Page 143 - Risk Management in current scenario

of existing preparedness to cope up with such extreme weather and
climatic change challenge.

The interplay of risk is also important in the global risk Iandscape.The
World Economic Forum have identified three key interplays that may
exacerbate the overall impact in short to medium term. They are,
geopolitical and economics, the risks related to rapid and unplanned
urbanization in developing countries and emerging technologies.

Another few areas that require attention in the effort of improving risk
management framework is the recognition of correlation between risks,
as correlation play an important role in risk diversification and
aggregation.

The important point to be considered is that, correlation under the
stressed condition increases which should be kept in mind while
aggregating economic capital.

Spotting of unusual activities in global landscape is another way to have
better risk identification process. Some of the activities could be political
unrest or increased parleys between few countries, high market returns
in the stock market without reason, extreme weather condition prevailing
for a long period of time, boom in one sector in the economy without
enough rationale, unusual high profit shown by some companies while
other competitors are struggling etc.

The 2008 global economic crisis had shown that boom in the housing
market followed by new financial products was an unusual activity, if
analyzed and assessed for its impact, the risk might have been reduced.

Enhancement in risk analysis

Understanding of the tail risk through expanding the risk identification
horizon to global macro risk factors, spotting the unusual trends in the
global activity, better understanding of correlation between different risks

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