Managing Risk in the New World

Source: Harvard Business Review, October 2009
with Robert S. Kaplan, Anette Mikes, Robert Simons, Peter Tufano, and Michael Hofmann. Moderated by HBR senior editor David Champion.

“Five experts discuss the future of enterprise risk management.

David Champion: How predictable was the financial meltdown of 2008–2009? Was it a Black Swan event or, rather, analogous to the next big California earthquake—something you know will happen though you don’t know when?

Peter Tufano: Many of the elements of the crisis were being talked about long before it happened. Analysts had been questioning the sustainability of the subprime business well before the meltdown. Macroeconomists had been worrying about the U.S. current account deficit. I myself had been looking at obviously unsustainable household saving rates and debt levels. Other people were writing about the imperfections of ratings models. What we didn’t see was how the elements were interacting. And that meant we were blind to the risk that the whole system would break down.” read more >