In this hyper-connected, globalized world, the traditional risk management model—in which risk is assessed on an annual basis and interaction with an insurance broker is typically limited to claims filing and policy renewal—is outdated. In practice, this operating approach limits the field of vision for many risk practitioners and endangers the very firms it was meant to protect.
These dangers are not theoretical. Take the example of Knight Capital: over the course of 45 minutes on Aug. 1, 2012, the company was brought to its knees by an untested, “rogue” algorithm it developed for its high-frequency trading platform.
