Applying Power’s (2003b: 14) definition, calculative idealism also entails the following:
‘While practitioners under this approach may be short-term pragmatists, they … worry
constantly about the ‘robust’ and ‘hard’ nature of … risk analysis.’ Indeed, characteristic of
the calculative idealism of risk people at Fraser was the amount of concern they devoted to
maintaining the ‘leading edge’ reputation of their risk methodologies, including that of the
Economic Capital framework.
There was a widespread conviction across risk officers as well as non-risk people at
headquarters that external constituencies rewarded Fraser for having ‘leading edge’ risk
practices. Debates on methodology were sparked by concerns that this leading technical
position might be eroded:
Back in the 90s I think Fraser had a really good methodology. The perception we had was:
some American banks were further down the road than we were, but we were ahead of the
UK banks. I think we have got to the point where there is this big upheaval: there is a big
question mark about whether our risk methodology is up to scratch. With Basel II going on,
the feeling is that everyone is catching up, I assume it is the impetus to the current debates. …
We can’t afford having any of the analysts or anyone else saying we have a bad
methodology.48
During my fieldwork I was witness to the complete overhaul of the Economic Capital
methodology. It was a process involving extreme political sensitivity, which defeated an
entire Economic Capital team before a second group of risk capital officers finally managed to
negotiate it through. The head of the economic capital team, who orchestrated the process
recalled:
Everyone said, let’s get it more accurate. But they wanted to minimise their portion of the
more accurate pie. So there was a tension… By setting the objective and clarifying the rules
there was less room for people to move. That’s not to say you don’t get people arguing and so
on, but the rules keep people straight. And you keep it all consistent. By sitting around a
table, instead of one-to-one negotiations, you end up with group negotiations. The best minds
in business bank and [the investment banking arm of the group] came up with the
methodology, so they cannot argue on technology. Each business unit was represented by risk
managers and lenders, to make sure we took in both the technical perspective and the market
perspective.
Apparently the creators of the new methodology derived much credibility from the procedural
fairness and political appropriateness that characterised the implementation, as well as from
the perceived technical competence that was deployed, appealing to the calculative idealism
of the people involved.
By successfully maintaining the internal credibility of the ERC framework risk capital officers
ensured that both Integrated Risk Management as well as Risk and Value Management rested
on a solid foundation.
Applying Power’s (2003b: 14) definition, calculative idealism also entails the following:‘While practitioners under this approach may be short-term pragmatists, they … worryconstantly about the ‘robust’ and ‘hard’ nature of … risk analysis.’ Indeed, characteristic ofthe calculative idealism of risk people at Fraser was the amount of concern they devoted tomaintaining the ‘leading edge’ reputation of their risk methodologies, including that of theEconomic Capital framework.There was a widespread conviction across risk officers as well as non-risk people atheadquarters that external constituencies rewarded Fraser for having ‘leading edge’ riskpractices. Debates on methodology were sparked by concerns that this leading technicalposition might be eroded:Back in the 90s I think Fraser had a really good methodology. The perception we had was:some American banks were further down the road than we were, but we were ahead of theUK banks. I think we have got to the point where there is this big upheaval: there is a bigquestion mark about whether our risk methodology is up to scratch. With Basel II going on,the feeling is that everyone is catching up, I assume it is the impetus to the current debates. …We can’t afford having any of the analysts or anyone else saying we have a badmethodology.48During my fieldwork I was witness to the complete overhaul of the Economic Capitalmethodology. It was a process involving extreme political sensitivity, which defeated an
entire Economic Capital team before a second group of risk capital officers finally managed to
negotiate it through. The head of the economic capital team, who orchestrated the process
recalled:
Everyone said, let’s get it more accurate. But they wanted to minimise their portion of the
more accurate pie. So there was a tension… By setting the objective and clarifying the rules
there was less room for people to move. That’s not to say you don’t get people arguing and so
on, but the rules keep people straight. And you keep it all consistent. By sitting around a
table, instead of one-to-one negotiations, you end up with group negotiations. The best minds
in business bank and [the investment banking arm of the group] came up with the
methodology, so they cannot argue on technology. Each business unit was represented by risk
managers and lenders, to make sure we took in both the technical perspective and the market
perspective.
Apparently the creators of the new methodology derived much credibility from the procedural
fairness and political appropriateness that characterised the implementation, as well as from
the perceived technical competence that was deployed, appealing to the calculative idealism
of the people involved.
By successfully maintaining the internal credibility of the ERC framework risk capital officers
ensured that both Integrated Risk Management as well as Risk and Value Management rested
on a solid foundation.
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