Risk Pearls of Wisdom

Being a risk manager involves reading risk reports that provide the complex cold numbers but little else. Risk managers need to place the report into spatial and temporal context to understand where the market or world is in the"distribution". The podcast discusses how the world, in general, operates along with concentric cycles and also pendulums. Sometimes the planet passes a crossover point that snaps the current state to the opposite side of the distribution. I never said being a risk manager is easy. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This episode discusses the physical nature of commodities notably oil and gas. The ultimate physical commodity is strangely power and has several here-and-now features. We discuss the introduction of renewables into the mix and a potential way forward using risk management as the anchor. (Apologies to the Goddess of Rock, Patti Smith for the title taken from "People Have the Power") --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

We start a new series by introducing KFC strategies to show how risk managers can talk to business heads and traders. The art is to avoid an "I win, and you lose" approach when discussing complex and charged topics such as evidence of excessive risk that requires a reduction strategy. Involves lashing one's boat to another and row together. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The imminent default of the most indebted property developer, Evergrande, has triggered much debate amongst risk folk. Will there be spiralling of property prices started by dumping stock at fire-sale prices? Who is going to buy them? Are they catching a falling knife? The answer is that we do not know how things will unfold. We can only draw from history, consider other crises, and see if we can stitch together a stress test. (Apologies to scholars of Nietzsche for this title) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This episode of RPW looks at the unintended consequences of government officials telling an already skittish population "Don't Panic". We talk about how people can be rational, including risk managers, as we look at the human psyche that separates sensible micro-decisions that aggregates into panic-like crowd dynamics. (Title is a tribute to the opening of Queen's Flash Gordon, de de de de de de de de de Flash a-ah) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This episode covers the second climate change risk category called "Transition risk" faced by corporates who need to reduce their carbon footprint radically. It covers several concepts, including how ill-conceived policies can work against those ready to innovate and transition. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

A recent crisis in a company called Evergrande has prompted the age-old question of "how much is too much". The answer always involved look back at a seismic event and wonder why people did not see it coming. The answer is that they probably did, but who cares when there is money to be made. (apologies to Babs S and her lyrics to Evergreen from A Star is Born) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

In the second on the RPW climate change series, we discuss the first CC risk factor that is Physical Risk. We discuss the policy-investment-resilience model used to reduce the impact of extreme weather conditions on housing, arable land and company assets. We take a history lesson on what happens when the national and geopolitical stage is weak and how they are susceptible to external shocks. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast provides a brief history lesson of the last invasion of the UK and the subsequent run on the banks. We talk about how banks provide the impression of solidity through architecture. With challenger banks without branches and the printing of money, what does the future of banks and payments look like? (Apologies for the title that is copied from Monte Python's Holy Grail) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The link below is the post mortem document penned by internal and external counsel. To say it is brutal is an understatement. It is thus required reading for any senior risk manager to pray this does not happen in their patch. In this podcast, we pick up on three keywords used: lackadaisical, perfunctory and holistic. May we all embed these in any risk manual. (the title is a derivation of the Standard Foreign Office response in a time of crisis, stage 2. A favourite Yes Prime Minister dialogue, episode 6) https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast separates the code red narrative around climate from the need that cool heads now need to execute on a transition from fossil fuels. We counter the doom-mongers with a message of optimism through innovation that comes from action rather than rhetoric. We introduce the concept of Climate Change Risk that we will cover in the next two episodes. (Apologies to the estate of Bob Dylan for lifting lyrics for the title from "the times they are a-changin") --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The RPW podcast has made it to its hundredth episode. To celebrate this milestone, we talk about a topic that has been a long time coming, and that is to articulate some thoughts and viewpoints on the risk of cycling in London. Without running a red light, obviously! (Shout out to the late Freddie Mercury for taking lyrics from Ride my Bicycle) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

