Success in volatile markets demands more than models. Here, Tin Lau, Chief Risk & Compliance Officer at Mirae Asset Securities (UK) explains why deep understanding, scenario discipline, and human judgment are now critical to managing risk.
Volatility is no longer an episodic scare. It is the everyday backdrop against which risk decisions are made. In this environment, traditional comfort blankets such as familiar hedges, tidy stress tests and tidy narratives often prove brittle.
What separates resilient firms from fragile ones is not just better tooling, but a shift in mindset toward disciplined curiosity, rapid learning and fast, focused execution when the unexpected arrives.
That shift came through powerfully in a recent discussion led by the chief risk officer of a leading asset management service.
The executive opened with a disarming truth that seasoned practitioners recognize instinctively: “If you try to model unpredictable market conditions, it doesn’t generally go very well.”
Their alternative is a deliberately philosophical approach that starts with understanding the problem in the real world before reaching for a spreadsheet.
The expert frames it as a three-stage method, beginning with deep study of the underlying drivers of change - political mechanisms, institutional incentives, supply chains and the human behaviors that push systems past their tipping points.
The study phase is more than a slogan. It is a practice of asking basic questions that too many experts skip.
How does a specific election system translate into policy risk? Where are the chokepoints in a critical supply chain? Which assumptions in a pricing model reflect convenience rather than reality?
The board member urges risk leaders to keep returning to first principles and to “identify gaps and go back to the source material” rather than rely on second-hand interpretations.
That ethos mirrors the broader imperative in today’s markets to look beyond basis points and balance sheets and interrogate how systems actually behave under strain.
From there, robust scenario analysis becomes possible. But the goal is not a longer list of shocks.
It is a more thoughtful view of time. The expert stresses “temporal awareness” - judging how long risks take to crystallize and how long their effects persist - and separating tactical noise from structural change.
As a rule of thumb, the executive treats structural or strategic shifts as five years or more, an explicit line that forces the organization to calibrate responses to horizon and durability rather than headlines.
It is a pragmatic correction to the false precision of single-period shocks that ignore path, persistence and feedback loops.
