The Hong Kong Polytechnic University & The University of Texas Risk Management for Globally-Interconnected Enterprises Ang...
<ul><li>Current Affairs </li></ul><ul><li>Groundhog Day </li></ul><ul><li>Risk Management -Lessons Learned </li></ul><ul><...
<ul><li>Losses on all subprime mortgage assets may reach US$300 Billion to US$400 Billion worldwide – Deutsche Bank Analys...
<ul><li>Numbers and impact still being revised… </li></ul><ul><li>Late disclosures, lack of disclosures, blindsiding inves...
<ul><li>2007 Subprime Credit Crisis – Leading into a crisis of confidence </li></ul><ul><ul><li>What has been happening? <...
<ul><li>Housing Market booming with prices skyrocketing </li></ul><ul><li>Independent Agents used </li></ul><ul><li>Banks ...
<ul><li>Learn from the mistakes of the past </li></ul><ul><li>Subprime Crisis </li></ul><ul><ul><li>Loose credit policies ...
<ul><li>Late Disclosures </li></ul><ul><ul><li>Should have been earlier?? </li></ul></ul><ul><li>Lack of Disclosure </li><...
<ul><li>Assessing: </li></ul><ul><ul><li>Legal and Regulatory Risk </li></ul></ul><ul><ul><li>Counterparty and Liquidity R...
<ul><li>Learning from the past as the same mistakes have and are being repeated… </li></ul><ul><li>Reevaluating Risk Model...
<ul><li>Angelina Kwan </li></ul><ul><li>Chief Operating Officer, Asia Pacific  </li></ul><ul><li>Cantor Fitzgerald </li></...
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The Hong Kong Polytechnic University

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The Hong Kong Polytechnic University

