This paper from Dr. Ashby, taking a sample of 20 risk management professionals (no mention of their backgrounds, which would have been handy in the context), is a look back over the causes of the credit crisis and how to negate such causes in future. It points at the following;
- Consensus that inappropriate risk culture, poor risk communication and over-reliance on modelled risk assessment were significant contributing factors (both institutions and regulatory/ratings agencies highlighted). These are of course the kinds of aspects most difficult to attack without an appropriate remit and seniority (i.e CRO seat)
- Recommends more of a balance "between modelling and judgement", to counter the increased focus on "objective measurement over effective management" - guessing the quota of pure risk versus actuarial-style in the 20 person sample was weighted towards my kind!
- Fairly critical of risk functions for either alienating themselves from the business with a compliance-led approach, or for lacking the skills to communicate risk exposures
- None of the sample agreed that Solvency II would lead to improvements in risk management.
- Strangely highlights operational risk as an aspect of risk management "that does not lend [itself] to formal mathematical modelling" - couldn't agree less, and I'm not an actuary!