Risk USA: Hancock calls for a reappraisal of risk management

Peter Hancock, president of Integrated Finance, a New York-based hedge fund and consultancy, urged managers to rethink the way they view risk. The dialogue on risk drivers has been “hijacked” by those who either oversimplify the process or become bogged down in details, according to Hancock, who was speaking at Risk USA’s derivatives and risk management conference in New York.

Instead, analysts should spend more time pondering possible unknowns. He said that in the past, a vulnerability identification test in which analysts are asked to describe the likely scenario where the firm would lose a lot of money has proved helpful.

Hancock also called for a more rigorous risk management framework which would include maintaining “risk balance sheets”, where the risk of the assets equal the risks of the liabilities. A systematic risk balance sheet would detail how much each