Risk & Resilience

On the morning of July 16, I looked outside in Milwaukee and the city seemed to have misplaced its horizon. The light had that strange, dirty cast that wildfire smoke gives it, and the air smelled faintly burned. This was Wisconsin, not a community evacuating ahead of a fire line. Nothing nearby was burning. The fires were hundreds of miles away, in northern Minnesota near the Boundary Waters and across Canada. Yet by then, the distinction between where the disaster was happening and where its consequences were being felt had become almost meaningless.

The Monetary Authority of Singapore is urging financial institutions to look beyond control deficiencies when serious risk events recur, warning that remediation may not hold if the behavioral patterns and cultural conditions behind those failures remain unchanged.

The bids arriving in Australia's wholesale electricity market increasingly have no trader behind the keyboard. They are generated by software following predefined instructions, often reacting to changing market conditions before a person has time to intervene. The technology has become common enough that the Australian Energy Regulator decided it was time to address not the software itself, but the responsibilities that survive its use.

The European insurance sector remains on stable footing despite growing geopolitical uncertainty and an increasingly challenging cyber threat landscape, according to the latest risk assessment from the European Insurance and Occupational Pensions Authority (EIOPA).

A banking outage used to be the sort of event that invited an engineering postmortem. Something broke, someone fixed it, and a report followed. Japan's Financial Services Agency no longer believes that sequence tells the whole story.

I have argued for years that risk is no longer a color. Red, amber, and green may make a report easier to scan, but they do not necessarily make risk easier to understand. The heatmap can tell an executive that something has been placed in a red box. It generally cannot explain how frequently the event might occur, what range of financial consequences the organization faces, whether a proposed control is worth its cost, or how one uncertain choice compares with another.

The European Central Bank has spent the past year teaching its collateral framework a new habit. First it learned to look at corporate bonds through the lens of climate-related transition risk. Now it will do the same for a broader class of assets that sit behind the Eurosystem's lending operations.