Risk Management

I feel very sorry for the mortgage industry these days. Despite their best efforts to quantify and manage the risk for their counterparties in the securities business, something really was lost in translation.

Could it be that risk patterns changed to an extent that traditioanl underwriting standards failed? Did product development get ahead of risk management to such an extent that cash flow or asset deterioration either less in assesing risk?

I’d give that a qualified: YES!

I don’t think the risk managers even cared or even thought about a downturn in housing. I do think they considered that risk was transferred to their counterparty and they worried less about it “backing up” than packaging the product.

In IT, this happens every day as IT owns the process but fails to consider results with equal fervor. You can Agile your way through a program or project but if you think you don’t own the results then I’d say you don’t get the purpose of product management.