Question

The future of risk management :

Risk management in banking has been transformed over the past decade, largely in response to regulations that emerged from the global financial crisis and the fines levied in its wake. But important trends are afoot that suggest risk management will experience even more sweeping change in the next decade. Consider the outbreak of COVID-19 witnessed during the last couple of months. What do you think this will mean for financial institutions (FI)? Do you think that FI were prepared to withstand the shock? Discuss the merits and problems of the current regulations and how they will shape the reaction of the financial market to the coming shock (max 250 words).

Answer 1

With the outbreak of covid 19, the global markets has gone for a toss on the way down and it is having a contagious effect on financial system.

The counties are facing shutdown and thus global demand has almost diminished and several precautions which were taken after global financial crisis are not working. FED is injecting liquidity by rate cuts and billions bailout but market aren't stopping.

This time it's more brutal than 2008 as this will need a long term restructuring cycle to overcome the damage done by covid 19.

Financial institutions has taken major hit and their shares have lost half their value as event like this was never predicted and cannot be prepared in advance.

The demerits can be seen as every economy is melting down and other countries even cannot come to rescue but definitely will add to the problem.

The merit could be this is not an economic crisis , this is a health crisis multiplying into an economic sluggishness, so the day vaccine is found and the disease starts to take the backseat, the recovery in the economy will be very Swift.