Associate Professor David Taylor, Director of AIFMRM, and Professor Don Ross, Dean of the Faculty of Commerce
The science of risk
The future of Africa’s financial services sector depends heavily on the industry’s
ability to boost its risk management capacity, writes Zweli Mokgata
T
he level of risk management of financial markets on the
continent is often inadequate, especially at a time when
the need for this vital function is more important than it
has ever been.
According to Associate Professor David Taylor,
convenor of the Master’s programme in Mathematical Finance at
the University of Cape Town, there is a shortage of risk management
resources specific to the financial services sector.
“Despite the sequence of financial disasters over the last 30 years,
the global financial services industry has not always embraced the
seriousness of risk management,” he says. “In the past, it was not
uncommon for traders in exotic derivatives to risk manage themselves.”
In the early 1990s, at least two of South Africa’s key banks had large
derivatives disasters, and in each case, the traders were risk managing
themselves. “In the high growth markets of the early 90s, when it
was relatively easy to make money, derivatives traders were often
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contributing considerably to company profits. As a result, interfering
with traders was frowned upon,” he says.
Taylor is also the founding director of UCT’s new African Institute
of Financial Markets and Risk Management (AIFMRM), launched on 29
January this year.
Taylor says the Institute is unique in SA, and possibly on the continent,
because it is a financially independent academic unit housed within
the university, but catering only to postgraduate students. AIFMRM
focuses specifically on a quantitative approach to the increasingly
complex discipline of risk management of financial markets.
The Institute will also be a vehicle for transforming the demographic
profile of the sector’s professionals, specifically in quantitative finance
and financial risk management.
The increasingly severe financial disasters between 1987 and 2008,
which caused suffering in all global financial markets, highlighted the
need to develop a coherent approach to risk management.
Edition 10
2014/06/24 10:34 AM