Risk Management: History, Definition and Critique

34 Pages Posted: 11 Mar 2013 Last revised: 6 Sep 2013

Georges Dionne

HEC Montreal - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: September 6, 2013

Abstract

La version française de ce document est disponible à http://ssrn.com/abstract=2198583

The study of risk management began after World War II. Risk management has long been associated with the use of market insurance to protect individuals and companies from various losses associated with accidents. Other forms of risk management, alternatives to market insurance, surfaced during the 1950s when market insurance was perceived as very costly and incomplete for protection against pure risk. The use of derivatives as risk management instruments arose during the 1970s, and expanded rapidly during the 1980s, as companies intensified their financial risk management. International risk regulation began in the 1980s, and financial firms developed internal risk management models and capital calculation formulas to hedge against unanticipated risks and reduce regulatory capital. Concomitantly, governance of risk management became essential, integrated risk management was introduced and the chief risk officer positions were created. Nonetheless, these regulations, governance rules and risk management methods failed to prevent the financial crisis that began in 2007.

Keywords: History risk management, risk management and financial crisis, regulation, Basel Accords, banking

JEL Classification: D80, G21, G22, G32, G33, G38

Suggested Citation

Dionne, Georges, Risk Management: History, Definition and Critique (September 6, 2013). Available at SSRN: https://ssrn.com/abstract=2231635 or http://dx.doi.org/10.2139/ssrn.2231635

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)

HOME PAGE: http://www.hec.ca/gestiondesrisques/

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