Security

Is Risk Management An Oxymoron?

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Executive Summary

Regulators expected that the provisioning of capital for extreme losses would sustain financial enterprises in periods of stress. In the current mindset of this financial crisis, perhaps a more appropriate view of these capital measures is as the ruler by which an organization counts down to failure, not the system that proactively prevents it. Did regulators truly believe these capital rules would prevent financial institutions from failing? To be fair to regulators, they did expect to see the coincident evolution of a risk culture within these institutions along with the development of a risk exposure measurement system to capture key operating metrics that could affect its operational risk profile.

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