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Journal 33: Technical Finance

Most of the articles in this edition of the Journal focus on two pertinent topics: increasing regulation and the complexities of integrating operations. We at Capco are investing heavily in our capabilities to assist forward-thinking institutions better manage the future challenges and opportunities. The tasks are many and the Journal, in its role as the medium of choice for the best thinking, endeavors to compile perspectives from both academia and industry. Most importantly, the Journal strives to work with the industry to ensure that this information is indeed executable.

Until very recently, many of us had assumed that a combination of advanced mathematical models and increasingly powerful computers would allow us to not only obtain a holistic view of the risks our enterprises face, both from within and without, but also measure and manage them effectively.

Needless to say, this assumption was shattered during the recent crisis. We have all now realized that we still have difficulties in evaluating risk, and moreover, that our organizations are structured in such a way that performing adequate enterprise-wide risk management is almost impossible.

Redesigning financial institutions to better provide management with a useful dashboard for monitoring risk is essential if we are to avoid similar institutional type crises in the future. We also need to restructure the financial ecosystem itself in order to make sure that financial services firms will not continue to believe that their bets will be covered by taxpayers. This reform cannot succeed so long as the banks remain so important to their respective national economies.

It is this aspect of technical finance that many of the papers in this issue of the Journal focus on, proposing improvements to the regulatory and operational landscape and critically examining most of the proposed changes that are being implemented by the world’s major banking institutions. In summary, most of our authors find the current and planned reforms to be very far from what is actually needed.

The list of issues that need to be addressed is far too long to be covered in a single edition of the Journal. But we trust that future issues will return to identifying ways to avoid the mistakes made during the recent crisis, and hopefully provide more prescriptive solutions as to how the financial system can best be managed.

We hope that you enjoy reading the articles in this edition of the Journal and that you continue to support us by sending us your best ideas.

Journal Articles