Why financial firms need structured forecasting for risk management

A great post from Coralie Consigny at the Swift Centre. Forecasting isn’t some mystic art. It’s the scientifically researched process of making well structured, transparent, and highly accurate predictions about the future. Financial institutions. Tech companies. Government departments. All these organisations face significant upsides from anticipating the future, and substantial downsides from failing to do so. Every decision you make is based on predictions. The question is, are you doing it the scientific way, or the guessing way?

Over the past few years, we’ve seen how quickly the risk landscape can evolve — from geopolitics to inflation cycles to AI’s growing role in markets. What hasn’t changed is the need for disciplined frameworks that balance quantitative insight with strategic judgment. Effective risk management today isn’t just about protecting downside — it’s about enabling better decision-making under uncertainty. I’m increasingly focused on how we, as investment professionals, can use data, technology, and experience to create adaptive risk frameworks that don’t just react — but anticipate. Curious to hear: how are others in investment or risk roles integrating adaptive thinking into their frameworks?

Now Live: Connect Magazine Issue 13 🔔 The financial landscape is changing - fast. From the end of low interest rates to the rise of AI in risk management, this issue dives into the trends reshaping the industry and the leaders driving the conversation. Available now for FREE, exclusively with CeFPro Connect: https://lnkd.in/eCt7u5BV Inside this edition: ⏰ The Long Goodbye - Why we’ve seen the last of low interest rates (for now) 🧠 Process vs Checklists - Rethinking compliance through Michelle Bowman’s lens 💤 Sleepwalking into Trouble - Why embedding AI into process isn’t optional 🪴 ESG Risk Is Everywhere - Going deeper into multi-tier supply chains 💵 Transition Finance - Why managing risk must keep pace with innovation 🗒️ Scenario Planning - Evolving from crisis response to enterprise resilience Plus... 🎤 Onstage: Key Voices to watch at Vendor & Third Party Risk Dallas, featuring Jennifer Wilkinson, Ryan Langshaw, Daniel "Danny" Heid, Bryan Phillips, CRMA and Malcolm Smith, MBA, CBCP. 🪙 An Infographic on credit risk amid rising defaults and refinancing pressures 📰 A recap of the latest news headlines. As always, a massive thank you to our industry leaders for providing us with invaluable insights - Mikko Venermo, Riten Dixit, Mathew Wells, Julie Antonelli, David Asermely, Koen De Leus, C. Robin Castelli MSc, Mark Norman 💫 Dive into the issue on CeFPro Connect! #InterestRates #TransitionFinance #Compliance #ScenarioPlanning #ESG

The biggest governance failure is the continued, deliberate separation of risk into two categories: 'Financial' and 'Non-Financial' (the ESG box). The truth is, any social, environmental, or governance failure that materially impacts our ability to operate, secure capital, or retain top talent is, by definition, a quantifiable financial risk. Yet, most organisations manage these risks in silos, treating them as abstract concepts rather than hard liabilities. The Quantifier’s Dilemma How do you accurately price in the risk of Systemic Obsolescence if your framework doesn't allow you to combine financial data with social and environmental impact data? The answer is: you can’t. You are preparing for a future with half the necessary information. This is why we focus on the Dynamic Materiality Assessment. Engineering Integrity into Risk Our approach to Risk Quantification is mechanistic. It eliminates the arbitrary distinction between risk types, creating a single, auditable view for the board. Combining the View: We use a proprietary methodology to blend traditional financial sensitivity analysis with social and environmental impact data. This allows us to quantify the cost of inaction with the same rigour as a traditional financial projection. In this way we produce a monetary value of avoided loss (the value generated by mitigating a specific, material systemic risk (e.g., a regulatory fine, operational shutdown, or supply chain failure). Risk is a language spoken by the Balance Sheet. If you can’t quantify the risk of a fragmented supply chain or poor cultural alignment in monetary terms, you don't own the risk; you're just auditing a future failure. If your current risk team is still treating Transition Risk as a qualitative challenge, let’s discuss how to move to a quantified, auditable framework. https://lnkd.in/ecD24g6B #RiskQuantification #TransitionRisk #DynamicMateriality #SROI #Finance #sustainablemindset #sustainability

