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Risk management: History, definition and critique

Author

Listed:
  • Dionne, Georges

    (HEC Montreal, Canada Research Chair in Risk Management)

Abstract
The study of risk management began after World War II. Risk management has long been associated with the use of market insurance to protect individuals and companies from various losses associated with accidents. Other forms of risk management, alternatives to market insurance, surfaced during the 1950s when market insurance was perceived as very costly and incomplete for protection against pure risk. The use of derivatives as risk management instruments arose during the 1970s, and expanded rapidly during the 1980s, as companies intensified their financial risk management. International risk regulation began in the 1980s, and financial firms developed internal risk management models and capital calculation formulas to hedge against unanticipated risks and reduce regulatory capital. Concomitantly, governance of risk management became essential, integrated risk management was introduced and the chief risk officer positions were created. Nonetheless, these regulations, governance rules and risk management methods failed to prevent the financial crisis that began in 2007.

Suggested Citation

  • Dionne, Georges, 2013. "Risk management: History, definition and critique," Working Papers 13-2, HEC Montreal, Canada Research Chair in Risk Management.
    • Handle: RePEc:ris:crcrmw:2013_002
    as

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    References listed on IDEAS

    as
    1. Georges Dionne (ed.), 2013. "Handbook of Insurance," Springer Books, Springer, edition 2, number 978-1-4614-0155-1, December.
    2. J. David Cummins & Mary A. Weiss, 2009. "Convergence of Insurance and Financial Markets: Hybrid and Securitized Risk‐Transfer Solutions," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 493-545, September.
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    4. Georges Dionne & Geneviève Gauthier & Khemais Hammami & Mathieu Maurice & Jean‐Guy Simonato, 2010. "Default Risk in Corporate Yield Spreads," Financial Management, Financial Management Association International, vol. 39(2), pages 707-731, June.
    5. Georges Dionne, 2003. "The Foundations of Banks' Risk Regulation: a Review of the Literature," Cahiers de recherche 0346, CIRPEE.
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    8. Georges Dionne, 2009. "Structured Finance, Risk Management, and the Recent Financial Crisis," Cahiers de recherche 0944, CIRPEE.
    9. Dionne, Georges & Eeckhoudt, Louis, 1985. "Self-insurance, self-protection and increased risk aversion," Economics Letters, Elsevier, vol. 17(1-2), pages 39-42.
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    More about this item

    Keywords

    History risk management; risk management and financial crisis; regulation; Basel Accords; banking;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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