Risk adjusting the culture of global finance

Abstract

The journey toward risk adjusting the financial system has begun in earnest. The pieces are being put in place: more resilient capital adequacy standards; more appropriate risk measurement techniques; central counterparties for over-the-counter (OTC) derivatives; new collateral and margin schemes; and the global identification coding system for financial market participants and their traded products. When completed, a long journey for sure, there will be a final piece left to do, risk adjusting the culture of global finance. That is certainly the most difficult of all as it effects people's attitudes and behaviour within newly evolving financial regulations, industry structures and financial institutions. It starts with hiring the ‘right’ people and then the way they are trained; it proceeds with the mentoring they receive and the habits they are taught within a tempered view of performance and risk; and its ends with a generational transfer of core principles from the seasoned to the young.