Derisking
Observer December 23rd, 2008
…Judging by the full page call-to-job-hunters in The Economist this week from McKinsey, the pendulum swing is well under way to build defences for the future against the financial market and wider economic mess of the year now closing, with risk management front and center. Missing from the ad’s menu of risks to be managed are reputational risk, governance risk and psychological risk. Assuming that the mistakes that were made are first understood, and secondly, not repeated, reputational risk may be managed and mitigated in due time through fundamentals, though many of the worse impacted banks will likely be in reputation rehab for a long time yet. Governance risk may be harder to manage as the CEOs that decide on significant consulting mandates are at the same time uniquely pivotal to most corporate governance systems. As for psychological risk, old Europe seems often discomfited by what is perceived as the pathological optimism of the US mindset, but in the delusion that domestic property values were a one way bet, many Europeans proved over optimistic as well.. And how to manage for that emotional thing of fear of missing out? In the future we’ll still likely have lemmings chasing bounties. Something even the men and women from McKinsey cannot guard against.
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