Roulette WheelThe long-term economic consequences of the government bail outs and stimulus packages are far from clear, and predications about what will happen to prices vary enormously.  Triple Point’s Michael Schwartz recently shared with the Journal of Compliance, Risk and Opportunity his thoughts on the New Risk Management Imperative. 

I particuraly enjoyed his thoughts on the 3 things one can be certain about:

1. High Levels of Volatility will Continue to Thrive. The Financial Times/Stock Exchange (FTSE) 100 Index over the recent three-month period shows a surge to 5,796 in April 2010 and a drop in June 2010 to 4,914. In 2008 alone, we saw three or four ‘100-year risk events,’ and will almost certainly see more such extreme events, that are simply outside of normal expectations.

2. Everyone is Taking Closer Look at Credit. Credit risk managers used to triage potential counterparties into three groups – definite yes, definite no and everyone in between. Now there is no chance that a potential counterparty will be automatically accepted – everyone is either rejected or sent for assessment. The profile of the credit department has risen and it isn’t going to sink any time soon.

3. Markets will be more Closely Regulated – The precise form of regulation is still being worked out, but there’s no denying the growing importance of accounting standards that require additional transparency in valuations and accounting methods such as International Accounting Standards (IAS) 39, Financial Accounting Standards (FAS) 133, FAS 157 and FAS 161.

Wherever the markets go in the next 12 months, firms with a real-time enterprise trading and risk platform that integrates the four key areas of risk – market/price risk; operational risk; regulatory risk; counterparty credit risk – will be best prepared to capitalize on today’s world of increasing uncertainty.  Click here to read the full article in from the Journal of Compliance, Risk and Opportunity.

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