In part two of aggregation-disaggregation, we return to the story of CDOs and how risk that was supposed to disseminate ended up in the hands of a few. From there we talk about how regulators responded, switching to a centralised control model. The upshot is disaggregation as banks interpret dictates. We see similar challenges when governments switch away from values-based rhetoric to excessive rule-making. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This episode covers one side of the aggregation-disaggregation dynamic that permeates most areas of finance, corporate and public life. We start with the art of aggregation of risk information that permeates from several trading groups so that management (who are far removed from the action) can make strategic decisions. This episode explains why a few notable banks do this well to avoid market corrections. (With reference to The Graduate and the one word spoken to Dustin Hoffman was before I get corrective emails in the riskpearlswisdom@gmail.com inbox, is "plastics"...) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast uses a recent discussion on Quora on how newbies should do if they want to be successful trader on Bitcoin. With a recent 40% correction, this is the time for cool heads from those salty seadogs to settle the nerves of those nursing losses. We introduce another top 6 list of advice for newbie traders. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

In this podcast, we look at a possible explanation of how we ended up with the offering of a safe space in a SW London estate agent. The podcast starts with why asthma has tripled in the past fifty years and points the blame directly to the dark arts of marketing, media and government propaganda. (with reference to the Fairy Liquid jingle used since 1961, "Now hands that do dishes can feel soft as your face With mild green Fairy Liquid" --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This episode provides some introductory information on the credit markets, why is it so complex compared to equities and why a credit default swap is not a derivative. This brings RPW to the end of Season 8. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast considers how not to argue with Bitcoin evangelists as they clutch onto a self-evident truth of the value of the currency. From an axiomatic foundation, we expand the intellectual framework the puts rules around how we model surprise events so that they become explainable and thus no longer a surprise. This behavioural pattern is notable in mania but can be seen in most elements of human interaction. The problem is when there is so much invested interest in keeping the stable status quo, we are exposed to an unexplainable surprise. like financial bubbles, delusional bubbles can also burst with similar consequences. (Title is ode to Monte Python and the Spanish Inquisition skit) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

People who do not make a living trading show similar behaviour characteristics to hypomania where they excitingly point out their prowess. With Bitcoin's recent retrenchment, the podcast discusses options on where the price can go from here and also whether hypomania of the crowd could lead to a hangover. (the headline is an adaptation of "We're in the money" used in the 1933 film, The gold Diggers) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast compares the actions of the scientific community around the source of covid-19 to those by the medical profession when a physician noted the direct link between not washing hands and death in a maternity ward.  Experts in their field never like outsiders asking simply "why" questions based on observations.  Expertise is a club - you don't need to be a scientist to make a scientific discovery.  --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast discusses the benefits of taking a risk from a perspective that is life-affirming. The antidote for risk-taking is "you can never be too careful" which has sucked out the mental health of so much of our population. Let's get out there and chase your dreams by taking some risk. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

Clusters are found in abundance in London. So how can competitors operate within a cluster were written (or unwritten) rules require everyone to collaborate? In the financial markets, derivative exchanges manage the risk of their participants as a collective. The risk profile is quite similar. One bad apple is manageable, but two or more can be catastrophic. People change their mind and make broad brush decisions that can destroy a cluster. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast covers the titular Ponzi and his financial scheme as well as Pyramids of the Tupperware party variety. Then we talk about Bernie Madoff who had the consummate establishment persona and was not afraid of swindling a large slice of the New York elites. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast the cycle a stock goes through when the price of its shares becomes a large multiple of its capacity to generate income. The current market is at the same insane levels that we have seen in the last two decades. The subsequent fallout seeks to push the stock back down to a level that attracts new value-based investors. In the case of many dot.com companies, the value was zero. Wonder how this reflects on cryptocurrencies? (the title is lifted from the 1841 book, Extraordinary Popular Delusions and the Madness of Crowds) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast discussed why scamming works as it exploits several human psyches and frailties around their perception of their worth relative to others. We continue with how banks have to deal with the biggest fraud of all; money-laundering of criminals ill-gotten gains. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

