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Best and Worst Practices in ERM

Treasury & Risk has been examining, five years after the fall of Lehman Brothers, whether a similar situation could arise again in the future. They asked actuary and financial risk management consultant Max Rudolph. As the founder and principal of Rudolph Financial Consulting, he helps companies analyze how their myriad risks aggregate at the company level and how different risks interact with one another. (He also conducts extensive research on enterprise risk management (ERM) and authors an annual survey of emerging risks for the Society of Actuaries.)

First T&R asked Rudolf, “At a systematic level, how well have the global financial markets evolved to avoid future financial crises?” He replied, “Horribly. I’m working on a research project on the low-interest-rate environment, and although I don’t see problems that are as obvious as the problems in the residential mortgage market back in 2007, I do see four bubble risks in the global economy.” and then detailed the four bubbles of risk. He commented,  “Companies would rather go over the cliff doing the same practice as everybody else than say, ‘This doesn’t make any sense.’ That’s a disappointement.”

Lots more sensible advice and examples in this essential article.

Read more in the full article - recommended - here

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