Managing Risk in Perilous Times: Practical Steps to Accelerate Recovery

by Economist Intelligence Unit, 16 March 2010

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Management Risk Management

tags:
Economist Intelligence Unit financial crisis financial regulation risk management

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This report from the Economist Intelligence Unit looks at the lessons that have been learned from the current financial crisis, and propose ten practical lessons that could help address perceived weaknesses in risk identification, assessment and management. Although the research is primarily directed at financial institutions, also highlighted are ways in which these lessons could apply to corporates from other industries.

The ten lessons covered are:
1. Risk management must be given greater authority
2. Senior executives must lead risk management from the top
3. Institutions need to review the level of risk expertise in their organisation, particularly at the highest levels
4. Institutions should pay more attention to the data that populate risk models, and must combine this output with human judgment
5. Stress testing and scenario planning can arm executives with an appropriate response to events

6. Incentive systems must be constructed so that they reward long-term stability, not short-term profit
7. Risk factors should be consolidated across all the institution's operations
8. Institutions should ensure that they do not rely too heavily on data from external providers

9. A careful balance must be struck between the centralisation and decentralisation of risk

10. Risk management systems should be adaptive rather than static

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Economist Intelligence Unit

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