Heads or Tails
Financial Disaster, Risk Management and Survival Strategy in the World of Extreme Risk
In the wake of the global financial crisis, Heads or Tails answers the question: what changes should financial institutions undergo to ensure reliable protection against extreme risks? Recent massive failures among large and respected financial institutions, clearly demonstrate that contemporary risk management and regulation fail to provide adequate responses to the challenges set by extreme risks. Dr Evgueni Ivantsov combines analysis of the nature of extreme risk (so-called tail risk), risk management practices and practical solutions to build a robust, enterprise-wide, extreme risk management framework which includes three lines of defence, ranging from strategic to tactical, designed to help address the tail risk during different stages of its development. The author also discusses: ¢ Why modern ’sophisticated’ risk management frameworks, strong capitalisation and liquidity do not prevent banks from failure in the face of systemic crisis; ¢ What it means to build an effective defence against systemic and catastrophic losses; ¢ What risk architecture should look like to ensure that extreme risk events are identified early and efficiently mitigated; ¢ How modern management practices, regulation and risk and business culture need to change to guarantee sustainability. While the context of Dr Ivantsov’s writing is financial services, the book contains an important message for specialists from any industries exposed to the extreme risks (oil/gas, energy, mining, chemical productions, transportation, etc.). Until the shortcomings of current risk management and regulation are resolved, financial services and other at risk industries will repeat the painful mistakes of the past, over and over again.
Dr Evgueni Ivantsov is an internationally-recognised specialist in risk management. He is Chairman of the European Risk Management Council, a think tank of risk executives from leading financial institutions operating in Europe. He is also a member of the Advisory Group on Global Risks of the World Economic Forum. Dr Ivantsov works at Lloyds Banking Group as the Head of Portfolio Management and Strategy responsible for solutions mitigating risks and improving the portfolio risk/return profile. Prior to this role, he was the Head of Portfolio Risk and Strategy and the Head of Global Analytics at HSBC Group responsible for setting risk appetite, stress testing portfolios across HSBC European region and building risk models and tools for HSBC global portfolios. Prior to this, he worked as a Senior Manager of Credit Portfolio Group at ING Bank, and a Senior Financial Analyst of Large Corporate Rating Agency at BBL (Banque Bruxelles Lambert). Dr Ivantsov was an adjunct Professor of International Economics at Boston University and a Professor of Money, Banking and Credit at the United Business Institutes in Brussels. Evgueni Ivantsov holds MBA and a Ph.D. in Economics.
’Risk managers that want to survive the next ice age in the financial system must read this book. Ivantsov lucidly explains what went wrong in the Great Recession and why financial institutions and their regulators remain ill-prepared for the next extreme event. They need to change, and this book tells them how.’ Mark Zandi, Chief Economist of Moody’s Analytics, cofounder of Economy.com and advisor to US policymakers ’Heads or Tails is an indispensable rethinking of extreme risks for the rebuilding of the financial services industry.’ Lee Howell, Managing Director and Member of the Managing Board, World Economic Forum Editor in Chief, Global Risks 2013 ’Heads or Tails is a thorough and readable account of the extreme dangers... Dr Ivantsov offers many suggestions as to how current risk management practices, regulation and culture should be changed to ensure that extreme risks are managed properly, to ensure the safety of the organisation and the stability of the financial system as a whole.’ Michael Imeson, Associate Editor, Financial Times Live, Contributing Editor, The Banker Magazine ’This book is an excellent read for anyone that has been involved with, or wants to learn about, the recent financial crisis. The author provides thought provoking analysis and presents a very engaging section that challenges the regulatory response to the crisis. The book is a joy to read. It is written in a forthright style using irrefutable empirical evidence and effective demonstrative analogies to great effect. As a risk practitioner I thoroughly enjoyed this book however I believe the author has approached the subject in such an engaging manner that its appeal will span a much wider audience.’ Kevin O’Rourke, Chief Risk Officer & General Manager, Mizuho Bank (Europe) ’Evgueni’s book, which is studded with interestingly relevant examples, reminds us that there is more to ensuring banks do not fail than the regulator’s more capital, more liquidity ma