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Wednesday, February 3, 2010

HBR's 10 Breakthrough Ideas for 2010: Risk Management

#8, Risk Management: Spotting Bubbles on the Rise: We have the tools to sound the alarm early (by Sendhil Mullainathan). We don’t have in place reliable predictors of asset risk. If we did have such “bubble” spotting metrics for identifying a particular asset class as “at risk,” we would be able to more accurately describe the proper level of value on the balance to ID risk threat.

The Breakthrough Idea: We can’t always prevent financial setbacks, anymore than we can prevent earth quakes or hurricanes. But we can predict financial bubbles through some sort of thoughtful research-based committee. Even a "bubbles committee!" Such a committee would not be unlike w hat the National Bureau of Economic Research does. The goal: “To use the research in behavioral finance to identify bubbles before they form….”

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