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editor introduction
Carl Densem Editor, PRMIA
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Steve Lindo Editor, PRMIA
When Warren Buffet said, “Only when the tide goes out do you discover who’s been swimming naked,” he could have been talking about 2022, when that tide – of low interest rates and timid inflation – went out faster than anyone thought possible. With higher interest rates still bringing inflation under control in much of the world, 2023 may be recessionary for many countries and turn more attention to risk management’s ‘bread and butter’: measuring risk, distilling cause and effect, and structuring responses to uncertainty.
Complex Adaptive System is a term which describes many social, environmental and biological phenomena, such as climate, cities, governments, industries, power grids, traffic flows, animal swarms, insect colonies, our brain and immune systems. It also describes financial markets where, as our capstone article by Paul Shotton demonstrates, established risk measurement practices have yet to fully incorporate their adaptivity and complexity.
Also in this edition of Intelligent Risk, Professor Rick Nason asks whether your risk management could pass the famous Turing Test: handling the particularly human domain of complexity beyond that which algorithms can solve. Closely related, Dr. Nawaf Almaskati looks at the rise of machine learning in credit risk and what the latest research can teach about how best to implement these models. Not to miss, Dan DiBartolomeo analyzes the implosion of the crypto-darling FTX.
Climate risk remains a top concern for risk managers and, in this edition John Thackery threads together the forces at play into a more coherent approach, while Ina Dimitrieva looks at the unseen risks of Greenwashing and puts the responsibility back on corporations to go above regulatory requirements.
Other February articles tackle a variety of perennial thorns in the side: cybersecurity, peer-to-peer lending, fraud and inflation.
The articles selected for this issue represent another step towards our goal of fostering a dynamic exchange of views on high-priority and fast-moving risk issues among PRMIA’s community. To that end, we welcome all and any feedback, either by email to iriskeditors@prmia.org or by posting a blog or discussion contribution on PRMIA’s Intelligent Risk Community webpage.
