Part 2–Systemic Risk, Financial Reform, and Moving Forward from the Financial Crisis
On behalf of the Society of Actuaries, the Casualty Actuarial Society and the Canadian Institute of Actuaries, we'd like to introduce our just-released essay collection entitled, "Risk Management Part Two–Systemic Risk, Financial Reform, and Moving Forward from the Financial Crisis." This collection is sponsored collaboratively by the SOA/CAS/CIA Joint Risk Management Section, the SOA Investment Section, the International Network of Actuaries in Risk Management (IN-ARM), and the Enterprise Risk Management Institute International (ERM-II).
Modeling
The following essays related to the unintended uses of modeling and points to the need to get away from assuming a constant set of assumptions and parameterizations from assumptions based on historic and potentially now irrelevant non-representative information. The world changes. Relying purely on history is inappropriate. Hence, if everyone relies on the same non-responsive and incomplete models, the risk of systemic crashes increase. The use of models can sometimes hide the subjective uncertain assumptions.
- A Tale of Two Density Functions
- By Dick Joss
- The Systemic Risk of Risk Capital (Or the "No Matter What" Premise)
- By C. Frytos & I. Chatzivasiloglou
- Actuaries and Assumptions
- By Jonathan Jacobs
- Managing Financial Crises, Today and Beyond
- By Vivek Gupta
Role of Government vs. Role of Market
The following essays relate the need for financial systems to require safeguards and protections. Should the role of government regulate these safeguards at the company level or industry level? Should government laws regulate and/or control centralized clearing houses? Should government be structured so as to prevent all business failures (big or small)? How can government allow the private sector incentives to run efficiently and innovatively? These and more questions are discussed.
- What Did We Learn from the Financial Crisis?
- By Shibashish Mukherjee
- Financial Reform: A Legitimate Function of Government
- By John Wiesner
- The Economy and Self-Organized Criticality
- By Matt Wilson
Emerging Systemic Risks
The following essays discuss emerging and potentially emerging systemic risks. There are some natural systemic risks in our society today. Society is demanding growth using fewer and fewer resources. Society is beginning to deal with the inadequacy of savings compounded by increased life expectancy. What new normal world is yet to be developed? These and more questions are discussed.
- Systemic Risk Arising from a Financial System that Required Growth in a World with Limited Oil Supply
- By Gail Tverberg
- Managing Systemic Risk in Retirement Systems
- By Minaz Lalani
Treating Systemic Risk
The following essays address ideas and suggestions as to how to treat systemic risk. Can one treat systemic risk the same way as any other risks? Can systemic risk be mitigated at all, especially as it relates to controlling human behavior? These and more questions are discussed.
- Worry About Your Own Systemic Risk Exposures
- By Dave Ingram
- Systemic Risk as Negative Externality
- By Rick Gorvette
- Who Dares Oppose a Boom?
- By David Merkel
Company Management/Board Governance
The following essays discuss the role and best practices of company boards of directors and company management. How can companies best strive for prudent strategic organized behavior within imperfect human constraints? These and more questions are addressed.
- Risk Management and the Board of Directors–Suggestions for Reform
- By Richard Leblanc
- Victory at All Costs
- By Tim Cardinal and Jin Li
Regulation
The following essays address the Dodd–Frank Regulation bill. Is the bill the ultimate solution? Are proper incentives enforced? Does it go far enough? Is this type of regulation truly enforceable? These and more questions are discussed.
- The Financial Crisis: Why Won't We Use the F(raud) Word?
- By Louise Francis
- Perfect Sunrise–A Warning Before the Perfect Storm
- By Max Rudolph
- Strengthening Systemic Risk Regulation
- By Alfred Weller
- It's Securitization Stupid
- By Paul Conlin
- I Want You to Feel Your Pain
- By Krzysztof Ostaszewski
- Federal Reform Bill and the Insurance Industry
- By David Sherwood
This essay collection is a follow–up to our first collection published at the end of 2008, "Risk Management: the Current Financial Crisis, Lessons Learned and Future Implications," where we published 35 short essays highlighting key lessons learned from the crisis, in the interest of inspiring prudent risk management practices for years to come.