WEF report designed to help finance learn risk management lessons from unlikely sources
The World Economic Forum (WEF) launched a new report designed to help financial services firms learn risk management lessons from other domains, like firefighting, immunology and even salmon farming.
The report, Rethinking Risk Management, triggered discussion into how the finance industry can prevent a repeat disaster and what to do if another crisis strikes.
Several proposals were made in the report. For example, in immunology pathogens that mutate before the immune system can respond are dangerous. Similarly, financial institutions and regulators should be weary of rapidly “mutating” products, by carefully monitoring these instruments, according to the report.
The WEF also recommended that banks learn from the airline industry, which continuously improves safety measures by analyzing data on accidents and near misses. Along these lines finance firms should aggregate and analyse data on critical threats to the system.
The World Health Organisation actively searches for information on the next pandemic, this improves its ability to detect outbreaks. The finance industry should similarly create early warning tools and a culture that looks out for trouble.
Axel Lehmann, chief risk officer, Zurich Financial Services, and co-chair of the report’s steering committee, said: "Risk management has many dimensions. This report shows how risks are successfully absorbed in situations and under circumstances entirely different from those faced by financial institutions. There are vital lessons to learn from these findings, particularly the ones that deviate from the conventional wisdom proffered in our industry."
Lazaro Campos, chief executive officer of SWIFT and co-chair of the report’s steering committee, said: "The industry has a responsibility towards itself and to wider society to not let this crisis go to waste."
Duncan Martin, managing director of the Boston Consulting Group, which partnered in the research, said: “Drawing inspiration from unusual quarters, the report makes a compelling argument for finance to break from its somewhat insular approach to risk management.”