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The 2007 Wharton Economic Summit ::
Panels
| The Known, the Unknown, and the Unknowable in Financial Risk Management |
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Sponsor: Wharton Financial Institutions Center Moderator: Richard Herring, Jacob Safra Professor of International Banking; Professor of Finance; Co-Director, Wharton Financial Institutions Center Panelists: Neil A. Doherty , Francis X. Diebold, Charles S. Sanford, Jr. |
| Friday, April 13 - 3:00 p.m.-4:15 p.m. :: Full Summit Schedule |
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A financial institution's long-run success depends on its ability to identify each of the known, unknown, and unknowable risks and deal with them appropriately. Managers face significant challenges determining how much to invest in an attempt to convert unknown risks into known risks and trying to clarify the boundary between the unknown and the unknowable, as well as developing strategies to deal with risks in all three categories. This panel will use the KuU (Known, unknown, Unknowable) framework, developed in a research project conducted by the WFIC with the support of the Sloan Foundation, to examine the development of risk management in financial institutions and to discuss some of the key remaining challenges. |
| Panelists |
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:: Neil A. Doherty
Frederick H. Ecker Professor of Insurance and Risk ManagementThe Wharton School |
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:: Francis X. Diebold
W.P. Carey Professor of Economics, Finance, and StatisticsThe Wharton School Francis X. Diebold is W.P. Carey Professor of Economics, and professor of finance and Statistics, at the University of Pennsylvania Wharton School, and faculty research Associate at the National Bureau of Economic Research in Cambridge, Mass. He is a leader in financial and macroeconomic modeling, forecasting and risk management, with extensive experience simultaneously in academic, corporate, and policy circles. Diebold has published more than 100 articles and 10 books and edited volumes, including the leading text, Elements of Forecasting, now in its fourth edition, and the volume of collected macroeconomic works, Business Cycles: Durations, Dynamics, and Forecasting. He has received widespread recognition for his research, including election to advisory and editorial boards of numerous leading journals, election to fellowship in the American Statistical Association and the Econometric Society, and Sloan, Guggenheim and Humboldt awards. Articles summarizing his work have appeared in leading popular press outlets, including Newsweek and The Economist. Diebold is also active in policy and corporate affairs. He has served on numerous boards and is consulted regularly by financial firms, central banks, and policy organizations, worldwide. He is a founding member of the Mercer Oliver Wyman Institute, a cooperative undertaking between Mercer Oliver Wyman and the international academic community, whose mission is to facilitate and accelerate knowledge transfer between academia and the financial services industry. Diebold is a popular lecturer, both in the U.S. and internationally. He is active in executive education and has received several prizes for outstanding teaching. His ongoing annual lecture series include those at FAME (Geneva) and at the International Monetary Fund (Washington, DC). He has held visiting appointments in Economics and Finance at Princeton University, Cambridge University, the University of Chicago, the London School of Economics, Johns Hopkins University, and New York University. Diebold received his BS from the Wharton School in 1981 and his PhD in 1986, also from the University of Pennsylvania. Before returning to Penn in 1989, he worked as an economist under Paul Volcker and Alan Greenspan at the Board of Governors of the Federal Reserve System in Washington, DC. He is married with three children and lives in suburban Philadelphia. |
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:: Charles S. Sanford, Jr. , WG'60
Retired Chairman and CEOBankers Trust Company The late 1980s and early 1990s were turbulent times for the banking industry, but Charles S. Sanford, Jr. was determined to advance Bankers Trust when he became chairman in 1987, and transform it from a second-tier lender into the highly profitable business of trading and custom dealing. During his tenure, Bankers Trust became a leader in challenging the status quo, instituting changes that were subsequently adopted broadly by the banking industry. These included: the creation of a process for measuring risk (RAROC), which became the foundation for regulatory standards to measure bank capital adequacy; acting as placement agent and then underwriter for issuers of commercial paper and, subsequently, entry into the debt and equity markets in competition with investment banks; conceived and developed the business of the origination and distribution of loans that included the distribution of loans to other market participants, which was the forerunner to the establishment of an active secondary market for loans; the development of dynamic businesses around transaction processing services, which had previously been provided as an appendage to lending relationship; and as an architect of the modern use of derivatives, which are now used by corporations and institutions worldwide to manage risk. RAROC is the cornerstone of modern risk management and derivatives are the fastest growing financial market - a testament to Sanford's determination to make banking a more dynamic and innovative business. Upon Sanford's retirement in 1996, Bankers Trust Director Hamish Maxwell, retired chairman and chief executive officer of Philip Morris Companies, Inc. (now known as Altria Group, Inc.), said, speaking for the board: "Charlie Sanford has been the principal architect of what has been recognized during his chairmanship as one of the most innovative and profitable global financial institutions." Sanford once told Wharton MBA students at a convocation that it was in their interests to practice what he called "enlightened capitalism," that is, "a capitalism that will create a surplus and reinvest in social and material productive capacity for posterity..Enlightened capitalism is a system that responds to general human needs while serving individual human aspirations - certainly including personal financial security." |
