Overview
In the ten years since the Great Financial Crisis, new risk management strategies and landscapes have come into focus. What are the chances and potential triggers of further financial crises and economic recession in the next decade? What national sovereign difficulties, commodity price shocks, or regional crises could occur? Can the current threat of trade wars and retreat from globalisation persist? How might the nature of finance itself change, with cryptocurrencies and blockchain technologies, and what risks these may hold?
The Decade in Financial and Economic Risk
2008: In the wake of the Great Recession, the global economy, particularly in developed markets, takes a dent in output and growth.
2009: Bitcoin, the first decentralised cryptocurrency based on blockchain is released as open-source software.
2009-2010: The European debt crisis erupts, leading to a wide contagion across Eurozone countries.
2010: The Basel III regulatory framework is agreed upon by the members of the Basel Committee on Banking Supervision, seeking to mitigate the risk of bank runs following the subprime crisis.
2014: Oil prices crash for the second time since the Great Recession due to slow growth and alternative production.
2018: Amazon, the leading transformer in the digital age, reaches a $1 trillion market cap for the first time since its founding in 1994.
2018-present: Trade tensions between the US and China rise to an unprecedented level, weighing on global investment sentiment.
Speakers
Chair
Michelle Tuveson
Executive Director, Cambridge Centre for Risk Studies
Michelle Tuveson is a Founder and Executive Director at the Cambridge Centre for Risk Studies hosted at the University of Cambridge Judge Business School. Her responsibilities include the overall executive leadership at the Centre. This includes developing partnership relationships with corporations, governments, and other academic centres.
Discussant
Dr Andrew Pitt
Head of Global Research, Citi
Andrew Pitt is a Managing Director and has been Global Head of Citi Research since 2008. He manages all of Citi’s independent investment research across economics, fixed income, equities and commodities. Between 2003 and 2008 Andrew ran Citi’s European Equity Research team, taking the team to a consistent top three ranking between 2004 and 2008 across all the major public surveys.
Andrew gained a BA in Modern History from Pembroke College, University of Oxford, in 1987 and a Master’s degree (MS) in 1988. He was awarded University of Oxford AM Read prize in 1990 for original research into 17th Century English social history and was a full time College Lecturer in Modern History at Keble College, Oxford, where he taught early modern European history.
Andrew worked as an Insurance analyst for both Robert Fleming Securities (1991-1993) and for Barclays de Zoete Wedd (1993-1996). Andrew joined Citi in 1996 and, until 2003, ran the European Insurance sector research team within Citi’s Equity research unit. He held the number one position as an Insurance Analyst in the 2003 Thomson Extel poll just before he moved into a management role.
Presentations
Ken Deng
Financial and Economic Risk Research Lead, Cambridge Centre for Risk Studies
Ken Deng is a Research Assistant at the Centre for Risk Studies and has a background in corporate finance, asset pricing and economics in general.
Financial and Economic Risks – CCRS Risk Outlook
An overview of the research work carried out by Cambridge Centre for Risk Studies for the risk class of Financial and Economic Risk, and description of a possible landscape of the risk over the next decade.
Duncan Needham
Senior Risk Researcher, Centre for Risk Studies and Director, Cambridge Centre for Financial History
Duncan Needham is Dean and Senior Tutor of Darwin College, Director of the Centre for Financial History and Senior Risk Researcher at the Centre for Risk Studies. His publications include UK Monetary Policy from Devaluation to Thatcher, 1967-82, and (edited with Anthony Hotson) Expansionary Fiscal Contraction: the Thatcher Government’s 1981 Budget in perspective. Before returning to academia, Duncan was a credit trader at JP Morgan and a fund manager at Cairn Capital.
Financial Crises of the Future: The Lessons of History
This paper builds upon the research on the history of financial crises that Duncan Needham and colleagues at the Centre for Financial History have carried out with the Centre for Risk Studies. It draws themes from twelve case studies stretching from the South Sea Bubble to the Global Financial Crisis. In the less ‘financialised’ 18th and 19th centuries, banking crises were frequent but tended to have shorter-term impact on the real economy. Following the Great Depression, governments were more willing to intervene to smooth out smaller disturbances. This had the effect of making financial crises less frequent, but more consequential. Since the 1970s, however, financial crises have become both more frequent and more consequential. This is partly the consequence of fundamental changes within western banking, particularly the growth of liability management, greater maturity transformation and increased balance sheet exposure to real estate markets. We analyse some of these changes, with particular emphasis on the United Kingdom. We conclude that, while the next major financial crisis may well bubble up in China, for instance, it will likely bear the hallmarks of recent financial crises in the west ie less-regulated financial institutions reliant on short-term wholesale funding finding themselves over-exposed to declining real estate values.
Dr Alessandra Mongiardino
Head of Enterprise-wide Risk Management, Nordea
Alessandra Mongiardino is a senior risk management executive and the outgoing Head of Enterprise-wide Risk Management at Nordea Bank Abp. In this role she has been responsible for establishing and delivering a comprehensive and consistent assessment of both financial and non-financial risks for Nordea through the risk identification process, the risk appetite framework and the stress testing programme. She has also been responsible for aligning the bank’s practices in these areas to the expectations of the ECB, Nordea’s new home supervisory authority.
She holds a PhD in Economics from the University of Warwick and is GARP FRM certified. While at the Abu Dhabi Investment Authority (ADIA) she designed and delivered five editions of the Risk Academy, ADIA’s flagship risk management training programme, in partnership with Harvard Business School, Saïd Business School (University of Oxford) and Eurasia Group. Throughout her career she has also written papers on topics ranging from the impact of Basel II and Basel III, to macroeconomic stress testing and risk governance.
Alessandra has more than 20 years international risk management experience, with focus on developing a holistic approach to risk that “connects the dots” across risk types and on delivering risk analyses that combine rigor with clear, effective communication to Board and C-suite leaders. Prior to joining Nordea in Copenhagen she was Head of Risk-adjusted Portfolio Analysis at ADIA, in Abu Dhabi, where she spearheaded the establishment and the workings of the Risk Management Committee, comprised of the organization’s top leadership. She also held positions as Head of Risk Strategy for HSBC Europe (London), Head of the Risk Management Specialist team at Moody’s Investors Service (London) and Head of Risk-adjusted Performance Analysis at Invesco (London).
Challenges in Managing Financial Risk in the Future: A Practitioner’s View
Financial risk management is going through a major process of transition. This presentation focuses on three key themes. First, it is becoming increasingly important to consider non-financial risks in the context of financial risk management. Second, digitalization creates opportunities to manage financial risk more efficiently, but also introduces new risks. Third, risk management needs to take into account the commercial risks to a financial firm’s future profitability and viability, in addition to the “traditional” risks.
The presentation will be based on a practitioner’s perspective and offers real life examples.