section, the International Network of Actuaries in Risk Management (IN-ARM) and the Enterprise Risk Management Institute International (ERM-II).

Congratulations to the following essayists who were selected as the top three prize-winning essays:

The 20 essays into the following six key resonating themes:

  1. The Unintended Uses of Models & Risk Metrics and their Contribution to Systemic Crashes
  2. The Role of Government to Safeguard the Public vs. the Role of the Private Sector to Optimize Innovation & Efficiency
  3. A New Normal World Yet to be Developed Under “Emerging’ Systemic Risks
  4. Potential Approaches & Solutions in Treating Systemic Risk
  5. Appropriate Role of Company Management & Company Board of Directors in Managing Systemic Risk
  6. Effectiveness of Government Regulation & the Frank-Dodd Financial Reform Bill

This essay collection is a follow-up to our first collection published at the end of 2008, “Risk Management: The Current Financial Crisis, Lessons Learned and Future Implications”, where we published 35 short essays highlighting key lessons learned from the crises, in the interest of inspiring prudent risk management practices for years to come.

In this latest essay collection, we explore the next step after the U.S. Congress in 2010 passed the most sweeping financial reform measure since the Great Depression in the interest of addressing the risky behavior and decision-making that led to the financial crisis – and to prevent future crises.

  • In reflecting on the events of the last two years, is it possible to effectively develop early warning indicators that trigger beneficial actions in advance of a complete collapse of an entire financial system or market?
  • Should the role of government regulate safeguards for the financial services industry?
  • Should government laws regulate and/or control centralized clearing houses?
  • Should government be structured so as to prevent all business failures (large or small)?
  • Can systemic risk be treated effectively at all, especially as it relates to controlling human behavior?
  • How can companies best strive for prudent strategic organized behavior within these imperfect human constraints?
  • Is the Dodd-Frank regulation bill the ultimate solution?
  • Is current insurance regulation a model that can be used for the broader financial services industry?
  • Is this type of regulation reform truly enforceable?

In addressing these questions and others, we invite you to read on. We hope these essays will provide thought-provoking discussion and commentary in the months and years to come.

I welcome your commentary, rebuttal and further discussion.

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