Risk Management, Leverage and Globalization
In "Risk Management Q&A: Risk is a four-letter word" (Perspectives, RBC Dexis Investor Services, April 2010), I talk about meaningful changes in terms of risk management as a result of the financial crisis. My comments about leverage in the same interview are nothing new. Leverage is not necessarily good or bad. Importantly, institutional investors must understand how to properly measure leverage and establish internal controls.
"All leverage is not created equal. A short position in an actively-traded instrument has a different risk-return profile than taking on debt or synthesizing exposure with puts or a combination of derivatives."
To read the full interview, go to page 10 of "The global power shift: New directions for the world economy". I am also quoted on page 8 in the article entitled "Reversal of Fortune: Regulators could push the consolidation trend back a few years" on the topic of reactionary regulation.
