Friday, September 12, 2014

Fatal Risk

AIG had been a a responsible risk taker for much of its history. Over several decades, Hank Greenberg oversaw its growth by taking appropriately-priced risk, ensuring no single event could take the firm down. After Greenberg's ousting, some things changed at AIG. One unit in particular grew to a large size and lost its way. In Fatal Risk, Roddy Boyd tells the tale of AIG's rise and dramatic fall during the recent recession.

The story is interesting, but as is the norm with this kind of book, I have a very difficult time recalling which characters did what because there are just so many people involved. Nevertheless, I got a pretty good idea of what went right at AIG for so long such that it became such an important company to so many others: it would insure business risks that nobody else would. This was a strength in that AIG could get good prices for what it insured, and it also served to diversify the firm's risks across a range of industries and geographies.

The beginnings of what went wrong occurred when the company started a derivatives group to generate incremental returns. The group was fine for many years and made some handsome, low-risk contributions to the company's income, as it was led by people who understood the risks (a term that comes up a lot in the book!) and avoided one-sided bets. But eventually the group got a little looser and then a little too loose, and the rest is history.

For a book that is so recommended, I do take issue with the writing, however. Call me a nitpicker, but i caught a few speling mystakes and a few sentenses that werent quit sentences and a lot of sentences that appear aimed to sound clever but were ambiguous as a result. Not only do I find that kind of thing annoying, but when you're trying to read at a fast pace (see here if you don't know what I'm talking about) that can throw a wrench in things.



楊大寶 said...

"speling mystakes" Saj you did this intentionally?

Saj Karsan said...

If you can't tell whether it's intentional, I have some work to do.