At-the-leading-edge-of-Risk

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At The Leading Edge of Risk: New Risk Paradigms focusing on Culture and Conduct

Markus Krebsz

Now in its third year, Imperial College Business School recently hosted another installment of its ‘Complete Course in Risk Management.

During the one week immersive course, world class thought leaders challenged the participants to think creatively about finance risk by taking them out of their comfort zone and encouraging them to make informed decisions.

Part of this was a crisis simulation at Imperial’s unique Carbon Capture Lab giving an unparalleled hands-on educational experience, with the four-story high state of the art carbon capture pilot trading facility representing a scaled-down chemical engineering plant. The centre piece of this unique environment is the show-stopping ABB control room. Attendees were split into two groups and placed in two lab sections simulating an on-shore carbon capture production facility and a North Sea off-shore oil platform.

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Immersive/experiential learning at Imperial College’s Carbon Capture Trading Lab. Photo: Markus Krebsz

Attendees, all from a financial, banking or regulatory background were placed into an unfamiliar environment to see how they perform individually and gel as a team in a simulated crisis situation. This is a fantastically immersive, and unique, way to experience elements that can ,and do, go wrong if an organisation is thrown into mayhem. Some of the issues that are often highlighted include a lack of communication, lack of initiative and not enough thinking outside of the box are just some of the issues that tend to surface as a result.

The course itself is a journey around ‘planet risk’, starting with the 50,000 mile high strategic view focusing on risk appetite and how this can be embedded throughout business models combined with foundations of risk measurement. It then delves deeper into some of the underlying foundations of risk finance theories. Their application is shown within the financial markets and instruments module before branching out into the more established risk types including market and credit risks.

Quantitative sessions on managing counter party/funding and non-standard risks equip participants with an arsenal of models and approaches to take back and implement at their organisations. In a world full of increasing uncertainty and regulatory requirements that are putting major constraints on capital, the last day provides unique perspective by looking at both macro-prudential regulation and capital allocation.

Finally, participants learned about operational risk and how this differs from Enterprise-wide risk management and got to meet the new kids on the risk block namely conduct risk and cyber security. To make the course ‘complete’ it expanded its views beyond the standard banking risks including the WEF2017 risk report and the evolution of those over the past 10 years reminding participants that the ultimate objective of risk management is “driving informed decision-making to ensuring survival with long-term sustainable benefit”.

The course is not only meant to introduce participants to current thinking, but also to explore the leading edge of risk together and provides faculty members with opportunities to sharing their latest research. This year, the author introduced two new risk paradigms exploring the linkage of culture and conduct within organisations – to a large extent driven by regulatory shifts towards behaviour and the question of ‘what does good look like?’ :

Ultimately, sustainability i.e. “survival with long-term sustainable benefit” is all that risk management is about and the Complete Course in Risk Management is testimony of its role as a key player at the leading edge of risk.

About the author:

Markus Krebsz is a former CRO, current member of a UN working party on risk and regulatory systems and published author. He is a faculty member for our Risk management programme and Programme director for Chinese EMBA and Global immersion programmes – with a focus on FinTech, Innovation, Leadership and Mergers & Acquisitions.

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