'Failure of risk management' led to financial crisis: RMS keynote
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NEW YORK — “Risk management was essentially abdicated” in the period leading up to the financial crisis of 2008 and 2009, as everyone from home buyers to investment bankers took on enormous amounts of risk, according to business journalist and money manager Ron Insana.
In a keynote speech at Business Insurance's 2013 Risk Management Summit on Wednesday in New York, Mr. Insana added that further contributing to the financial crisis was the scant attention paid by regulators to newly developed financial derivatives. “We had this event, and very few people paid attention to the attendant risks,” Mr. Insana said.
“When you look at everything we did wrong leading up to the crisis, really at the end of the day it was a failure of risk management,” he said. “None of this was pre-ordained. It didn't have to happen.” Today, however, the various risks that contributed to the financial collapse are being managed more rigorously in the U.S., Mr. Insana said.
Mr. Insana also said the current U.S. economic outlook probably is better than it appears to many. Such factors as a domestic energy boom, a U.S. “manufacturing renaissance,” improved real estate and stock markets, and well-capitalized banks are among the factors contributing to his positive outlook for the U.S. economy, he said.
“We have considerably more tailwind than we do headwind,” Mr. Insana said.
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