Examine lessons learned from the current financial crisis in this EIU white paper.

The white paper proposes ten practical lessons that could help address perceived weaknesses in risk identification, assessment, and management.

The ten lessons to address current weaknesses in risk management , which are listed below in no particular order of priority, can be summarized as follows:

• risk management must be given greater authority;
• senior executives must lead risk management from the top
• institutions need to review the level of risk expertise in their organization, particularly at the highest levels
• institutions should pay more attention to the data that populate risk models, and must combine this output with human judgment
• stress testing and scenario planning can arm executives with an appropriate response to events
•  incentive systems must be constructed so that they reward long-term stability, not short-term profit
• risk factors should be consolidated across all the institution’s operations
• institutions should ensure that they do not rely too heavily on data from external providers
• a careful balance must be struck between the centralization and decentralization of risk
•  risk management systems should be adaptive rather than static.

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"Managing Risk in Perilous Times: Practical Steps to Accelerate Recovery"

Offered Free by: SAP

ABOUT THIS REASEARCH
Managing risk in perilous times: Practical steps to accelerate recovery is a briefing paper written by the Economist Intelligence Unit and sponsored by ACE, KPMG, SAP and Towers Perrin.

The findings and views expressed in this briefing paper do not necessarily refiect the views of the sponsors, which have commissioned this publication in the interest of promoting informed debate. The Economist Intelligence Unit bears sole responsibility for the content of the report.

The findings are based on two main strands of research:

• A programme of desk research, conducted by the Economist Intelligence Unit, which examined current academic and industry thinking around risk management, with a particular focus on financial institutions.
• A series of interviews in which senior risk professionals, financial services participants and academics were invited to give their views. In some cases, interviewees have chosen to remain anonymous.

Our sincere thanks go to all the interviewees for sharing their insights on this topic.

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