The mission of the Canada Research Chair in Risk Management is to understand the choices that are made in situations involving risk and develop instruments to improve risk management. The Chair focuses mainly on areas where risk management has failed in recent years, such as during the H1N1 influenza pandemic and the financial crisis that started in 2007.
The Chair’s research will help ensure that history does not repeat itself when society is faced with its next major risks.
Risk management is a promising field of research. Many events—including the disastrous return on certain investments, fatal road accidents, food contamination, and acts of terrorism—show just how numerous and varied the sources of risk can be. Research such as that conducted by the Chair makes it possible to develop tools to manage risks and, consequently, to reduce the substantial costs they incur.
Traditionally associated with the insurance industry, risk management has now reached into other sectors of activity that closely concern not only businesses, but also individuals and society as a whole. Georges Dionne has contributed to this development in many ways, notably by designing risk management models with applications in several fields: insurance, banking, road safety, environmental risks, health, public safety, and finance (with specific attention to operational, liquidity, and credit risks and the management of financial portfolios).
Research to better understand the decision-making process
Individuals and businesses are often called upon to make decisions without knowing all the associated risks involved. How are decisions made under such conditions of uncertainty? What are the factors enabling individuals to manage their risks optimally? The Chair will be looking into this new aspect of risk management.
Based on the latest psychological findings on decision-making in a climate of uncertainty (cognitive processes and dissonance), the Chair is striving to better understand how individuals’ decisions are made and to find tools to measure the factors that determine whether individuals will manage their risks in an optimal fashion. Decisions about choosing to play the lottery, to drive while inebriated, or simply to smoke are all excellent examples of this research topic.
Creation of the Chair
As a recipient of financial support from the Canada Research Chairs Programme, the HEC Montréal Chair of Risk Management became the Canada Research Chair in Risk Management in January 2004.
Financial support for the purchase of high-performance computer equipment
The Canada Research Chair in Risk Management also obtained $780,000 in joint funding from the Canada Foundation for Innovation, the Quebec Department of Education, and private-sector partners. The additional funding has enabled the Chair to build a high-performance infrastructure by purchasing equipment needed to handle huge databases and rapid calculations. This powerful computer hardware opens up new access to fields of research such as banks’ securitization, insurance pricing for vehicle fleets, demand for reinsurance, high frequency trading, banks’ operational risk, hedging in different industries, and bonds and CDS liquidity risk which require the processing of millions of observations spread out over time and intraday trading.