Masters in risk management

SFE’s OWEN KELLY welcomes the launch of the UK’s first academic-industry partnership to correct one of the key causes of the financial crisis.

The management (or not) of risk has become one of the defining talking points of the financial crisis. Phrases like ‘tail risk’, ‘risk appetite’ and even ‘fat tails’ have become, if not commonplace, at least a lot more frequently heard than anyone might have expected a few years ago.

The challenges of managing financial risk – including the fundamental importance of hard-to-measure external factors – have rightly come to the fore in recent years, as the consequences of our collective failure to do so become clearer. And increased regulation is the first instinctive objective for those seeking to avoid the same mistake in future.

But recently Standard Chartered listed the unintended consequences of regulation as one of five risks to the world economy – along with the imbalances between countries’ economies, the deleveraging now happening in the West, the unwinding of central banks’ liquidity support measures and unemployment. The many faces of risk and the inherent volatility of the current economic outlook reinforce the need for a skilled and knowledgeable workforce ready to take on this challenge. We can be sure that financial services will be in the vanguard when it comes to handling risks of all kinds.

Successful collaboration with academe, exploiting the knowledge found in highly regarded departments, is going to be crucial and this year we have seen a significant development with the establishment of the Scottish Financial Risk Academy (SFRA)*. It is the first academic-industry partnership in the UK to address quantitative financial risk management.

Led by Professor Alexander McNeil, the SFRA has been established by Heriot-Watt University and the University of Edinburgh, through their joint research institute, the Maxwell Institute for Mathematical Sciences. Set up with funding from the Scottish Funding Council, and the support of the financial sector, the Academy has set out an important agenda to enhance the understanding of financial risk management, focusing on the quantitative aspects of financial risk, with their foundations in mathematical modelling.

But the industry will always be at the sharp end of managing risk and that realisation lies behind the contributions to the Academy, as founder members, of Aberdeen Asset Management, the Actuarial Profession, Barrie & Hibbert, Lloyds Banking Group and Scottish Financial Enterprise.

The SFRA will deliver a number of activities, combining academic insights with the complementary skills of industry experts, to offer students and professionals a range of postgraduate training and CPD opportunities. There are a number of things in the pipeline for the academy, including Risk Colloquia – the first one taking place this November in Edinburgh – masterclasses delivered by visiting experts, a programme for placing postgraduate students in financial services companies and courses taught by industry practitioners to MSc students.

The SFRA will also be working with key players in the UK banking sector to ensure that its workshops and events offer relevant training and CPD opportunities to industry professionals. Companies will also have the opportunity to build their expertise in quantitative financial risk via access to the latest thinking and research and opportunities to recruit the most able postgraduate talent coming out of Scottish universities.

Of course, quantitative risk is not the full story and discussions are already in hand about broadening the Academy’s interests to encompass behavioural and other risk disciplines. But it is off to a good start and is a real, live example of industry and academe working together to improve our capacity to manage risk.

*Further details can be found online at www.sfra.ac.uk

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