Northwest decided to try a “hub and spoke” strategy that had worked well in the North American market—wherein airplanes fly to a central location and then fan out to distant points. After comparing profiles of several European airlines, Northwest selected KLM of the Netherlands as a good candidate for its needs. It also saw how [...]
What conclusions can be drawn from these observations? Portfolios that are optimized with regard to risk seem to do better than those that additionally rely on return forecasts. Sample means are not a good predictor for future returns of bond portfolios. In this context Jorion (1986) argues, that the sample mean is exposed to considerable [...]
Simply recognising the need to manage risk is not enough. The ethos of an organisation should recognise and reward behaviour that manages risk. This requires a commitment by senior managers and the resources (including training) to match. Too often, control systems are seen only as an additional overhead and not as something that can add [...]
When mitigating risks, start by reducing or eliminating those that result only in cost, essentially non-trading risks. These might include property damage risks, legal and contractual liabilities and business interruption risks, and can be thought of as the “fixed costs” of risk. Reducing these can be achieved with techniques such as quality assurance programmes, environmental [...]
Once risks are identified they can be prioritised according to their potential impact as well as the likelihood of them occurring. This helps highlight not only where things might go wrong and what their impact would be, but how, why and where these catalysts might be triggered. There are many potential risk catalysts. Five of [...]
My name is Emily Mortimer. I'm an academy professor with a degree in economy and considerable experience in training both students and private contractors in matters of business, finances and money management.