The Risk Telescope Blog
Risk and its close cousin cannot be legislated out of existence. Different people and institutions have different tolerances for risk and volatility. Financial firms are specifically chartered by governments to take certain types of risk. Different types of financial firms are structured to have higher or lower tolerances for risk, based on their corporate structure and regulatory priorities. As in the physical world, risk will migrate to the spot in the system where there is the least resistence and the least pressure. Yet financial risk is not like physics in at least one crucial aspect: there is no one constant amount of risk; it can increase or decrease depending on the good and bad decisions made by bankers, their customers, and policymakers.
We are living through a massive societal re-definition of what kinds of risks financial firms can and should take. Policymakers are making many of these decisions, as is their right and obligation. Some of the issues are old, but the technical, technological and political environments make different decisions possible today than were taken in the past. Other issues are entirely new. The risk community also is asking deep questions about how the experience of the last few years and the decisions taken now will affect perceptions and measures of risk. Those decisions will determine how and under what circumstances companies can acquire working capital loans and individuals can acquire the finance to purchase a home or a car. These are the issues this blog will explore, together with questions of who has the authority to make which decisions.
Among other things, it is fair to question whether the risk genie can be put back into the bottle. Once one knows how to find risk and knows it is important to measure it so as to control exposure to risk, is it really possible to return to a world where those tools were not available? Probably not. The only question is how transparent the risk measurement (and risk transfer) mechanism will be.
Into this fray steps The Risk Telescope. It seeks to provide a window into how I think about risk and the intersection between risk management and public policy choices. It is not an advocacy platform. Instead, it collects in one place various streams of thought so that they are easier to view.
Many wise, intelligent and articulate economists opine on components of the regulatory or political debate swirling around the G20 and its satellite groups, the EU, the US, China, Brazil, etc. But very few risk specialists engage in the debate beyond the risk management and financial engineering universe. And even fewer blogs address the intersection between risk policy, politics, economics, and regulatory issues.
The goal is to encourage thoughtful and pragmatic discussion of the issues of the day based on political and economic realities, grounded in a good understanding of history. It also provides a broader set of market participants with a small window into the kind of strategic analysis we provide to clients through a growing new product.
The Risk Telescope blog has a number of inter-related components. They are:
–Book reviews: This is not just a review of crisis literature, although that would certainly be an interesting project in its own right. The books chosen for review will balance between those written now and those written in the 1980s and 1990s. The idea is not so much to laugh at old ideas that led us astray but to understand how thinking evolved over the last twenty or thirty years in risk management, banking and finance so that we can learn from mistakes (and remember forgotten good ideas). Ideas for books to read will be welcome. Post frequencies for this component will likely be 1-2 per month.
–Speeches, Public Statements and Publications: Not everyone attends the same conferences I do. The blog format provides a good place to keep people updated on my current thinking and research focus outside the business. It also provides a quick way for me to share media stories where I am quoted and provide a bit more background on the issue discussed in the story.
–The Risk Telescope: The blog launch is timed also with the launch of our first major product expansion. The blog will permit folks outside the client base with a small window (one paragraph) into the kind of analysis and issue coverage we are providing inside the business. Consider it an invitation to join us as a client….
–The Risk Telescope Calendar: You don’t spend almost two full decades in advocacy without acquiring a keen appreciation for the value of knowing the sequence of events. The Risk Telescope calendar provides a quick glimpse of the major policy meetings that will be occurring that month, so that visitors can mentally prepare for the events that will follow. Consider it a small contribution to getting ahead of the news cycle.
–The Countdown Clock: Media coverage of some G20 meetings tends to be spotty. Once upon a time, media coverage of EU EcoFin meetings also was spotty. Sometimes, it is not immediately obvious how quickly events crop up, or how closely linked they are in time. This countdown clock can serve as a handy visual reminder of when the next big policy meeting is on the way.
As with any blog, there are a few ground rules. The most important ground rule is that all posts must be undertaken with respect for other writers and civility. This blog is designed for thoughtful consideration of difficult and important issues. You don’t have to be an expert in financial models to participate. But you do need an active and good faith interest in finding a good solution to today’s challenges and understanding how they will affect intermediation for individuals and businesses in the years to come.