Are your business units constantly pushing back on Risk & Compliance? The battle for a pervasive culture often feels like an uphill struggle against perceived red tape. The latest financial analysis points to how markets respond to even 'soft' economic data, shaping modest gains. This dynamic offers a unique perspective on integrating Risk & Compliance into your core business operations: 📈 Embrace the 'soft data': Just as markets interpret subtle signals, listen closely to your business units' frustrations. These aren't just complaints; they are valuable insights into how Risk & Compliance can be reframed to enable, rather than hinder, their objectives. 🌱 Cultivate modest, consistent gains: Financial stability isn't built overnight. Similarly, transforming your organisation's culture involves continuous, incremental engagement. Highlight small wins where proactive Risk & Compliance improved efficiency or opened new avenues, building trust and demonstrating value over time. Instead of seeing Risk & Compliance as a barrier, how can you leverage these insights to proactively integrate it as an intrinsic driver of business success? https://lnkd.in/gaC6_pKF #riskculture #complianceculture

𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬 𝐥𝐞𝐚𝐝𝐞𝐫𝐬 𝐢𝐧 𝐟𝐢𝐧𝐚𝐧𝐜𝐞: 𝐭𝐡𝐞 𝐩𝐥𝐚𝐲𝐛𝐨𝐨𝐤 𝐡𝐚𝐬 𝐬𝐡𝐢𝐟𝐭𝐞𝐝. It's no longer about explaining what you do. It's about demonstrating how you're prepared for fragmentation, regulatory tightening, and geopolitical shock. 🔴 𝐃𝐢𝐠𝐢𝐭𝐚𝐥 𝐒𝐨𝐯𝐞𝐫𝐞𝐢𝐠𝐧𝐭𝐲: Central banks aren't building the digital euro to compete with fintech. They're ringfencing infrastructure against political fragmentation and sanctions. If your institution frames this as a payment convenience, you'll appear tone-deaf to board-level risk officers. 🔴 𝐀𝐈 𝐑𝐞𝐩𝐮𝐭𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐑𝐢𝐬𝐤: It's not about explainability. Regulators are prosecuting outcome bias—discriminatory lending, algorithmic exclusion, failed onboarding. A single algorithmic discrimination case is an earnings-multiple compressor. Your narrative must shift from "cutting-edge AI" to "equitable outcomes." 🔴 𝐄𝐒𝐆 𝐚𝐬 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐂𝐫𝐢𝐦𝐞: Greenwashing is no longer a values issue. It's enforcement-ready. The regulatory trigger isn't insufficient action—it's false representation. Institutions making overreaching claims face regulatory prosecution. The safest narrative is measured, evidence-backed, specific. Not ambitious. 🔴 𝐆𝐞𝐨𝐩𝐨𝐥𝐢𝐭𝐢𝐜𝐚𝐥 𝐅𝐫𝐚𝐠𝐦𝐞𝐧𝐭𝐚𝐭𝐢𝐨𝐧: The era of seamless, borderless fintech is fragmenting. Payment infrastructure is now critical national infrastructure. Your external communications still promise "global reach." Regulators are testing whether you have pre-prepared messaging for scenarios where cross-border operations freeze. 🔴 𝐂𝐫𝐢𝐬𝐢𝐬 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐚𝐬 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞: The SRB's October 2025 consultation makes crisis communication a regulatory resolvability requirement, not a reputational afterthought. Without tested resolution-scenario messaging pre-approved by boards and regulators, you face dual risk: enforcement + reputational damage. These aren't discrete trends. They're one integrated shift: from brand-driven communications to compliance-integrated strategic communication. 𝐓𝐡𝐞 𝐜𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬 𝐥𝐞𝐚𝐝𝐞𝐫'𝐬 𝐢𝐦𝐦𝐞𝐝𝐢𝐚𝐭𝐞 𝐭𝐚𝐬𝐤: Map your architecture against these five imperatives. Identify gaps. Build resolvability into capability. Read the full strategic analysis on Substack: 👉 https://lnkd.in/eUYbgDay And if you're navigating these shifts, subscribe to 𝐁𝐚𝐥𝐚𝐧𝐜𝐞𝐝 𝐒𝐢𝐠𝐧𝐚𝐥𝐬: deep, research-backed strategic analysis for finance communications leaders thinking ahead of the curve. #FinancialServices #CorporateCommunications #FinTechStrategy #RegulatoryCommunications #StrategicPR #CrisisCommunication #DigitalSovereignty #FinanceComms

