Risk governance review

Risk special
How should fund boards handle non-quantifiable risk? Everyone knows that risk is much more than a number generated by VaR or some similar calculation. But examining it beyond the number-crunching stage is difficult. As result it can get ignored. At a time of when macro and geo-political risks are growing that is a mistake.

The well-known statistician and risk analyst, amongst many other things, Nassim Taleb, does not believe that risk can be packaged-up and accurately measured. The Sunday Times called his book ‘The Black Swan’ one of the 12 most influential since World War II.
 
Taleb has several criticisms of VaR and similar quantitative static risk systems that use complicated mathematical modelling to come up with a number to determine a particular level of risk. He predicted the 1987 stock market crash, the bursting of the dotcom bubble and the 2008 financial crisis.

To read more on this story, see the October issue of The NED.