Philip M Halperin - Scribblings

Music to the Risk Manager's Ear: Nineteen Stupid Comments We've All Heard Before


Well, you know how it goes. You are trying to maintain your integrity here, considering the profitability of the business and the risk of some catastrophic low probability event, trying to optimise the relationship between risk and return, and act in a responsible manner. Your business manager/client relationship guy/structured product salesman/trader interlocutor's face gets that old 'Eureka!' look, his face brightens --- he's done it, folks! He has found his muse. Yes, he has discovered the most original, articulate, convincing argument that will, due to its originality and brilliance, will convert you immediately to his point of view. Having uttered his original word of wisdom, he exudes a smug, self-congratulatory aura, secure in the knowledge that this articulate display of erudition has won his case for ever.

The only problem is, we have heard it long before...

"Even a rocket-scientist like you should be able to understand that."

"Can't you just relax some of your assumptions?"

"This isn't some theory, this is the real world!"

"If we have to follow that, we will not be competitive. There is a market in the real world, you know!"

"But unlike you, I have a budget to make!"

"This isn't academic research, this is business!"

"But everyone knows that that 'risk' just isn't going to happen!"

"There's real money involved here!"

"Can't you think outside the box?"

"Can't you be more pragmatic?"

"Can't you be more flexible?"

"Can't you be more consistent?"

"But all of our competitors do it."

"But none of our competitors do it."

"But I, on the other hand, am concerned with the P and L!"

"You don't understand the nature of this market!"

"You don't have any street-smarts!"

"This is a completely riskless transaction."

And the Number One comment is...

"Who makes the money that pays your salary around here, anyway?"


ęCopyright 2004