Most policy and decision-makers struggle with the outside world due to its complexity and non-linearity of the risk factors that impact our lives. We discuss how people simplify this world through the use of the spreadsheet. We discuss, as an example, how purchasers of restaurants use their spreadsheet to eek out as much value right up to the point their paying customers notice. We end by talking about the law of unintended consequences that led to the 1700s gin craze. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast captures some history of how artificial intelligence came about, where it has enormous potential but also where its value is restrictive. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

Welcome to Season 8 of RPW. This podcast covers the disaster around the collapse of Archego that prompted several banks to declare multi-billion-dollar losses. We introduce that listener to Prime Brokerage and its derivative version Total Return Swap and rekindles the podcast's love (or hate) affair with big piggies. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast discusses the introduction of the risk governance framework known as "Three Lines of Defence" which is the latest and most effective manifestation of risk governance in banks etc that enforces other considerations such as "should we" as opposed to "can we". This brings an end to the seventh series of RPW. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The incident of the Ever Given container ship is both a surprise and predictable. This podcast talks about the comfort decision-makers operate with a restricted framework because that has worked in the past. What nobody was willing to question was the desire to build larger ships. A gust of wind has made a mess of the Suez model where 30% of global trade goes through the canal. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast describes the mathematics that underpins the utility of the MMR vaccines as well as describing the spectrum of coercive behaviour used by governments to enforce lockdown measures and uptake of the vaccine. To make sense of this we introduce Game Theory to enable us to move away from a continuous cycle of surprise, anger and helplessness that happens every time Hancock steps to the podium. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast provides insight of how officials have latched on to random events to assert that a particular vaccine caused blood clots. We discuss the concepts of error functions in mathematical regressions to outline the abuse of white noise by politicians for pure political gain. The title is (with apologies) an adaptation of the lyrics of "White Noise White Heat" by Elbow. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast takes us back to the period just after the UK was beholden to the militant Left. Since then, we have seen enormous economic expansion, but also debt that has proliferated but also, paradoxically, over-valued. The Fed tools on fiscal intervention are now spent, so governments can only shake the magic mushroom tree. We bring together several policy actions that lead to the conclusion that it will not end well. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

In this podcast, we return to the observation back in May 2020 that with more people moving around, the population is collectively making more risk-based decisions balancing their immediate need to get on with their lives and the present threat of the virus. This podcast looks at the six "best practice" rules for a risk manager to set limits on a trading operation. The most important is reasonableness. We map the government's approach to the rules it has set around lockdown 2 with risk managements "best practice". --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

As all people of a certain again will tell you, a screen or test that presents a positive result for a nefarious condition is the trigger for further rather than the end of medical consultation. This podcast explains why the chances of a positive test leads to a confirmed diagnosis is still relatively small. A positive test is not the same as a case, something we seem to be hearing mixed signals on. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast takes the listener on fun and slightly trippy journey from set theory, Shakespear, greek astronomy, space rock where we finally settle on proving that lockdowns work is false thus creating a glitch in the pandemic Matrix. This is all possible by understanding the power of the law of the excluded middle and its associated tool, reductio ad absurdum. Going to be a ride! --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

Everyone blames the banks for the catastrophic mess of the 2008 meltdown in the US housing sector. Films such as "The Big Short" point to the crazy complexity banks created to shift the risk into opaque parts of the world. They are right, it was that bad. There were two other actors rarely mentioned that gave the banks the green light to go crazy and that was the repel of regulation put in place after the 1929 crash plus government policy to make home-ownership the norm. (picture is that of Ben Bernake, that was the famous chairman of the Fed) --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The most key aspect of being a risk manager is to develop a risk nose. Everyone is one the receiving end of an avalanche of information and we have to decipher the signals that suggest impending losses are just around the corner. The hardest to detect is, like the dog that didn't bark, a lack of volatility. Which is good yes? Well, ask the investors in the Madoff funds where Bernie sold them income without volatility and they will tell just how well that turned out. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

My friend told me of an encounter with a masked couple who used passive aggression on her as she was (entitled to be) unmasked. In one of those large lifts. This podcast explains my joyous response to this story. Someone actually made a covid-19 risk decision that went against the grain of the current narrative. There is hope in the wisdom of crowds (a reference to my first podcast). --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

