Everything banks think they know about risk is wrong
Haley Tippmann The risk models that banks use to help inform their commercial-lending decisions have been dealt a blow by Covid-19. The pandemic has presented a crisis where historical correlations do not hold. In 2021 we will find new ways of assessing risk that use forward-looking as well as backward-looking data. This will make lending smarter and better for everyone. Traditional risk models are based on historical data, but the dynamics of the Covid-19 crisis mean that extrapolating from the past may now be a less helpful approach. As is the case with trade wars, natural disasters or, ind...