Strategic Intelligence for CFOs, Finance Directors, Controllers and Treasurers in Asia  | 
2014, Apr 17

Preparing for Systemic Risks

Preparing for Systemic Risks

by CFOInnovation Staff, 07 August 2009
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If this crisis teaches the world one thing, it will be that businesses should pay more attention to the issue of systemic risk.

John Farrell of KPMG’s Advisory practice explained that it was the inability to cope with the systemic risks which brought the global economy to where it is today. He said that systemic risks such as the rapid decline of leading banks, the tightening of credit, spiraling unemployment, and the collapse of consumer spending rarely became the focus of any single regulator’s efforts.

 

"Businesses considered risk at a micro level but this crisis has shown that more effort should have been expended at a macro level," he explained, adding that realization is dawning that the regulation which was in place has been somewhat ineffective.

 

Farell stressed that preparing now for a switch to systemic risk regulation is something which no company can afford to ignore. "Extensive scenario analysis and the posing of numerous ‘what if’ questions is one way forward here," he advised. He said that the outputs of any such activity can prove helpful in dealing with the kind of enquiries likely to be posed by any global regulator eventually tasked with overseeing systemic risk. "Better, therefore, to be preparing for that now rather than panicking at a later date."
 

Orignal Author: 
CFOInnovation Staff

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