I’m thrilled to share my latest report: “Reframing Financial Markets as Complex Systems: Tools for Systemic Risk Analysis, Portfolio Management, and System-Level Investing,” co-authored with Raymond Pang, PhD. In today’s world of rapid technological change and global interconnection, traditional equilibrium-based models often fall short in explaining the nonlinear, adaptive, and networked dynamics we observe in markets. This report reframes how we understand financial systems—through the lens of complexity science—and introduces practical methods like agent-based modeling and network theory to help professionals analyze systemic risk, improve portfolio resilience, and think at the system level. Key ideas explored: • Financial markets behave as complex adaptive systems. • Small shocks can cascade through interdependent networks, amplifying nonlinear systemic risks. • Modeling techniques from complexity science can enhance stress testing, scenario planning, and portfolio construction. • A systems mindset helps investors and policymakers design more resilient, adaptive financial systems. Ultimately, this report aims to spark a mindset shift—challenging conventional paradigms of market behavior and equipping the investment profession to thrive amid complexity, uncertainty, and accelerating change. 📘 Read the full report here: https://lnkd.in/ewgRxveH Tremendous gratitude goes to those who made this research possible, including: Rick Bookstaber, Roger Urwin, Joo Hee Lee, Rhodri Preece, CFA, Karen Pickering, Jeanie Cox, Mark Fortune, and John Van Deren. Thanks also to Santa Fe Institute, Doyne Farmer, Eric Beinhocker, Andy Haldane, John Rutledge, Rob Axtell, Matthew Oldham, Dr. Gueorgui S. Konstantinov, CAIA, FDP, William Burckart, Jon Lukomnik, and Principles for Responsible Investment for their work in this field, which informed the report. #ComplexSystems #InvestmentManagement #SystemicRisk #PortfolioManagement #SystemsThinking #CFAInstitute #SystemsLevelInvesting #DoubleMateriality #AgentBasedModeling #NetworkTheory

I'm flagging this report for those interested in complexity science and finance. The CFA Institute’s recent report, Reframing Financial Markets as Complex Systems, is an important signal of how the investment profession is beginning to evolve its analytical foundations. The report argues that financial markets should be understood as complex, adaptive systems characterised by feedback loops, network effects, non-linear dynamics and emergent behaviour. This shift in perspective moves beyond traditional equilibrium-based frameworks and brings the profession closer to ideas that complexity economists have been developing for decades. What I find particularly valuable is the framing of systemic risk, portfolio construction and market behaviour as products of interconnected relationships rather than isolated variables. The report’s focus on system-level investing, heterogeneous actors, and the use of network and agent-based approaches reflects a growing recognition that our analytical tools must match the complexity of the world they seek to describe. The CFA Institute has taken a constructive step in opening this conversation. I hope it prompts further research, collaboration and debate across the profession. Bravi Genevieve Hayman, PhD, Raymond Pang, PhD Jess Daggers, PhD, Dominic Hofstetter, Johannes Tschiderer, Tanuja Prasad, Ammy Vogtlander, Hubert Fonteijn, PhD, Duncan Austin, Graham Boyd, Joss Colchester, Leon Seefeld, Jaume Mora Pedros

Over the past few months, I’ve been exploring a challenge I see across the financial crime landscape: why strategies that look aligned on paper can fall apart in practice 📄 In my new paper, Recalibrating Risk: Translating Convergence into Coherence, I argue that while convergence, bringing core stakeholders and teams closer together, is necessary, it isn’t sufficient. Proximity alone doesn’t create alignment. The missing capability is translation: the ability to bridge different languages of risk, surface trade-offs, and connect strategy to operational reality. Without it, organisations face what I call the “thousand-cut fracture” - small misalignments that quietly compound until they undermine resilience. ➡️ The tensions that drive misalignment aren’t new, but what’s needed is active acknowledgement and the discipline to embed proactive responses into strategy. It isn’t about perfection, but about intentional progress: moving from assumed alignment to deliberate coherence. ✅ Firms that build translation into their infrastructure and decision-making will not only strengthen their defences against financial crime, but also enhance resilience, agility, and regulatory trust Short on time? You can find a summary version here: https://hubs.li/Q03Pr37V0 ➡️ Download the full version here: https://hubs.li/Q03Pq_4m0 Huge thank you to Isabella Chase and Daniel Keay for their support #FinancialCrime #RiskManagement #Compliance #Governance #Resilience

An interesting post and paper (or at least I think so!) that looks at how systems and controls fail or deviate from original intent...