Date Added: May 2010
The global financial crisis had many causes but failures in risk management were clearly a contributory factor. Although there were technical shortcomings, especially related to the use of risk models and metrics, a more widespread problem was a failure of governance, which meant that the legitimate warnings of risk managers went either unheeded or unnoticed. In the euphoria of the credit bubble preceding the crash, a culture in banking and insurance that prioritized short-term gains over prudence all too often rode roughshod over the concerns of risk managers. Many senior executives were more concerned with outperforming revenue and profit targets than paying heed to growing risk concentrations.