Managing Extreme Financial Risk

Chapter 7

Simplicity to Counter Complexities of Revenue Models

Abstract

Over the last 20 years, financial institution revenue models have become progressively more complex and thus hard to understand. Since 2008 a lot has been done to avoid the repeat of the experience of the last crisis. Almost everyone agrees on two things. First, an already complex situation has been made more complex. Second, no one is certain if significant contributing factors from 2008 have been addressed. Just because something is complex doesn’t mean it can’t be simplified and thus handled more effectively. Anything to the contrary is a recipe for disaster. Therefore, it is critical that any measure to drive tail-risk or sustainability management for complex institutions ...