Adaptive Risk Management
London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS
This one-day workshop will provide delegates with practical asset allocation tools that can be easily applied.
Adaptive markets require adaptive risk management processes.
The adaptive moment turns risk management from a feedback control system into an integrated element of the corporate management process. It supports decision makers to develop or maintain a comparative advantage while staying compliant to regulatory requirements. Adapting the risk management techniques lead to a diminution of a correlation based understanding of risk. It forces the decision maker to think in causalities.
Participants will learn how to distinguish uncertainty from risk and how to apply new risk parameters in risk and compliance management. Two practical exercises will allow participants to apply their lessons learned.
Seminar context: Based on applied behavioral finance insights, a new generation of risk management principles is currently gaining ground. Those principles are academically validated and empirically sound. Nudging, Choice Architecture and Heuristics Management become success factors for professional (risk) managers in a increasingly competitive markets.
With this seminar, corporations can now benefit from those behavioral insights.
This course is addressed to the following corporate target groups: finance directors, financial analysts, corporate treasurers, management consultants, legal and tax advisors, performance managers.
9.00 - 10.30 INTRODUCTION TO ADAPTIVE RISK MANAGEMENT (ARM)
- Definition of adaptive markets
- Definition of risk
- Classification of risks
- Feedback/Concurrent/Feedback control systems in RM
- Limitations of traditional risk management techniques
- Implications of correlation-based risk management
- A critical appraisal of volatility-based risk measures
- Beyond volatility-based risk measures
- Risk versus uncertainty
- Correlation versus causality
- Quantitative versus qualitative
10.45 - 12.15 ADAPTIVE RISK MANAGEMENT STRATEGIES. MANAGING A CORPORATE SERVICE/PRODUCT PORTFOLIO WITH RISK FACTOR DIVERSIFICATION
Changing from diversifying product to risk factors
- Maximizing diversification with risk factor management
- Causality-based risk factor analysis
- Best practices explained
EXERCISE ONE: DIVERSIFYING MACRO AND MICRO RISK FACTORS
13.30 - 15.00 ADAPTIVE RISK MANAGEMENT TECHNIQUES
Utilizing bounded rationality for most rational risk management
- Behavioral Finance, Neuroscience & Animal Spirits Management
- Definition of heuristics
- how do we take decisions
- Proactive heuristics management
- Choice architecture in adaptive risk management
- The knowing-doing gap in behavioral finance - implications for managing risks
SIMPLE RULES IN ADAPTIVE RISK MANAGEMENT
- Definition of simples rules.
- Aligning choice architecture and empowerment in managing heuristics
- Best practices of using simple rules in ARM
15.15 - 16.45 DEBIASING TECHNIQUES IN PROACTIVE HEURISTICS MANAGEMENT
- 3 practical debiasing techniques
EXERCISE TWO: TESTING A DEBIASING TECHNIQUE IN ADAPTIVE RISK MANAGEMENT