Controlling risk lessons from 2008 financial crisis

Controlling risk lessons from 2008 financial crisis
In order to reduce risks, we should learn from our mistakes and in this case, it is fact that the biggest financial mistake is 2008 financial crisis. This essay shows main lessons from 2008 financial crisis and conclude main ideas.
The shape of the crisis may change, but its essence remains the same. A re-emergence of an environment of abundant liquidity, low interest rates, rapid credit growth and low inflation, followed by a sharp rise in asset prices. By 2007, rising defaults in the U.S. subprime mortgage market destabilized U.S. markets, sparking a global financial contagion that spreads around the world, distorting markets and triggering a global economic crisis. caused it. This contagion can be seen, for example, in the nationalization of large financial institutions, bank failures, the end of the investment banking era, increased federal insurance on bank deposits, government bailouts, opportunistic investments by sovereign wealth his funds and others.
The 2008 global financial upheaval has taught risk management lessons that will be crucial for future financial markets development. It is discovered that both negative and positive lessons deriving from this crisis. It is divided the negative lessons into three groups: financial products and valuation (e.g. failure of rating agencies when valuating structured products), processes and business models (e.g. the failed originate-to-distribute model), and strategic issues (e.g. moral hazard or principle-agent problem). Moreover, the 2008 crisis heralded a new risk occurred during the crisis – globalization risk as a risk of worldwide contagion resulting from increasingly correlated markets and a decoupling of markets.
In conclusion, new crises are likely to emerge because the world cannot meet its costs. Not only that, in short, as in 2008, many today underestimate the (real) risks that exist in global finance. The problems lie not with credit growth, which has been relatively tepid in industrial markets and stronger in emerging markets, but with asset pricing associated with financial risks. Financial crises are unpredictable: if you don't hit hard, the risks will increase.