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The extreme uncertainty of the global economy requires a new risk management framework. This session will examine the rapidly changing risks to the global economy and the need for new ways of behaving, making decisions and even reversing decisions.
[vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Lakshmi%20Shyam-Sunder%22%2C%22job_role%22%3A%22Vice%20president%20and%20chief%20risk%20officer%2C%20World%20Bank%20Group%20(United%20States)%22%2C%22content%22%3A%22Lakshmi%20Shyam-Sunder%20was%20appointed%20vice%20president%20and%20World%20Bank%20Group%20chief%20risk%20officer%20in%20February%202014.%20She%20was%20previously%20chief%20financial%20officer%20and%20director%2C%20finance%20and%20risk%20at%20the%20Multilateral%20Investment%20Guarantee%20Agency%20(MIGA)%2C%20the%20political%20risk%20insurance%20and%20credit%20enhancement%20arm%20of%20the%20World%20Bank%20Group.%20Shyam-Sunder%20was%20one%20of%20the%20key%20contributors%20to%20the%20MIGA%2FIBRD%20Exposure%20Exchange%20Agreement%20within%20the%20Bank%20Group%2C%20and%20was%20responsible%20for%20strengthening%20and%20enhancing%20the%20finance%2C%20risk%2C%20resource%20management%2C%20IT%2C%20and%20control%20functions%20in%20MIGA.%20Prior%20to%20joining%20MIGA%20in%20March%202011%2C%20she%20worked%20at%20the%20International%20Finance%20Corporation%20(IFC)%2C%20also%20part%20of%20the%20World%20Bank%20Group%2C%20where%20she%20held%20a%20variety%20of%20positions.%20As%20director%20for%20corporate%20risk%2C%20she%20led%20the%20development%20of%20a%20new%20client%20risk%20management%20advisory%20service%20function%20for%20IFC%20clients%20and%20the%20creation%20of%20the%20International%20Financial%20Institutions%20Risk%20Data%20Consortium.%20Before%20that%20Shyam-Sunder%20was%20director%20of%20IFC%E2%80%99s%20risk%20management%20and%20financial%20policy%20department%20where%20she%20developed%20IFC%E2%80%99s%20integrated%20economic%20capital%20and%20pricing%20framework%2C%20and%20had%20responsibility%20for%20all%20financial%20risks%20arising%20from%20the%20corporation%E2%80%99s%20loan%20and%20equity%20investments%20in%20emerging%20markets%2C%20and%20Treasury%20activities%20as%20well%20as%20managing%20rating-agency%20issues.%20She%20was%20also%20co-chair%20of%20IFC%E2%80%99s%20new%20products%20assessment%20group.%20Shyam-Sunder%20has%20consulted%20for%20a%20wide%20range%20of%20public%20and%20private%20sector%20institutions%20in%20the%20US%20and%20in%20emerging%20markets.%20She%20has%20also%20served%20on%20the%20board%2C%20and%20finance%20and%20risk%20committees%20of%20institutions%20in%20emerging%20markets.%20Before%20joining%20IFC%2C%20Shyam-Sunder%20was%20a%20faculty%20member%20at%20the%20MIT%20Sloan%20School%20of%20Management%20where%20she%20received%20an%20award%20for%20Excellence%20in%20Teaching.%20Shyam-Sunder%20was%20also%20on%20the%20faculty%20of%20The%20Tuck%20School%20of%20Business%20Administration%20at%20Dartmouth%20College.%20She%20holds%20a%20Ph.D.%20in%20Finance%20from%20the%20MIT%20Sloan%20School%20of%20Management%20and%20an%20MBA%20from%20the%20Indian%20Institute%20of%20Management%2C%20Ahmedabad.%20%20Shyam-Sunder%20was%20born%20in%20Iraq%2C%20and%20grew%20up%20in%20India.%20She%20is%20married%20and%20has%20one%20daughter.%22%2C%22image%22%3A%2231887%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Flakshmi-shyam-sunder-7b24a03%2F%22%7D%5D” title=”Speaker” el_class=””][vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Amanda%20White%22%2C%22job_role%22%3A%22Director%20of%20institutional%20content%2C%20Conexus%20Financial%20(Australia)%22%2C%22content%22%3A%22Amanda%20White%20is%20responsible%20for%20the%20content%20across%20all%20Conexus%20Financial%E2%80%99s%20institutional%20media%20and%20events.%20In%20addition%20to%20being%20the%20editor%20of%20Top1000funds.com%2C%20she%20is%20responsible%20for%20directing%20the%20global%20bi-annual%20Fiduciary%20Investors%20Symposium%20which%20challenges%20global%20investors%20on%20investment%20best%20practice%20and%20aims%20to%20place%20the%20responsibilities%20of%20investors%20in%20wider%20societal%2C%20and%20political%20contexts.%20She%20holds%20a%20Bachelor%20of%20Economics%20and%20a%20Masters%20of%20Art%20in%20Journalism%20and%20has%20been%20an%20investment%20journalist%20for%20more%20than%2025%20years.%20She%20is%20currently%20a%20fellow%20in%20the%20Finance%20Leaders%20Fellowship%20at%20the%20Aspen%20Institute.%20The%20two-year%20program%20seeks%20to%20develop%20the%20next%20generation%20of%20responsible%2C%20community-spirited%20leaders%20in%20the%20global%20finance%20industry.%22%2C%22image%22%3A%2231872%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Famanda-white-101a7515%2F%3ForiginalSubdomain%3Dau%22%7D%5D” title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Key takeaways
