Risk Management Still at Rudimentary Stage in Nigeria’
Deputy Governor, Financial System Stability, Central Bank of Nigeria (CBN), Dr. Chiedu K. Moghalu, recently spoke on “Risk-Ability: Risk Management Knowledge and Infrastructure for Nigeria’s Financial Services Industry,” at a Chief Risk Officers’ retreat. Obinna Chima, who was there presents the excerpts:

Financial Crisis
From the tulip mania in Holland in the mid-1630s to the ultimately disastrous speculative rush for the shares of the Mississipi Company promoted by John Law and his Banque Royale in Paris in the early 1700s, from the South Sea Bubble in London in the same period (to which Sir Isaac Newton lost a princely £20,000) to the great Wall Street Stock Market boom of the 1920s that preceded the Great Crash of 1929 and the Great Depression and on to the global financial crisis of 2008 – 2009, the history of finance over the past 500 years has been marked by frequent booms and busts.

Historical evidence suggests, as the famous American economist John Kenneth Galbraith put it, “that the financial memory should be assumed to last, at a maximum, no more than 20 years. This is normally the time it takes for the recollection of one disaster to be erased and for some variant on previous dementia to come forward to capture the financial mind.”

If this is so, and we are condemned to cycles of financial implosions that wipe out economic value, is the modern science of risk management doomed? It isn’t. The future is always uncertain. But as the experts in the science of risk management assert, it is quite possible - and necessary – to manage the financial risk that uncertainty brings with it. There are three ways to look at, or define risk management.
The first is to view risk management as a pure defensive play in which we sacrifice growth and hold on to whatever value we already have, and perhaps