Managing Risk During Financial Crisis : Lessons to be Learnt

As the financial crisis gained ground in global financial markets, the economic situation deteriorated very quickly and the world economy faced recession. Identifying, measuring and managing the risk exposure, designing and putting into place appropriate risk management systems and modifying them in the light of changing external conditions and internal requirements became a core financial activity and, in many cases, a strategic tool for survival and competitiveness. Much of the failure around past and current risk management practices does not point to a failure of risk management as such, but to a lack of understanding about the discipline and how it should be applied correctly. This article examines various aspects of financial risk management, especially when the economy is in a downturn.