Institutional inertia on tail risk measurement

Institutional inertia is one of the abiding forces in human experience, especially in governmental institutions. Sadly, such inertia is likely to hinder much-needed revisions in the practice of financial risk management, argues David Rowe

Historical examples of the pervasive power of institutional inertia are many. For me, one of the most compelling was the way senior ranks in world navies resisted the transition from sail to steam in the mid-nineteenth century. One would think the superior speed, manoeuvrability and reliability of ships driven by steam-powered locomotion would be obvious. Rather amazingly to later generations, men whose professional experience was exclusively shaped in the age of sail often refused to recognise