Workshop – hybrid event, web and physical
Thursday, November 17, 2022
17:30-18:45
Risk through the looking glass
Speakers: Savvakis Savvides – Visiting Lecturer, John Deutsch Institute for the Study of Economic Policy, Queen’s University, Canada
Chair: Marios Clerides – Economist, formerly CEO of the Cyprus Cooperative Bank; Group Senior general Manager, Hellenic Bank; Former Executive Chairman, CSEC
Abstract: The question of what is really risk in capital investments is posed and discussed. It suggests that the almost total acceptance of the concept that volatility constitutes a good measure of risk is wrong and leads towards a misallocation of economic resources. It is argued that the Expected Loss of a capital investment project should be used as a measure of risk. It is further illustrated how the risk aversion attitudes of potential investors can be taken into consideration in the decision to invest or not. The pursuit of return without risk inevitably leads to the transfer of wealth through a failing banking system which collaborates with an unregulated financial market who constantly seek low risk and relatively safe returns for the benefit of their wealthy clients. It is further argued that wasteful finance impairs the real economy and inevitably brings about financial crises and economic recessions. The promise of a “return without the risk” leads financial intermediaries in the direction of an elusive quest whereby the only way to attain this is through directing funding towards the capture of existing assets rather than investing in the real economy to create new wealth.