Skipped over to this Swiss Re report this morning, thinking it would have some insights on Solvency II and capital modeling. Instead it focuses on ERM issues, such as getting a company used to the idea having a risk manager hanging around when a deal is pending. Interesting stuff, especially if you haven’t seen it before.
Beyond that, the report does manage to turn a phrase or two. Here’s a rejoinder to those who blame the financial crisis on poor modeling:
One argument emerging from the financial crisis was that banks became too dependent on models and that models failed. A response to this argument is to ask for more “common sense” in risk management. . . .After all, “models do not make decisions, people do”.
Or this on the value of risk models up to now:
This is not an industry where simplification will always improve understanding. In fact, risk modelling has served the business remarkably well. The long-term perspective required to manage a risk profile has been accurately reflected in the models; and even extreme recent events had been anticipated as remote but definitely possible occurrences.
Or more generally on the role of a risk manager:
It is vital that risk managers have the courage to speak up and make up their own minds: Should they escalate the issue, or persist in asking the difficult question until the answer emerges?