  1. 1. The Hong Kong Polytechnic University & The University of Texas Risk Management for Globally-Interconnected Enterprises Angelina Kwan Chief Operating Officer Asia Pacific Region 15 th March 2008
  2. 2. <ul><li>Current Affairs </li></ul><ul><li>Groundhog Day </li></ul><ul><li>Risk Management -Lessons Learned </li></ul><ul><li>Summary </li></ul><ul><li>Questions? </li></ul>Overview
  3. 3. <ul><li>Losses on all subprime mortgage assets may reach US$300 Billion to US$400 Billion worldwide – Deutsche Bank Analysts </li></ul><ul><li>One of the benefits of securitization is the offloading and global distribution of risk. Ironically, this is now a capital markets hazard, since no one is sure where subprime losses lie- JP Morgan Analysts </li></ul><ul><li>Consumer sentiment down and Credit Crisis worsening </li></ul><ul><li>“ I've been in this market for 30 years, I'm one of the senior citizens of the bond market, and I have never, ever seen such a confluence of negative events,'' said Marilyn Cohen, President of Envision Capital Management in Los Angeles. </li></ul><ul><li>``Clearly the Fed has been rendered impotent on doing anything to end this credit crisis.'' </li></ul>Current Affairs
  4. 4. <ul><li>Numbers and impact still being revised… </li></ul><ul><li>Late disclosures, lack of disclosures, blindsiding investors, risk of more losses to come… </li></ul><ul><li>Surprises at every turn </li></ul><ul><ul><li>New announcements and CEO firings every day – Bear Stearns </li></ul></ul><ul><ul><li>Bank losses on Credit Default Options (CDO) forecast US$77 Billion (JPM) </li></ul></ul><ul><ul><li>Overall losses even more… </li></ul></ul><ul><li>World Markets fluctuating and volatile - flight to cover losses… </li></ul><ul><li>Uncertain Economic Outlook and its World-Wide effect – RECESSION </li></ul>Current Affairs
  5. 5. <ul><li>2007 Subprime Credit Crisis – Leading into a crisis of confidence </li></ul><ul><ul><li>What has been happening? </li></ul></ul><ul><ul><li>Impact in the US </li></ul></ul><ul><ul><li>The Difference 20 years later </li></ul></ul><ul><ul><li>Impact on the Global Markets </li></ul></ul><ul><ul><li>How long to clean up? </li></ul></ul><ul><li>Where was risk management – with the very thing we were trying to do – being the main cause of another even bigger problem?? </li></ul>Groundhog Day
  6. 6. <ul><li>Housing Market booming with prices skyrocketing </li></ul><ul><li>Independent Agents used </li></ul><ul><li>Banks aggressively make loans –subprime loans in particular </li></ul><ul><li>Banks doing great </li></ul>Groundhog Day-The Subprime Crisis <ul><li>Loans securitised –sold to Fannie Mae and Freddie Mac </li></ul><ul><li>Investment banks and other financial institutions repackage, issue complex debt, CDOs linked to mortgages </li></ul><ul><li>Complex products underwritten by banks and sold to: </li></ul><ul><li>Hedge Funds </li></ul><ul><li>Other Financial Institutions </li></ul><ul><li>Investors </li></ul><ul><li>Money making products – highly successful- very popular </li></ul><ul><li>US Housing Market drops </li></ul><ul><li>Loan defaults increase </li></ul><ul><li>Complex products, CDOs, Securitised Loans plummet in value </li></ul><ul><li>Investors flee from these products… </li></ul>
  7. 7. <ul><li>Learn from the mistakes of the past </li></ul><ul><li>Subprime Crisis </li></ul><ul><ul><li>Loose credit policies </li></ul></ul><ul><ul><li>Use of Loan Agents </li></ul></ul><ul><ul><li>No monitoring of defaults? </li></ul></ul><ul><ul><li>Hedging? </li></ul></ul><ul><ul><li>Why didn’t this get flagged? </li></ul></ul><ul><li>Concentration risk </li></ul><ul><ul><li>Too much subprime </li></ul></ul><ul><ul><li>Too much underwritten </li></ul></ul><ul><li>Relooking and reevaluating models – stress testing </li></ul><ul><li>Emperor with no clothes – who is going to be the messenger? </li></ul>Risk Management - Lessons Learned
  8. 8. <ul><li>Late Disclosures </li></ul><ul><ul><li>Should have been earlier?? </li></ul></ul><ul><li>Lack of Disclosure </li></ul><ul><ul><li>Underwritten and on the books </li></ul></ul><ul><ul><li>Off the books? What should be disclosed? </li></ul></ul><ul><ul><li>How much more out there? </li></ul></ul><ul><li>Where were the Credit Agencies and why didn’t this get flagged? How good is their opinion? </li></ul><ul><li>Where were the auditors? Accounting standards for disclosure? </li></ul><ul><li>With so many CEOs/Chairman throwing themselves on their swords…Succession planning… </li></ul>Risk Management - Lessons Learned
  9. 9. <ul><li>Assessing: </li></ul><ul><ul><li>Legal and Regulatory Risk </li></ul></ul><ul><ul><li>Counterparty and Liquidity Risk – funds drying up – how will it affect businesses </li></ul></ul><ul><li>Thinking ahead - what are the Regulators going to do when this has settled? </li></ul><ul><ul><ul><li>Securities and Futures Regulators </li></ul></ul></ul><ul><ul><ul><li>Central Banks and Banking Regulators </li></ul></ul></ul><ul><ul><ul><li>Insurance and other product Regulators </li></ul></ul></ul>Risk Management - Lessons Learned
  10. 10. <ul><li>Learning from the past as the same mistakes have and are being repeated… </li></ul><ul><li>Reevaluating Risk Models, Stress Testing, Concentration Risk evaluation, as there is still more to come… </li></ul><ul><li>Have the systems in place to identify weaknesses – escalation system </li></ul><ul><li>Be ready for what Governments, Central Banks and Regulators will be doing… </li></ul>Summary
  11. 11. <ul><li>Angelina Kwan </li></ul><ul><li>Chief Operating Officer, Asia Pacific </li></ul><ul><li>Cantor Fitzgerald </li></ul><ul><li>Suites 6707 - 6712, The Center, </li></ul><ul><li>99 Queen’s Road, </li></ul><ul><li>Central, Hong Kong </li></ul><ul><li>Tel: +852 3477 7851 </li></ul><ul><li>Fax: +852 3477 7995 </li></ul><ul><li>Email: akwan@cantor.com </li></ul>Questions?

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