United States or Ireland ? Vote for the TOP Country of the Week !
With governments, central banks, or the IMF as lenders and insurer of last resort there is little counterparty risk. Private counterparties are a whole different ballgame. They are loth and slow to pay. Dismayed creditors have learned this lesson in Russia in 1998. Investors in derivatives get acquainted with it in the 2001-2 Enron affair. Mr.
Corporate risk models measure the effect that simultaneous losses from different, unrelated, events would have on the well-being of the firm. Some risks and losses offset each others and are aptly termed "natural hedges". Enron pioneered the use of such computer applications in the late 1990's to little gain it would seem.
The shareholders and employees of Enron may be entitled to some kind of safety net but not so its managers. Laws and social norms that protect the latter at the expense of the former, should be altered post haste. The government of a country bankrupted by irresponsible economic policies should be ousted its hapless citizens may deserve financial succor.
Long before Enron and World.com, the tech bubble and Wall Street's accounting frauds and pernicious conflicts of interest transition has exposed the raw and vulnerable nerves running through the foundations of Anglo-Saxon capitalism. Eastern Europe is a monument to the folly of unmitigated and unbridled freemarketry.
In the Risk annual congress in Boston two years ago, Myron Scholes of Black-Scholes fame and LTCM infamy, publicly recanted, admitting that, as quoted by Dwight Cass in the May 2002 issue of Risk Magazine: "It is impossible to fully account for risk in a fluid, chaotic world full of hidden feedback mechanisms." Jeff Skilling of Enron publicly begged to disagree with him.
Insiders collude to monopolize it and obtain a "first mover" advantage. Intricate nets of patronage exclude the vast majority of shareholders and co-opt ostensible checks and balances such as auditors, legislators, and regulators. Enough to mention Enron and its accountants, the formerly much vaunted Andersen.
Word Of The Day