Risk Adaptation in the Financial Arena

This exploratory project brings the anthropological theory of risk to bear on the financial arena and examines how “clumsy” solutions might lead to better responses to an ever-shifting risk environment.

Risk management © Warchi | iStock

Risk management © Warchi | iStock

When dealing with volatile financial markets, IIASA researchers with the Financial Risk/Rational Adaptation project note that risk environments are constantly shifting between four distinct forms and that no single risk strategy is productive for all situations. That is the premise of the project, which brings the anthropological theory of risk to bear on traditional financial risk theories.

The anthropological approach is critical because the responses of investment firms to risk are often determined by risk managers who fall into one of four types: pragmatists, conservators, maximizers, and managers. Project researchers propose that the best approach in a shifting risk environment is not to follow a path prescribed by one particular type of manager, but to listen to voices from all four types to ensure that the decision making is “clumsy.” A clumsy process means all points of view are heard, and that each is responsive to the others.

IIASA researchers are working with Willis Re, a global reinsurance brokerage firm, to implement this clumsy decision making process as a “rational adaption” approach to a high-risk marketplace.


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Last edited: 25 September 2015

CONTACT DETAILS

Michael Thompson

Senior Research Scholar

Risk and Resilience

T +43(0) 2236 807 287

Timeframe

2011 - 2014

RESEARCH PARTNERS

International Institute for Applied Systems Analysis (IIASA)
Schlossplatz 1, A-2361 Laxenburg, Austria
Phone: (+43 2236) 807 0 Fax:(+43 2236) 71 313