It has been sometimes since the last article came out on this page. This page was supposedly, at least in the initial days of its existence, meant to instruct and impart some practicalities on the subject. The subject is vast, and infinitely complex. Risk management, as a tool, on the whole subject of Risk, is like a drop of water picked up from the mighty ocean ( of Risk, or even Financial Risk, as a subject). By definition, tools only encourage, and enhance, facilitation of a solution to a problem. They are not the solution itself, and could never be. The world of Finance is like the Universe itself, we can vaguely understand the immensity, by taking recourse to complex mathematics, but never fully fathom out its real size, immensity, let alone the expansive nature.
Finance as a subject, is old, and disciplined. It is disciplined because it makes a statement of some sort. When we want to make a statement of some sort, we need methods, tools, and a predictive capability. The subject matter of Risk evolved due to these needs. Finance was originally developed to record bygone transactions, incurred by humanity, individually or organisationally, because a systematic recording inculcates discipline. Once we look at carefully at things we did in the past, we tend not to make repetitive mistakes. We tend to become disciplined in a finer way, since we have certain means to look at the effectiveness of the bygone transactions that we incurred.
Thus, we look at the “deeds” we did, but does it help us in taking a better decision in future, even though we understand the nature of the transactions we incurred? If I want to do something bigger, or different, or expansionary, can these past recordings guide me to choose the right path? A guidance, howsoever great, falls short of a methodology to do things differently, or even doing different things. We certainly need tools, methods, and better insights.
It must be stated here, irrespective of the audience and the maturity, that the subject of Risk does not necessarily contend to Finance only, but they are intricately intertwined. The early development of the stock markets, and methods of investments necessitated studying and understanding of the subject better. With passage of time, markets built up products, and complexities to not only raise capitals of various forms, but provide financial intermediation to the next level. With advent of super fast computing, proliferation of data at multitudinous levels, and development of advanced tools, the art of investment gradually transformed into a science. Like any discipline, this new science demanded careful studies, contemplation, and enhanced development of methodologies. The world of Risk did certainly evolve.
