Just having finished a risk analysis on a real estate and financial transaction I made the following reflection on how to make the stakeholders understand the full picture of what I am trying to conveying.Being presented with the concept of “risk” the most common perception and systematic is to divide it up in the conventional order of f.i:

  • Business risk
  • Operational risk
  • Legal risk
  • and on the list it goes…

This is a classical part of any new business venture or IPO prospect where the disclaimers are clearly divided and described in such a way. It is a necessary process and one that any new business venture must go through. It takes various types of professionals in the various stages of the process to generate the correct answers and analysis. But it is always necessary to have one professional with the experienced in weighing all the aspects of the risk together and skilled enough to paint a picture to the stakeholders what it actually entails for their risk of investment.  This is the conventional view and way to handle analyse risk. I like to analyse it from another perspective on top of that

  1. The risk you can quantify and mitigate
  2. The risk you can quantify but not mitigate
  3. The worst risk of them all….the one no one has yet not found out is exists.

A good risk analyst must be able to report to the stakeholders in a way that the 2 first are easily and clearly understandable. An important part of the process is to clearly define and implement contingency plans if number 2 should appear. The most important is though to keep analyzing and keep researching and ask every possible and impossible question and analyse every answer to find new questions to ask, in order to minimize no 3 as number 3 is the one no one is prepared to handle if it should appear.

 

 

 

 

 

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Very correct he is.

CIJ Blog

James Woolf of Flow East in Prague has taken issue with the Financial Times’ editorial on Hungary’s treatment of the country’s banking sector. The truth is that Hungary has alienated many of the banks active there with what they claim are heavy-handed measures to compensate consumers who borrowed in Swiss franc to finance their homes. The government claims the banks misled their clients, but in his letter to the editor, Woolf basically says the banks should have known better.

Sir, With reference to “Beware Hungary’s cure for Swiss franc mortgage hangover” (Inside Business, January 29): it is not often that one can find agreement with the policies of Hungary. In the case of a deliberate mismatch of income and liability by allowing foreign currency loans to be (mis)sold by banks, it is clearly not a “tricky problem for regulators and banks”. No sane investor would have unhedged currency…

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Yesterday the Swedish National Bank lowered the overnight repo rate again. Many other countries in EU are following the same strategy. Keep the currency weak and be more competitive than thy neighbour. Keeping the Interest rate low enables the countries with a strong export sector to lower production cost and increase competitiveness compared to to the neighbours with little efforts. This is a short sighted tool as the weak currency will lead to inflation and the population will get poorer compared to the neighbours. Which leads to the conclusion that it is a cynical way for countries to increase GDP. As a Swede, remembering the 70ties with the constant devaluations of the SEK to improve the conditions for the export sector which took the SEK from parity with the D-mark to 5 to 1 ratio, it also awakens memories of foreign holidays and products becoming more and more expensive. The poorly managed countries in the EURO are paying the price with high interest rates and no possibility to manipulate their currencies. Mostly these countries being very dependant on tourism. Austria has seen one of the best winter seasons in many years although the snow has been scarce. This because the Swiss currency has appreciated with 30%. Skistar the Swedish holiday home provider and lift operating company have better bookings than many years because of the weak SEK. Does the governments and the national banks underestimate the common man’s understanding of the mechanisms and pay the price in the next elections or is this an effect of price comparisons. my experience is the latter.