Welcome to Series 7! For the next three podcasts, I am going to take the listener into the world of structured products and how traders build a hedging strategy. I will introduce you to the weird language of the greeks and explain how the stack and roll again fails. The final part will take us to the point where I had a conversation with a truly smart risk person whose quote I use in the title. Going to be a ride, so hold on! --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The recent media coverage of the shenanigans around GameStop show just how little the media understand anything about trading including shorting a stock. Shorting comes in two varieties of liquidity provider and liquidity taker. Going naked short is a liquidity taker and few practitioners are equipped to take such a bet. There are many ways players can improve their odds of winning, and few are legal. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

Auctions have been around for centuries and provide a fair and transparent way for a seller to connect with potential buyers. The finance industry has in the past used aspects of the auction design to provide liquidity on demand to those clients wanting to shift blocks of stock around. The advent of order matching and the rise of algorithmic trading has increased volume but often gives a false impression of liquidity shown by the flash crash of 2010. Sometimes a new shiny toy is not always better than the incumbent. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

Risk management can look a lot like whack-a-mole where the checkers focus on individual silos rather than connect the dots across multiple areas that together create a catastrophe either financial or loss of life from a structural failure. The connectors are Red Flags that answer the question, "how did we come to this". There are many Red Flags, so in this podcast, I share my favourites. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

This podcast is a follow on to a much earlier podcast called Eliminate! Eliminate! where I discussed the dangers of risk elimination. A recent survey from Germany outlines the extent of the damage for kids that daily wear masks for extended periods. This podcast outlines the concept of a form of risk management in parenting that is south of risk elimination. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The British Psychological Society recently called out the behaviour of the UK government's Behavioural Insights Team psychologists for a breach of ethical standards. The BIT urged the government at the start of the pandemic to use scare tactics to ensure the population comply with draconian measures. Now that the citizens are reduced to a quivering mess, the question is how to get out of this mess. Step forward the second wave of a mutant variant and the chance of a vaccine. Like being at the movies. Worse, we are the movie. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

A large fraction of foreign policy is to deter enemies to act in such a way that military intervention is the only option. With nuclear power, this option is made complicated by the strategy of mutually assured destruction. The MAD strategy comes up frequently in daily life. This podcast discusses MAD and how it transcends activities such as the imposition of Omertà on pro cyclists and how people in political life get compromised. Apologies to Carl Sagan that gave me the inspiration for the title and used his image. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

In the arena of innovation and risk-based decision making, diving in with one's ego will always lead to a bad outcome. In business, people assign themselves "hat" to signal their role in a conversation to avoid conflict. finance, we learn to not make things personal and focus on the problem. In the public narrative of the past months, this has not happened and ego has dominated, leading to moral outrage and calls for censorship. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The most important number in the world is Libor. Omnipresent Libor dominates the rates everyone pays from lending. This podcast provides a brief history on why things went so wrong with a concept that was so right. Surely not due to snouts in the trough, stupidity and greed? Apologies to Simon and Garfunkel for messing up their lyrics --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

One aspect of Covid-19 that is not discussed is why did the Western Democracy countries all lock down in unison. Not exactly how the global big pigs operate. Or do they? This podcast provides a potential explanation using the previous Big Pig Little Pig concept. I also close out 2020 with a top ten thoughts accumulated while making this podcast since May. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

The US in the summer 1976 was racing to develop a vaccine for a new virus call swine flu. The academics, using anecdotal data, had predicted a death toll double that of Spanish flu and President Ford had to vaccine everyone before his re-election. The pandemic never took hold and 4,000 were made disable or died thanks the government agency not disclosing the risk of the vaccine. Good job we have learnt the lessons of the past. --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message

We spend our days mentally measuring two metres. When we need something more accurate, we use a ruler or a tape measurer. Strangely, when we measure the length of our coastline, we have to take into account the length of the "ruler". This observation takes us into a world of fractals, butterfly wings and measuring weather patterns and climates. Caveats anyone? --- Send in a voice message: https://anchor.fm/riskpearlswisdom/message