We need to think far more broadly beyond simply financial risk, our view of risk must not be one dimensional. The crisis helps us learn and get better at modelling interconnected risks. Bigger, broader risks are interconnected and require increased collaboration to mitigate. Even if we are sitting on the fence and maintaining investment positions, risk has gone up.
The pandemic has turned our lives not inside out, but ‘outside in’. Rather than shut down, we should ask ourselves ‘what can we do to help the situation?’
We are in the deepest recession since World War 2, and it is completely synchronised across the world. If a vaccine is not available, the World Bank forecasts the global economy will shrink by 8 per cent.
The pandemic has set The World Bank back in its aim to help alleviate poverty – 170 million people will remain in poverty due to the pandemic with an income of below $2 per day.
The challenging environment is exacerbated by intergenerational and geopolitical tensions. Key question is how to exit from the pandemic stimulus measures.
Green bonds for example are a heartening development from the financial community.
Institutional investors are considering more non-financial risks and are engaging more deeply with investee companies. If we do this right it will mitigate, not exacerbate the issue.
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Poll results
Have you changed your attitude to risk taking because of the recent onset of unforeseeable risks including this current health pandemic?[vc_line_chart x_values=”” values=”%5B%7B%22title%22%3A%22Yes%2C%20we%20have%20taken%20risk%20off%20the%20table%20in%20our%20portfolio%20allocations%20(21%25)%22%2C%22y_values%22%3A%2221%22%2C%22color%22%3A%22pink%22%7D%2C%7B%22title%22%3A%22No%2C%20about%20the%20same%20(58%25)%22%2C%22y_values%22%3A%2258%22%2C%22color%22%3A%22sandy-brown%22%7D%2C%7B%22title%22%3A%22Yes%2C%20we%20are%20taking%20more%20risk%20as%20we%20see%20opportunities%20in%20the%20disruption%20(21%25)%22%2C%22y_values%22%3A%2221%22%2C%22color%22%3A%22sky%22%2C%22custom_color%22%3A%22%23ff9900%22%7D%5D” css=”.vc_custom_1593673826068{border-radius: 2px !important;}”]
The Florida State Board of Administration has made some strategic moves to take advantage of opportunities in the dislocation, including in private equity, distressed debt and active listed equities.. But CIO, Ash Williams, is concerned about the underlying real economy.
Fraud and falsehoods are nothing new but technology has made it much more difficult to separate fact from fiction. Professor Stephen Kotkin discussed investing in a world of deception.
Are the two world powers on a collision course for war? Could global investors get smashed between the two? Unfortunately, the answers appear to be yes and yes.
There is growing recognition that globalisation has a downside. But whether they are mitigated, or continue on the current course, investors should be looking to safeguard their portfolios.
The implications for investors of the inclusion of China A-shares in the wider MSCI indexes, an inevitable outcome, will be discussed at the Fiduciary Investors Symposium at Yale in October.
Geopolitical risk is largely priced in to markets according to the John P. Birkelund ’52 Professor in History and International Affairs at Princeton University, Stephen Kotkin.
Former Governor of the US Federal Reserve, Ben Bernanke, says there are no foreseeable shocks to the financial system. In any case, he says, the system itself is so much more robust than it was before the crisis, that it could weather the storm. The only possible cause for concern is geopolitical risk. Risk
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