Risk managers warned of ‘liquidity black holes’

Speaking at Risk’s annual European conference, he told delegates that increasingly sophisticated software used throughout the industry is causing a clustering effect in decision making. The Asian financial crisis was an example of a liquidity black hole that was created by risk analysis systems, he said.

He told risk managers to identify slow moving, structural long-term correlations with which to diversify portfolios. Short term, cyclically correlated assets would be more vulnerable to change properties in times of crisis, he added, making the portfolio more susceptible to liquidity black holes.

He advised risk managers to avoid homogeneity in the industry and to use simple processes. He also gave a strong warning against the dangers of implementing single risk analysis systems throughout large corporations.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here